Workplace Reform Proposed Changes regarding Non-Complete Clauses

Significant changes to non-compete and restraint clauses are on the horizon for Australian workers, aligning with recent overhauls in the US and UK.

Since 2022, discussions around non-compete clauses have gained traction, with the Labour government pushing for workplace reforms through initiatives such as the Secure Jobs, Better Pay Bill and the Closing Loopholes Bill. Now, following last night’s Federal budget, a major reform has been announced:

• From 2027, employers will no longer be able to enforce non-compete clauses on employees and contractors earning under $175,000 per year.
• For higher-income earners, additional protections will be explored, given the role of intellectual property and sensitive business information.

This decision stems from a Treasury Competition Review, which found troubling cases where minimum wage workers faced legal action for seeking new job opportunities.

What are Non-Compete Clauses?

Non-compete clauses restrict employees or contractors from joining competitors or starting their own businesses within a set time frame and geographic area after leaving their roles.

It’s essential to distinguish between non-compete clauses and confidential information protections, which remain covered under the Corporations Act and other restraint clauses, such as those preventing employees from soliciting former clients or colleagues.

What Happens Next?

The Labour government will consult on key policy details, including potential exemptions, penalties, and the practical rollout of these reforms, likely through amendments to the Fair Work Act.

Treasurer Jim Chalmers also noted that removing non-compete clauses could add $5 billion to GDP and increase wages by 2–4 percent.

Now is an opportune time to review your employment contracts, taking into account these and other recent workplace law changes. If you have any questions, please contact your Morrows advisor.