Reform to non-compete clauses and other restraints on workers
2 October 2025
On 12 September 2025, the Law Council provided a submission to the Treasury in response to its consultation on proposed reforms to non-compete clauses and other restraints on workers. The proposed reforms are part of an ongoing Competition Review announced by the Treasurer in August 2023 and would give effect to announcements made in March 2025 that the Government would:
- implement a ban on non-compete clauses for employees earning less than the high-income threshold in the Fair Work Act 2009 (Cth); and
- seek to ‘close loopholes’ that may allow businesses to make anti‑competitive agreements that cap wages or conditions or prevent staff from being hired by competitors.
In its submission, the Law Council expressed broad support for the Australian Government’s objective of addressing the misuse of non-compete and related clauses and recognised the potential for the reforms to improve labour market efficiency, boost productivity and improve outcomes for workers who might otherwise be unnecessarily restrained.
However, the Law Council also noted that care must be taken to avoid overregulation, legal uncertainty, and unintended consequences. The common law provides a robust framework for many issues, and statutory intervention should be targeted, clear, and proportionate.
Recommendations included:
- The definition of ‘non-complete clause’ eventually adopted should be consistent with existing terminologies and practices within the Australian industrial law context. The definition should exclude standard confidentiality clauses, and clauses relating to intellectual property and other critical information.
- Subject to consideration of high-income employees with low ‘base salaries’ and high-income ‘junior’ employees, the existing definition of ‘high income employee’ in section 329 of the Fair Work Act is an appropriate income threshold below which non-compete clauses should not be permitted.
- The penalty regime should be proportionate and consistent with other Fair Work Act contraventions. Civil penalties, similar to those for sham contracting and pay secrecy provisions, are appropriate
- Exemptions should be limited and clearly justified on public interest or national security grounds. For example, exemptions in respect of workers who are engaged to conceive, create or develop particularly valuable or otherwise material intellectual property, or whose role is reasonably expected to involve accessing such intellectual property.
- Non-solicitation clauses should be permitted but subject to clear limits.
There is a continuing role for no-poach agreements between cooperating businesses, such as in the context of joint venture agreements, secondment arrangements and so on.
Last Updated on 29/09/2025
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