Australia plans to prohibit non-compete clauses for workers earning below the high-income threshold from 2027, a proposed reform that could change how employers manage employee departures, protect confidential information and retain key talent.
The federal government announced the proposal as part of its broader competition agenda, arguing that non-compete clauses can limit workers' ability to change jobs and reduce competition in the labour market.
However, the legislation has not yet been released, and the final scope and timing of the reforms will depend on the legislative process.
What Australia's proposed reforms include
The government intends to prohibit non-compete clauses for workers earning below the high-income threshold, which the supplied report identifies as A$190,100 for the 2026–27 financial year.
The proposed changes are expected to take effect in 2027, subject to legislation being passed. Non-compete clauses associated with the sale of a business are not expected to be covered by the proposed prohibition.
The government has also announced plans to prohibit two other types of arrangements:
- No-poach agreements: Agreements between businesses that restrict the hiring of workers.
- Wage-fixing arrangements: Agreements between businesses that limit wages or employment conditions without workers' knowledge.
The proposals form part of a wider effort to promote competition and make it easier for workers to move between jobs.
The final details remain uncertain. The government's consultation materials indicate that the broader treatment of worker restraints may also be examined, although the precise implications for non-solicitation provisions and other contractual restrictions will depend on the legislation.
What employers should review
For employers that currently rely on non-compete clauses, the proposed changes provide a reason to review employment contracts and identify which roles may be affected.
Organisations may also need to assess how they protect legitimate business interests if non-compete restrictions become unavailable for some employees.
Other contractual and operational measures could become more important, including:
- Confidentiality obligations and information-security controls
- Intellectual property protections
- Conflict-of-interest provisions
- Appropriate notice periods and gardening leave arrangements, where legally available
- Customer relationship management and succession planning
These measures serve different purposes, and their effectiveness will depend on the circumstances and applicable law. Employers should obtain legal advice before changing contractual arrangements or assuming that an alternative restriction will be enforceable.
A broader shift in workforce mobility
The proposed reforms could affect how Australian employers balance protection of their business interests with employees' ability to move between roles and employers.
For HR teams, the immediate task is to understand where non-compete clauses are currently used, which employees could fall within the proposed restrictions, and whether existing workforce protection measures would remain appropriate.
The proposals do not yet establish new legal obligations. Until the legislation is released and passed, employers should monitor developments rather than assume the final rules have been settled.
The planned 2027 changes nevertheless give organisations a reason to examine whether their approach to protecting confidential information, intellectual property and customer relationships relies too heavily on non-compete clauses.
