A peak employer group says the banning of non-compete clauses for many workers will have “predictable problematic consequences” for businesses.
The Australian Industry Group described the move as unnecessary and a further unwarranted blow to employers.
The Federal Government released draft legislation this week that bans most non-compete clauses for employees earning below $190,100 per year from 2027.
Ai Group Chief Executive Innes Willox said the non-compete clauses targeted in the legislation were already unenforceable under the common law unless they were reasonable and protected an employer’s legitimate interests.
“However, the law also recognises that businesses may have legitimate interests that warrant protection and that such protection can be reasonable in many cases,” Mr Willox said.
“Overriding this longstanding legal position is yet another change that will be celebrated by unions but viewed as a further unwarranted blow to employers.”
Mr Willox said there were many employees earning below $191,100 in roles involving access to commercially sensitive or otherwise confidential information.
“Just think about employees working in sales roles, preparing commercial tenders or privy to confidential production processes or business plans,” he said.
“This applies to a lot more employees than the hairdressers commonly referred to by the Government’s spokespeople.”
Mr Willox welcomed the Government not taking away contract clauses that prevented employees disclosing confidential information.
However, he said this did not go far enough.
“The courts have repeatedly recognised that clauses preventing employees from disclosing confidential information are not sufficient to provide practical protection for an employer when their former staff member moves to a competitor as they are notoriously difficult to enforce,” he said.
“The almost blanket ban on such provisions is a heavy-handed approach.
“It is hoped that the consultation with industry will not just be lip service and will lead to improvements to the flawed Bill. There needs to be a more nuanced approach.
“The legislation must include a mechanism affording employers practical protection where it is reasonable and they have legitimate interests, regardless of an employee’s earnings.”
In a statement released this week, the Federal Government said the draft legislation was designed to ensure workers were not held back by other unfair restraint clauses when they sought to get a better job.
“The widespread use of these clauses can lead to lower wages, and negatively impact labour mobility and productivity,” it said.
“Building a more innovative and productive economy depends on workers being able to move to jobs where their skills are most valued.”
The Government also announced it would consult on:
- A ban of co-worker non-solicitation clauses
- A ban on no-poach and wage-fixing arrangements
- A ban on cascading restraint of trade clauses
- Appropriate exemptions and safeguards to protect legitimate business interests.
Submissions can be made online on the Treasury consultation hub until October 2, 2026.
Minister for Employment and Workplace Relations, Amanda Rishworth said non-compete clauses dragged down wages, handcuffed workers and put a handbrake on labour productivity.
“Labor is determined to help boost job mobility for the more than three million Australian workers constrained by a non-compete clause,” she said.
