Legal development

A free for all? Consultation opens on new laws to ban non-compete and staff non-solicitation clauses and make wage-fixing and non-poaching cartel conduct

September 11, 2026

What you need to know

On 7 September 2026, the Federal Government published its draft Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026.
The draft Bill will:
- ban non-compete clauses for employees paid below the high-income threshold (currently $190,100) and for all casual employees and pieceworkers;
- ban co-worker non-solicitation terms for all employees regardless of income; and
- introduce two new cartel conduct prohibitions and indictable criminal offences for arrangements that contain "no-poach" or "wage-fixing" provisions.
The draft Bill will permit non-compete terms for high-income employees and other post-employment restraints for all employees, provided that the restraint is necessary to protect confidential information or client/professional network relationships, is reasonable, and is not drafted in a cascading manner. A non-compliant term will be of no effect.
The proposed reforms apply only to national system employers and employees under the Fair Work Act. Partnerships, many state government entities and private unincorporated businesses will continue to be governed by common law restraint of trade principles.

What you need to do

Businesses should begin planning now for prohibitions on the use of post-employment restraints, and review any arrangements with other businesses about wages or no-poaching.

Some practical steps to consider include:

Reviewing organisational culture survey feedback and benefit and incentive programs, including flexible work policies, to strengthen staff retention, independent of post-employment restraints.
Auditing contracts, deeds, policies and other employment documents to identify which employees have post-employment restraints. For those who are subject to a non-compete term (as defined in the draft Bill), assessing whether the employee falls below, close to or well above the high income threshold.
Identifying the employees your business is most concerned about retaining and the information, relationships or other legitimate interests at risk.
Reviewing template and existing non-compete clauses and policies, and the changes required to have them meet the requirements of a permitted restraint (but noting that businesses should hold back on implementing changes to templates until the legislative process is further progressed).
Considering whether remuneration should be increased for any employees, for example, by converting some discretionary payments into contractual entitlements, to move an employee above the high income threshold where commercially appropriate.
Considering the use of longer termination notice periods and utilising gardening leave as an alternative to post-employment restraints.
Maintaining robust confidentiality, information-security and intellectual-property protection systems.
Reviewing arrangements to receive any wage analysis from other businesses or third parties (including benchmarking and reporting) and whether those arrangements may create new cartel conduct risks.
Reviewing any agreements with other businesses that impose restraints on poaching employees.
Reviewing any wage-fixing arrangements with other businesses.
Considering whether to make a submission to the Government by 2 October 2026 about the Bill.

On 7 September 2026, the Federal Government published its draft Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 and opened a four-week period of consultation which closes on 2 October 2026.

The Bill sets out a number of proposed changes to the Competition and Consumer Act 2010 (Cth) and the Fair Work Act 2009 (Cth).

Why is this an issue now?

The release of the Bill is the culmination of a three year process, since the Treasury Competition Taskforce's Competition Policy Review was announced in August 2023.

The Australian Bureau of Statistics reported in 2022 that approximately 46.9% of Australian businesses use some form of restraint clause. The Competition Policy Review was tasked with examining whether competition settings needed reform to promote a more dynamic and competitive economy, including by improving job mobility, innovation, productivity and wages.

On 4 April 2024, the Competition Taskforce released an Issues Paper on employment restraints as part of its broader Competition Review. It considered non-compete, non-solicitation, confidentiality, in-employment restraints, no-poach and wage-fixing arrangements.

In March 2025, in the Budget speech, Labor announced it would abolish non-compete clauses for most workers.

On 25 July 2025, the Competition Taskforce released a Consultation Paper about proposed areas for reform in respect of non-compete clauses and other restraints on workers.

Employment law changes

Who will the proposed reforms impact?

The Bill applies to national system employers and employees, as defined in the Fair Work Act.

This captures most Australian employers and employees. However, those excluded from the proposed reforms include those currently not covered by the Fair Work Act; being some State and local government employers and employees, and private unincorporated businesses, such as partnerships, sole traders and non-constitutional corporations. Workers who are not employees, such as Australian Defence Force members, are also outside the impact of the reforms.

The proposed bans apply specifically in respect of “employment arrangements”. An "employment arrangement" is defined in the Bill as being any document (even unwritten) that regulates the employment relationship, such as the employment contract, a deed, or a workplace policy.

What are the key proposed changes?

	Non-compete term	Co-worker non solicitation term	Permitted post-employment restraint of trade term
Means	A term which restrains an employee from seeking to be involved in any business/undertaking after their employment ends, or to commence subsequent employment The following terms are not non-compete terms: terms that prevent the use/disclosure of confidential information retention arrangements agreed termination notice periods (including garden leave arrangements) The explanatory materials also clarify that terms used in other contexts, such as sale of business and shareholder agreements (eg, where employees purchase shares and enter arrangements with their company as an employee shareholder), are not captured by the definition.	A term which restrains an employee from seeking to recruit a co-worker to be involved in any business/undertaking after their employment ends, or to commence subsequent employment A co-worker means a person who works, or has previously worked, for the relevant employer in any capacity, eg as employee, contractor or labour hire worker	For employees paid above the high income threshold (and who are not casual employees or pieceworkers), a non-compete term For all employees, any other restraint of trade term which applies (or purports to apply) after an employee's employment ends
Application	Banned for employees paid below the high income threshold (currently $190,100 per annum) or who are casual employees or pieceworkers	Banned for all employees	As above
Exceptions	A term which gives effect to or is authorised by another law will not be a banned non-compete term – this exception is designed to prevent inconsistencies with other post-employment obligations which apply under specific legislation – eg, for solicitors under Conduct Rules to avoid conflicts of interest with former clients, and for Defence personnel An employee's right to be free of a non-compete term does not apply to the extent that the employer is acting to prevent prejudice to Australia's defence / national security or to the integrity of government	A term which gives effect to or is authorised by another law will not be a banned non-solicitation term – this exception is designed to prevent inconsistencies with other post-employment obligations which apply under specific legislation – eg, for solicitors under the Conduct Rules to avoid conflicts of interest with former clients, and for Defence personnel	N/A
Effect of the ban	Employees (other than those who can be lawfully the subject of a non-compete term) have a right to be free of any non-compete term It will be a contravention for an employer to enter into or establish an employment arrangement that includes a non-compete term, unless the employee is paid above the high income threshold (and is not a casual employee or a pieceworker) Non-compete terms entered into unlawfully will be of no effect It will be a contravention for an employer to seek or threaten to enforce a non-compete clause against an employee who is paid below the high income threshold or is a casual employee or pieceworker Non-compete terms cannot be included in a fair work instrument (eg a modern award or enterprise agreement)	All employees have the right to be free of any co-worker non-solicitation term It will be a contravention for an employer to enter into or establish an employment arrangement that includes a co-worker non-solicitation term Co-worker non-solicitation terms entered into unlawfully will be of no effect Co-worker non-solicitation terms cannot be included in a fair work instrument (eg a modern award or enterprise agreement)	The following criteria must be satisfied for a permitted restraint of trade term to be enforceable: the term is necessary to protect: the employer's confidential information; customer / client / professional network relationships; and/or Australia's defence or national security, or the integrity of government; the term is reasonable, meaning that (as well as any other relevant factors): the term goes no further than is necessary to protect the interest(s) in question; and the term is reasonable with respect to the relationship between the employer and employee; the term does not contain cascading drafting – eg, defines restraint period to be each of 12 months, 6 months, 3 months, whichever is the greatest period that is enforceable. A restraint of trade term which does not satisfy those criteria will be of no effect, but it will not be a contravention to enter into an employment arrangement that includes such a term.

Effect on post-employment restraints

In short, the Bill will ban co-worker non-solicitation terms (often referred to as "staff non-solicitation restraints") for all employees, regardless of income, and will limit the availability of non-compete terms to high-income employees only. For all non-banned restraints, the restraint clause must comply with specified requirements which codify many aspects of the common law, but also go further by outlawing cascading drafting.

This means that employers will need to ensure that an employee is eligible to be subject to any non-compete term, and for all other kinds of restraint (eg client non-solicitation, non-dealing or non-interference), will need to ensure that the clause is appropriately drafted so as to meet the required criteria.

Commencement and transition periods

If the Bill passes into law, the expected timeline for implementation is below:

Timeline	Action
Commencement	The Act will commence from the beginning of the quarter following Royal Assent, ie on either 1 January, 1 April, 1 July or 1 October. The ban on including non-compete / co-worker non-solicitation terms in employment arrangements will take effect six months after commencement of the Act. Civil penalties for contravention can be imposed after this transition period. An employment arrangement which was entered into or established before the Act commences, and which contains non-compete and/or co-worker non-solicitation terms, will continue to apply until the employment arrangement is varied. Any permitted restraint of trade term to be included in a new or varied employment arrangement must meet the statutory criteria for enforceability (otherwise it will have no effect).
Variations post commencement	If a pre-existing employment arrangement which contains a non-compete / co-worker non-solicitation term is varied (irrespective of whether the variation to the employment arrangement relates to the restraint term), the banned term(s) will cease to apply. If a pre-existing employment arrangement which contains a permitted post-employment restraint of trade term is varied, that restraint term will only have effect if it meets the statutory criteria for enforceability.
Restraints in industrial instruments	Non-compete and/or co-worker non-solicitation terms which already exist in an enterprise agreement or workplace determination will remain operative until the instrument is replaced.

Grey areas and ambiguities

As with any new legislation, some aspects of the Bill are open to interpretation and yet to be clarified. These include:

The extent to which a court may still 'blue pencil' terms so as to be enforceable
Up until now, Australian courts have applied the blue pencil test to strike out or modify unreasonable parts of a post-employment restraint clause, either under the common law, or by applying the Restraints of Trade Act 1976 (NSW). The courts have then enforced the remaining parts of the clause. It is not clear the extent to which, if at all, courts will continue to apply this approach if the Bill passes. In jurisdictions outside of NSW, the ability to "blue pencil" terms will be limited in any case by the new prohibition on cascading drafting.

Whether terms and conditions in other documents are subject to the ban
The explanatory materials clarify the regulatory intent that shareholder agreements and business sale agreements are the kinds of arrangement that are not intended to be captured by the definition of "employment arrangement". They say: "Shareholder agreements where employees purchase shares and enter arrangements with their company as an employee shareholder, are another example of arrangements where restraint of trade terms may be used outside the employment relationship. In this scenario, these employees will gain additional financial benefits as shareholders and may also have greater access to trade secrets and confidential information".

There is a potential grey area in respect of incentive plans and other arrangements that provide for equity entitlements for employees, which may also impose certain restrictive terms as a condition of ongoing eligibility. If such an arrangement is an "employment arrangement", and we think it probably is, there would then be a question as to whether the terms are in the nature of a benefit that encourages retention (ie not a non-compete term), or a non-compete term that would only be available to high-income employees. Much will turn on the specific drafting.
Whether cascading drafting is not permitted for any kind of restraint, or just in non-compete clauses
The Bill will allow for restraint of trade terms to be included in employment arrangements, provided that the clause is not banned by virtue of being a co-worker non-solicitation term or a non-compete term for an employee who is not a high-income earner.

For a non-banned restraint, it will only have effect if it meets specified criteria which are set out in the proposed section 333ZJ. One of those criteria is that the "post-employment restraint of trade term" (which means any kind of restraint) not include cascading drafting. However, the heading of and example given under the relevant subsection refers only to "non-compete terms".

It is unclear whether the ban on cascading drafting is intended to apply to non-compete terms only, or for any restraint whatsoever. We expect that this drafting matter will be addressed following the consultation period.

Competition law changes

Along with the changes to the Fair Work Act, the Bill will also extend the cartel conduct civil prohibitions and criminal offences set out in Part IV of the Competition and Consumer Act. The Bill proposes that the cartel conduct framework will now apply to contracts, arrangements or understandings between businesses that prevent or restrict hiring of staff (no-poach agreements) or that fix, control or cap remuneration and other employment conditions (wage-fixing agreements). This will apply in relation to contracts, arrangements, or understandings containing no-poach or wage-fixing agreements concerning all employees, regardless of their employment status (ie permanent, casual, or part-time).

This is a significant change to Australian competition law. For policy reasons, contracts, arrangements and understandings relating to the remuneration, conditions of employment, hours of work or working conditions of employees, and arrangements in relation to employment contracts generally, have historically been exempt from the application of the Competition and Consumer Act (the industrial relations exemption), because they are regulated by employment laws.

However, the Bill proposes to change this position by making no-poach and wage-fixing agreements new and separate forms of cartel conduct. In that context, no-poach and wage-fixing agreements will be subject to the full scope of civil penalties and criminal fines available for cartel conduct under the Competition and Consumer Act (including for companies up to $100 million per contravention, three times the benefit obtained, or 30% of the company's adjusted turnover during the breach period, and personal fines or imprisonment for up to 10 years for individuals involved in the conduct). Cartel conduct is viewed as one of the most serious forms of economic misconduct under Australian law and is an enduring enforcement priority for the Australian Competition and Consumer Commission.

The industrial relations exemption will continue to apply to other employment-related conduct.

In a further change to the current cartel conduct framework, while all existing forms of cartel conduct require that the parties to the contract, arrangement or understanding are competitors or potential competitors (the competition condition), the proposed new forms of cartel conduct for no-poach and wage-fixing agreements do not have a similar requirement. As a result, they will apply regardless of whether the parties making the no-poach or wage-fixing agreement are in competition with each other. Further, the new cartel conduct provisions do not require that the conduct occurs "in trade or commerce", and therefore as long as one of the parties is incorporated in or carries on business in Australia, or is an Australian resident, it appears that any conduct globally could fall foul of the new prohibitions and offences.

The Bill introduces targeted exemptions for specific forms of conduct that may serve the public interest, but which would otherwise constitute no-poach or wage-fixing agreements. The exemptions are each subject to specific, detailed conditions that must be met, and therefore should not be relied upon without thoroughly considering the facts of the agreement in question and ensuring all elements of the relevant exemption are met. As with all exemptions, not meeting the technical requirements will expose the agreement to significant risk as a form of cartel conduct. At a high level, the exemptions apply to:

joint ventures;
provisions that relate to conduct permitted or approved under the Fair Work Act (multi-employer bargaining, protected industrial action, etc) or under State or Territory industrial law;
Government wage-setting and minimum labour standards;
employee secondment arrangements;
labour hire arrangements;
professional sporting leagues; and
agreements (exclusively) between related bodies corporate.

If introduced, there will be separate prohibitions and offences for both the making of no-poach and wage-fixing agreements, as well as giving effect to such agreements. As a result, businesses will need to consider if relying on existing agreements made before the commencement of the new cartel conduct prohibitions and offences will be caught as giving effect to those agreements.

Practical steps for businesses to take now

Businesses should begin planning now for prohibitions on the use of post-employment restraints and review any arrangements with other businesses about wages or no-poaching.

Some practical steps to consider include:

Reviewing organisational culture survey feedback and benefit and incentive programs, including flexible work policies, to strengthen staff retention, independent of post-employment restraints.
Auditing contracts, deeds, policies and other employment documents to identify which employees have post-employment restraints. For those who are subject to a non-compete term (as defined in the draft Bill), assessing whether the employee falls below, close to or well above the high income threshold.
Identifying the employees your business is most concerned about retaining and the information, relationships or other legitimate interests at risk.
Reviewing template and existing non-compete clauses and policies, and the changes required to have them meet the requirements of a permitted restraint (but noting that businesses should hold back on implementing changes to templates until the legislative process is further progressed).
Considering whether remuneration should be increased for any employees, for example, by converting some discretionary payments into contractual entitlements, to move an employee above the high income threshold where commercially appropriate.
Considering the use of longer termination notice periods and utilising gardening leave as an alternative to post-employment restraints.
Reviewing arrangements to receive any wage analysis from other businesses or third parties (including benchmarking and reporting) and whether those arrangements may create new cartel conduct risks.
Reviewing any agreements with other businesses that impose restraints on poaching employees.
Reviewing any wage-fixing arrangements with other businesses.
Maintaining robust confidentiality, information-security and intellectual-property protection systems.

Businesses may also want to consider whether to make a submission to the Government by 2 October 2026 about the Bill.

Authors: Jane Harvey, Partner; Simon James Moore, Senior Associate; Julie Mills, Global Practice Management Counsel; Justin Jones, Partner; Rowan Kendall, Counsel; Amanda Tesvic, Expertise Counsel and Caitlin Green, Graduate.

The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.