Non-Compete Clause Reforms: Preparing Your Business for Upcoming Changes

In March 2025, the Federal Government announced plans to ban non-compete clauses for low and middle-income employees, while also consulting on their use for higher-income workers. The proposed reforms are expected to take effect from 2027, marking a significant shift in employment law that could impact both employers and employees across Australia.

Why the Change?

The announcement follows findings from the Competition Review and the Productivity Commission, both of which highlighted that restricting the use of non-compete and restraint-of-trade clauses could materially boost wages and improve job mobility.

Treasury’s Consultation Focus

Treasury has since released a consultation paper seeking feedback on key areas, including:

• Implementation – how a ban on non-compete clauses should be rolled out
• High-income employees – whether additional restrictions should also apply to post-employment restraints at senior levels
• Concurrent employment – whether clearer rules are needed for part-time or casual employees holding multiple jobs
• Competition law changes – implementing bans on no-poach and wage-fixing agreements in the Competition and Consumer Act

Importantly, the Government has clarified that these reforms will not affect restraints of trade outside employment arrangements, such as the sale of a business, or the ongoing use of confidentiality clauses in employment contracts.

What Employers Should Consider

Although the reforms are still under consultation and not yet finalised, they may require significant adjustments to employment agreements in the years ahead. Employers should:

• Keep informed of Treasury updates and legislative developments
• Begin identifying which employee agreements include non-compete clauses
• Consider alternative strategies for protecting business interests, such as confidentiality and intellectual property protections
• Be prepared to review and update contracts if and when the reforms become law

What’s Next?

While it is too early to know exactly what the final laws will look like, employers should be aware that change is coming. With reforms expected from 2027, businesses have time to prepare but should avoid being caught off guard.

At PPT, we’ll continue to keep clients updated as more information becomes available. For guidance on how these potential changes may affect your business, contact us today.