What employers need to know about the proposed ban on non-competes
Summary
The exposure draft Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 proposes reforms across:
competition law (Part IV of the Competition and Consumer Act 2010 (Cth) (CCA)) to treat “no-poach” and “wage-fixing” arrangements as cartel conduct; and
workplace law (the Fair Work Act 2009 (Cth) (FW Act)) to significantly limit post-employment restraints by banning most non-compete clauses and banning co-worker non-solicitation clauses for all employees.
In practical terms, the draft would:
expose businesses to civil and criminal risk for certain labour-market coordination arrangements with competitors, subject to narrow exemptions; and
render many contractual restraints in employment arrangements void and unenforceable, with civil penalties for employers who include, enforce, or threaten to enforce prohibited terms (subject to transitional timing).
Proposed Legislation Changes & Reasons
Extending cartel rules to “no-poach” and “wage-fixing” labour-market conduct.
Cartel conduct is considered the most egregious form of anti-competitive behaviour. A cartel:
is made up of independent businesses;
attempts to increase members’ profits while maintaining the illusion of competition;
can involve businesses of any size, from small, local businesses to large corporations;
can be local, national or international.
The 4 types of cartel activity are price fixing, market share co-ordination, output control and bid rigging. The laws apply to all Australian corporations and individuals and attract both civil and criminal penalties.
The draft expands cartel provisions to include “no-poaching” provisions which is restricting recruiting/soliciting/hiring another party’s staff, including via permission/notification/fees and “wage-fixing” provisions meaning fixing/controlling/capping remuneration or terms and conditions for staff.
There are limited exemptions for legitimate arrangements, and narrow exceptions/defences for specified legitimate business arrangements. These include joint ventures, secondments, labour hire and professional sporting leagues, typically framed around “reasonably necessary” limitations and conditions such as transparency/consent and time limits.
The legislative intention is to target collusive conduct while preserving certain coordination that may be in the public interest (including where likely to provide net benefits to workers and/or the economy), but only in limited and regulated circumstances.
Right to be free of non-competes for most employees
The draft creates a statutory “right to be free of a non-compete term” for employees who earn at or below the full-time equivalent earnings of the high income threshold (currently $191,100 but subject to change 1 July each year). Casuals and pieceworkers have the right to be free of a non-compete term regardless of their income. This means a prohibited non-compete term is “of no effect” and unenforceable. The draft legislation also targets enforcement/threats to enforce where the term is unenforceable.
Ban on co-worker non-solicitation terms for all employees
The draft provides a right for all employees to be free of “co-worker non-solicitation terms” and makes it a civil remedy contravention for an employer to enter into or establish an employment arrangement that includes such a term. This means any co-worker non-solicitation term included contrary to the prohibition is “of no effect” and cannot be enforced.
Permitted restraints must meet codified reasonableness/legitimate interest requirements and cannot be “cascading”
Where a post-employment restraint of trade term is permitted (including non-competes for those above the high-income threshold), the draft requires the term to be necessary for specified legitimate interests and to be reasonable. The draft restricts the use of cascading clauses which is said to create ambiguity and disadvantage employees.
Penalties and transition approach
Civil penalties may apply for prohibited non-competes and co-worker non-solicitation terms, including for enforcement/threats to enforce unenforceable terms.
The draft contemplates a transition approach with delayed application of civil penalty provisions (after a 6-month period beginning on commencement) for employment arrangements entered into or established on or after commencement, intended to allow employers time to adjust. Employment agreements that are varied after this legislation comes into force, will be subject to the new legislation.
What this means for employers
Employers should be considering how these changes will impact their businesses and speak with a lawyer if they are concerned so they are prepared ahead of the new legislation.
In time, employers will need to review employ contracts and existing practices to avoid including non-compete terms for employees at or below the high income threshold (currently $191,100), and for casuals and pieceworkers (regardless of income), because mere inclusion of the terms in a new or varied employment arrangement, is contemplated to contravene the prohibition, even if the clause is never enforced.
Co-worker non-solicitation terms are proposed to be prohibited for all employees, with contravention occurring upon inclusion in an employment arrangement and the term being of no effect.
Given co-worker non-solicitation terms are proposed to be prohibited for all employees, employers will need to pivot to other lawful retention and risk-management tools that do not fall within the prohibited definition (for example, ensuring compliance with the permitted restraint framework and focusing on legitimate interests).
Businesses will need to audit any arrangements (formal or informal) with other businesses that could be characterised as restricting hiring or coordinating remuneration/conditions, because the draft treats these as cartel conduct subject to the existing cartel framework (including civil and criminal consequences), albeit with narrow exemptions for specified legitimate structures. Where a business intends to rely on an exemption (e.g., joint venture, secondment, labour hire or sporting league context), it should ensure the arrangement is structured to meet the statutory conditions and is confined to what is reasonably necessary, as the exemptions are described as narrow and conditional.
Consider planning ahead so onboarding processes, variation paperwork and employment contracts are updated and compliant when the legislation is passed and give thought around legitimate interests and reasonableness in relation to permitted restraints.
If you need legal advice for your business, please reach out to jade@jeslegal.com.au or 07 4599 3009 to discuss.
This article is general information. It is not legal advice, and it is not specific to your situation. If you need legal advice, please reach out to us.