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The proposed changes are intended to make it easier for workers to move to better-paid roles without being restricted by clauses in their employment contracts.
The Albanese Government has released draft legislation to ban non-compete clauses for Australian workers earning below the Fair Work Act high-income threshold, currently set at AUD$190,100 a year.
The proposed changes are intended to make it easier for workers to move to better-paid roles without being restricted by clauses in their employment contracts. The reform would apply across a broad range of occupations, including childcare workers, tradespeople, and receptionists.
Non-compete clauses generally prevent an employee from working for a competing business, in a similar industry or geographical area, for a specified period after leaving a job. While they have traditionally been used to protect legitimate business interests, concerns have grown that they are increasingly being applied to workers who have limited bargaining power and may not have access to commercially sensitive information.
The government argues that widespread use of the clauses can limit job mobility, suppress wage growth, and reduce productivity by preventing people from taking jobs where their skills are more highly valued.
Research from the e61 Institute, cited in an explanation on the draft, suggests at least one in five Australian workers is subject to a non-compete clause. The institute’s survey of 3,000 respondents found that such restrictions affect many lower-paid workers, including clerical workers and labourers, as well as employees in customer-facing roles such as childcare workers, yoga instructors and IVF specialists.
The research also found that around half of the workforce is bound by some form of post-employment restraint. These can include non-compete clauses, confidentiality obligations, client non-solicitation clauses and restrictions on recruiting former colleagues.
According to e61, a ban on non-compete clauses could increase the wages of affected workers by up to four per cent. For a typical worker, that could amount to about AUD$2,500 a year.
The draft legislation would be accompanied by consultation on further restraint-of-trade reforms. These include a potential ban on clauses preventing workers from soliciting former co-workers, as well as bans on no-poach and wage-fixing arrangements between businesses. The Government will also consult on banning so-called cascading restraint clauses, which set out multiple alternative restrictions in a contract, and on appropriate exemptions to protect legitimate business interests.
Employment and Workplace Relations Minister Amanda Rishworth said non-compete clauses were holding back workers and the broader economy.
“Non-compete clauses drag down wages, handcuff workers, and put a handbrake on labour productivity,” Ms Rishworth said.
“Labour is determined to help boost job mobility for the more than three million Australian workers constrained by a non-compete clause, including childcare workers, construction workers, and hairdressers.”
Andrew Leigh, Assistant Minister for Productivity, Competition, Charities and Treasury stressed that workers should not need permission from a former employer to take a better job.
“Non-compete clauses can act like a padlock on opportunity, holding down wages and keeping people from jobs where their skills are worth more,” Dr Leigh added.
Submissions on the draft legislation and related consultation proposals can be made through the Treasury consultation hub until 2 October 2026.
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