Australian employers may soon have significantly less ability to prevent employees from joining competitors or establishing competing businesses after their employment ends.
On 7 September 2026, the Federal Government released draft legislation proposing a broad new regime regulating post-employment restraints. The proposed reforms would prohibit non-compete clauses for most employees earning below the Fair Work Act high-income threshold, currently $190,100 per annum.
The reforms represent a significant shift away from the current common law approach to restraints of trade and will require employers to reconsider how they protect confidential information, customer relationships and other legitimate business interests.
Importantly, the reforms are not yet law. The legislation is currently subject to consultation, which closes on 2 October 2026. The Government has indicated that the reforms are intended to commence in 2027.
A non-compete clause is a contractual provision which seeks to prevent an employee from competing with their former employer after their employment ends.
For example, an employment contract may provide that for 6 or 12 months after leaving employment, an employee cannot:
- work for a competitor;
- establish or operate a competing business;
- provide services to a competing business; or
- work within a specified geographical area in competition with the former employer.
Under the current law, such restraints are generally governed by the common law doctrine of restraint of trade. A restraint will generally only be enforceable where the employer can establish a legitimate business interest requiring protection and the restraint goes no further than is reasonably necessary to protect that interest.
The proposed reforms would fundamentally change this position for most employees. The draft legislation proposes to prohibit non-compete clauses for employees whose annualised full-time equivalent earnings are at or below the Fair Work Act high-income threshold which is currently $190,100.00.
The proposed ban is not an outright prohibition on all employee non-competes. Employees whose earnings exceed the applicable high-income threshold would generally remain outside the proposed ban on non-compete clauses. However, employers should not assume that they will be able to continue using their existing restraint provisions without amendment.
The draft legislation proposes broader changes to employee restraints, including restrictions on certain non-solicitation provisions and the use of “cascading” restraint clauses. The Government is also consulting on the appropriate treatment of restraints applying to higher-income employees.
Employers do not necessarily need to delete every non-compete clause from their contracts immediately. The legislation remains in draft form and may change following the consultation process. However, employers should start preparing now by using the intervening period to audit their existing contracts and consider what protections they genuinely need before the new regime takes effect.
This article was published on 10/09/26 and the information is valid as at the date of publishing. This article is general in nature and is not and should not be considered or relied on as legal advice. Meehans Solicitors is not responsible in the event this information is relied upon by the reader in the absence of specific legal advice.
