Restraints of Trade Reform: What Australian Businesses Need to Know
Background
The Australian Government has released a draft Treasury Laws Amendment (Banning Unfair Non-Competes) Bill 2026 (Bill) as part of its broader agenda to increase labour mobility, improve productivity and strengthen competition in Australian labour markets.
The proposed reforms represent significant changes to the existing laws governing restraints of trade, including non-compete, non-solicitation and related post-employment restrictions in employment and commercial agreements.
If enacted, the reforms would limit the use of non-compete clauses and certain other post-employment restraints, requiring businesses to reconsider how they protect confidential information, customer relationships and workforce stability.
The proposed reforms are expected to commence in 2027.
Key Changes
Ban on Non-Compete Clauses for Low and Middle-Income Workers
The proposed reforms would prohibit non-compete clauses for workers earning below the applicable remuneration threshold of $190,100 per annum.
This change would limit employers’ ability to prevent affected employees from working for competitors or establishing competing businesses after their employment ends.
Businesses will need to consider how they can continue to protect their legitimate commercial interests within the proposed framework.
Ban on Co-Worker Non-Solicitation Clauses
The proposed reforms would prohibit clauses that prevent employees from soliciting or encouraging their former colleagues to leave their employment.
This change may affect existing employment contracts and standard restraint provisions, requiring businesses to review their current arrangements.
Prohibition on Cascading Restraints
The proposed reforms would prohibit cascading restraint clauses. These clauses typically include multiple alternative restraint periods, geographical areas or combinations of restrictions, with the intention of allowing a court to enforce a narrower restraint if a broader one is unenforceable.
Businesses should review their existing restraint provisions to determine whether amendments may be required.
Prohibition on No-Poach and Wage-Fixing Arrangements – Non-Employment Agreements
The proposed reforms also address certain no-poach and wage-fixing arrangements between businesses outside the employment agreement context.
Businesses should consider whether any existing commercial arrangements could be affected by these proposed restrictions.
Will the Changes Apply to Existing Agreements?
The application of the proposed reforms to existing agreements will depend on the final legislation and any applicable transitional provisions.
Businesses should review their current employment contracts and restraint provisions to identify clauses that may be affected and determine whether changes may be required.
What Protections Remain Available to Employers?
Although the proposed reforms may restrict the use of certain restraints, businesses may still be able to protect their legitimate commercial interests through other contractual measures.
These may include:
- Confidentiality obligations: Protecting confidential information and trade secrets.
- Intellectual property protections: Protecting ownership and use of intellectual property.
- Client non-solicitation restraints: Reviewing whether these restrictions remain permissible and enforceable under the proposed framework.
- Garden leave: Using appropriate contractual provisions to manage an employee’s departure, subject to the applicable terms and law.
The availability and enforceability of these protections will depend on the circumstances and the final legislative framework.
How Can Businesses Prepare for the Reforms?
Businesses should consider taking the following steps to prepare for the proposed changes:
- Review existing employment contracts to identify non-compete, non-solicitation and other restraint provisions.
- Identify potentially affected clauses and assess how the proposed reforms may apply.
- Review contract templates and consider whether updates may be required.
- Assess legitimate business interests that require protection, including confidential information, intellectual property and client relationships.
- Consider alternative protections that may be available under the proposed framework.
- Seek legal advice before making changes to existing agreements or introducing new restraint provisions.
Taking a proactive approach will help businesses identify potential risks and prepare for the proposed changes.
Key Takeaways
- The proposed reforms could significantly change how businesses use non-compete and other restraint clauses.
- Non-compete clauses for low and middle-income workers may be prohibited, subject to the applicable remuneration threshold and final legislation.
- Co-worker non-solicitation clauses, cascading restraints and certain no-poach and wage-fixing arrangements may also be affected.
- Businesses should review their existing employment contracts and commercial arrangements.
- Alternative protections, including confidentiality and intellectual property obligations, may remain available.
- Businesses should monitor the progress of the Bill and consider obtaining legal advice on their contractual arrangements.
Final Thought
The proposed reforms represent a significant development in Australian employment and competition law. Businesses should begin reviewing their existing contractual arrangements and considering how they may be affected if the legislation is enacted.
Early preparation will help businesses identify potential risks and consider appropriate ways to protect their legitimate commercial interests.
How We Can Help
MistryFallahi Lawyers & Business Advisors can assist businesses in reviewing employment contracts, restraint provisions and commercial agreements in light of the proposed reforms.
Our team can help identify potential risks, review contractual protections and advise on appropriate changes as the legislative position develops.
If your business would like advice on how the proposed reforms may affect its employment contracts or commercial arrangements, please contact our team.
