Restraining post-employment restraints: Federal Government releases Exposure Draft Bill

In March 2025, as a measure to improve wages, productivity and competition, the Albanese Government announced its intent to ban with effect from 2027 the use of non-compete clauses in employment contracts for the majority of Australian workers.

On 7 September 2026, the Government released an exposure draft of its proposed bill to prohibit non-compete terms for low- and middle-income employees and non-solicitation terms for all employees, as well as to prohibit no-poach and wage-fixing agreements. The draft Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 (Exposure Draft Bill) proposes to expand the cartel framework of the Competition and Consumer Act 2010 (CCA) and to amend the Fair Work Act 2009 (FW Act).

The Government has called for submissions on the Exposure Draft Bill by 2 October 2026 via the Treasury Consultation Hub.

Below, we highlight our key observations from the Exposure Draft Bill.

Proposed prohibition on non-compete terms

The Exposure Draft Bill proposes to prohibit:

• non-compete terms being in employment arrangements for employees below the high income threshold; and
• seeking to enforce unenforceable non-compete terms.

"Employment arrangements" include deeds, workplace policies and written or unwritten arrangements, in addition to the contract of employment.

The proposed prohibitions would not apply to non-employment arrangements such as a sale of business and in shareholder agreements.

Definition

A critical issue is what constitutes a non-compete term.

The Exposure Draft Bill defines "non-compete term" broadly to target any term or condition of employment limiting an employee from "be[ing] involved in any business or undertaking" post-employment or from "commenc[ing] subsequent employment", whether the term does so by being:

• a term that directly "restricts" (e.g. restricts employment with a competitor or starting a competing business);
• a term that indirectly "prohibits or prevents" (e.g. restricts working for a business with the same major customers); or
• a term that "adversely affects the employee" (e.g. requirements to pay amounts out-of-pocket, repay bonuses or deny severance packages).

Certain terms and conditions of employment are not proposed to be prohibited as they are excluded from the definition of "non-compete term". These include:

• confidentiality clauses (unless the clause is so restrictive as to effectively meet the definition of a non-compete term);
• terms encouraging retention, whether monetary or non-monetary;
• notice period clauses (and gardening leave clauses) as an employee is ceasing employment; and
• terms authorised by other laws (including conflict of interest obligations under the Australian Solicitors' Conduct Rules or restrictions from working for foreign militaries or governments under the Defence Act 1903).

Exemptions to the prohibition on non-compete terms are proposed in the Exposure Draft Bill for:

• preventing prejudice to Australia's defence or national security, or the integrity of the Government (e.g. not working for an institution that was the subject of Government investigations conducted by the employee); and
• declarations made by the Minister for Employment and Workplace Relations.

The significance of the high income threshold

The proposed prohibition on non-compete terms will apply to all casual employees and pieceworkers irrespective of their income, and to employees with "annualised full-time equivalent earnings" below the high income threshold. Significantly:

• The "annualised full-time equivalent earnings" would be the 12-month earnings of an employee calculated on wages at the time an agreement takes effect or is varied, not accounting for any wage increases during the 12 month-period.
• The high income threshold for this financial year is $190,100, and is indexed annually on 1 July each year.

Where a non-compete term is initially agreed to when an employee is above the high income threshold, and the employee's "annualised full-time equivalent earnings" later is at or below the high income threshold, then:

• the non-compete term in their employment arrangement would be unenforceable until such time that the employee's "annualised full-time equivalent earnings" are again above the high income threshold; and
• it would be unlawful for an employer to seek or threaten to enforce the non-compete term during a period when it is unenforceable.

Restrictions on non-compete terms even when permitted

Whilst the Exposure Draft Bill allows for a non-compete term in an employment arrangement for a high income employee, changes are proposed to what should be included in such a provision.

The Exposure Draft Bill proposes to introduce restrictions on permitted post-employment restraint of trade terms in employment arrangements, including, but not limited to, non-compete terms for high income employees by:

• codifying the common law test for post-employment restraints of trade that the restraint must be necessary to protect the employer's legitimate business interest and be reasonable; and
• making cascading non-compete clauses unenforceable.

The first part of these proposed restrictions codifies that post-employment restraints of trade must:

• be necessary to protect the employer's legitimate business interest; and
• be reasonable with respect to the relationship between the employer and employee and go no further than necessary.

Notably, the Exposure Draft Bill proposes to exhaustively provide legitimate business interest reasons must be for:

• protecting confidential information;
• protecting professional or personal business relationships; or
• (if one of the prescribed exemptions to the prohibition for non-compete terms applies) preventing prejudice to Australia's defence or national security, or the integrity of the Government.

This would exclude earlier case law on other legitimate business interests, such as maintaining a stable workforce.

The second part of the proposed restrictions notably affects the use of cascading clauses in non-compete clauses. Cascading clauses have commonly been used to provide subsets of geographical or temporal restrictions such that a Court may find a greater restriction unenforceable but a smaller subset still enforceable.

The Exposure Draft Bill proposes to make permitted non-compete terms with cascading clauses unenforceable, though no civil penalty would apply.

Proposed prohibition on non-solicitation terms

The Exposure Draft Bill proposes to prohibit co-worker non-solicitation terms in respect of all employees regardless of income.

This proposed prohibition would cover any term that "restricts or prohibits an employee from recruiting, or attempting to recruit" a co-worker. This would capture advertising, sending business proposals, conducting interviews, networking, referring, negotiating, or offering roles.

The Exposure Bill defines "co-worker" broadly to extend beyond fellow employees to include, both existing and former:

• employees;
• contractors or subcontractors (and their employees);
• employees of labour hire companies assigned to work for the employer;
• outworkers;
• apprentices or trainees;
• work experience students; and
• volunteers.

Post-employment restraint terms imposed or authorised by other Commonwealth, State or Territory legislation would not be affected by the prohibition.

Penalties and Fair Work Instruments

Proposed penalties for breaching the prohibitions

Contraventions of these prohibitions on non-compete and co-worker non-solicitation terms would attract civil penalties with a maximum of 60 penalty units (currently $21,840) or 600 penalty units for serious contraventions (currently $218,400) by individuals and $109,200 and $1,092,000 respectively for body corporates.

The prohibitions and Fair Work Instruments

The Exposure Draft Bill proposes to also insert provisions prohibiting non-compete and co-worker non-solicitation terms in modern awards, enterprise agreements and workplace determinations, however inadvertent inclusion in enterprise agreements would not attract civil penalties.

Proposed prohibition on no-poach and wage-fixing agreements

Australia's competition laws currently prohibit certain types of cartel conduct between competitors including price fixing, output restrictions, market allocation and bid rigging.

The Exposure Draft Bill would expand the cartel prohibitions to include two new cartel provisions:

• no-poach provisions: which have the purpose, effect or likely effect of preventing a party from recruiting, soliciting or hiring another party’s current, former or future staff or imposing notification or other requirements before a party can conduct any part of, or complete, a process that results in the recruiting, soliciting or hiring of another party’s current, former or future staff; and
• wage-fixing provisions: which have the purpose, effect or likely effect of directly or indirectly fixing, maintaining, decreasing or controlling the remuneration or terms and conditions of employment of the current or future staff of two or more parties to the contract arrangement or understanding.

The proposed prohibitions would apply to employees regardless of employment status (permanent, casual or part-time), but would not cover independent contractor arrangements, which would continue to be subject to the existing cartel framework of the CCA as contracts for service.

There are specific exemptions to the proposed cartel prohibitions for entering into or giving effect to agreements containing a no-poach or wage fixing provision. These include exemptions for:

• employees deployed on joint venture, secondment or labour hire arrangements (subject to the no-poach ending no later than three months after the end of the employee's involvement and wage-fixing ending immediately after);
• remuneration, conditions of employment, hours of work or working conditions that are permitted or approved under the FW Act or a State or Territory industrial law (including multi-employer enterprise bargaining);
• government wage setting between Commonwealth or State or Territory authorities;
• minimum labour standard codes where they would otherwise unintentionally be caught by the prohibition; and
• professional sporting leagues where the provision is reasonably necessary to enable selections.

A number of other exemptions to cartel conduct (for instance in relation to internal arrangements between related body corporates) continue to apply.

Even if an arrangement falls within a specific exemption to the cartel prohibition, employees would continue to be able to challenge arrangements under common law restraint of trade doctrines.

In relying on the existing cartel framework, the Exposure Draft Bill proposes that existing criminal and civil penalty provisions that apply to cartel provisions would be applicable to no-poach and wage-fixing agreements.

The maximum civil penalties for corporations for contravening the cartel prohibitions are the greater of:

• $100 million;
• if the Court can determine the value of the "reasonably attributable" benefit obtained, three times that value; or
• if the Court cannot determine the value of the "reasonably attributable" benefit, 30% of the corporation's adjusted turnover during the breach turnover period for the contravention.

Individuals can also face significant civil and criminal penalties for contravening the cartel laws, including up to 10 years' imprisonment.

The Australian Competition and Consumer Commission (ACCC) would retain responsibility for enforcing these prohibitions on cartel conduct and can refer criminal matters to the Commonwealth Director of Public Prosecutions.

Proposed timeline for the prohibitions in the Exposure Draft Bill

The Exposure Draft Bill proposes amendments to the FW Act and CCA to come into operation from the first quarter after the amendments receive Royal Assent. In respect of non-compete and co-worker non-solicitation terms in existing employment arrangements:

• existing non-compete and co-worker non-solicitation terms would be permitted to remain in existing employment arrangements and would apply until the employment arrangements are varied (irrespective of whether the variation relates to the non-compete or co-worker non-solicitation terms).

In respect of non-compete and co-worker non-solicitation terms in new employment arrangements or existing employment arrangements that are varied:

• proposed prohibitions and unenforceability (being non-compete terms for employees below the high income threshold and co-worker non-solicitation terms for all incomes are prohibited and unenforceable) operate from the commencement of the proposed amendments to the FW Act;
• civil penalty provisions against enforcing or threatening to enforce unenforceable non-compete terms would apply to employment arrangements created from the commencement of the proposed amendments to the FW Act; and
• civil penalty provisions against the inclusion of prohibited non-compete or co-worker non-solicitation terms would apply to employment arrangements created from six months after the commencement of the proposed amendments to the FW Act.

In respect of non-compete and co-worker non-solicitation terms in enterprise agreements:

• existing non-compete and co-worker non-solicitation terms in enterprise agreements would remain and continue to operate even if the enterprise agreement is varied; and
• non-compete and co-worker non-solicitation terms in new enterprise agreements or inserted into existing enterprise agreements that currently do not have such terms will be prohibited.

In respect of no-poach and wage-fixing provisions:

• prohibitions on the making of no-poach and wage-fixing agreements would operate from the commencement of the proposed amendments to the CCA, prospectively restricting new agreements; and
• prohibitions on giving effect to no-poach and wage-fixing provisions would operate from the commencement of the proposed amendments to the CCA, preventing the application of existing agreements.

Key considerations for employers

Review use of non-compete and non-solicitation clauses

Employers will need to review their employment arrangements and employment contracts to consider the extent and use of such clauses and determine what will need to change in their employment contracts, policies and procedures especially where the prohibitions if enacted will apply. This includes NSW employers as the proposed changes intend for post-employment restraint of trade terms for all national system employees to be regulated exclusively by the FW Act, instead of the common law or the Restraints of Trade Act 1976 (NSW).

Unenforceability of cascading clauses

The Exposure Draft Bill is not limited to proposing prohibitions on certain terms, but also proposes limitations on permitted post-employment restraints of trade, that would codify and modify the existing position at common law. The proposed unenforceability of cascading clauses as part of these restrictions may significantly impact the way employers approach negotiations for arrangements involving permitted post-employment restraints. If enacted, employers would need to review past case law to understand the limits of what restraints are considered reasonable and enforceable.

Non-compete and co-worker non-solicitation penalties

The proposed civil penalties in respect of non-compete and co-worker non-solicitation terms are significant. The proposed civil penalties would apply for the mere inclusion of such terms in employment arrangements created or varied after the civil penalty provisions take effect. Employers would need to ensure that permitted confidentiality terms are not so onerous as to amount to prohibited non-compete terms.

Existing provisions

Whilst the Exposure Draft Bill proposes that prohibited terms in existing arrangements would continue to apply, this is only until they are varied (even if the prohibited term is unaffected by the variation). Employers would need to exercise caution when varying any existing arrangement with non-compete or co-worker non-solicitation terms, as keeping the provisions in the varied arrangement would attract civil penalties (unless the non-compete term is permitted due to the employee being above the high income threshold).

Significant expansion to cartel laws

The Exposure Draft Bill would significantly expand the operation of Australia's cartel laws to no-poach and wage-fixing agreements. In advance of the implementation of the new laws, all businesses will need to carefully review their existing arrangements for compliance with the new laws, including taking necessary steps to bring existing arrangements within the scope of available exemptions.

Exemptions

The proposed exemptions for no-poach and wage-fixing agreements ensure legitimate arrangements such as multi-employer enterprise bargaining do not trigger the prohibitions. At the same time, it is important to note the limited number of proposed exemptions for non-compete terms and the absence of proposed exemptions for co-worker non-solicitation terms.

Short implementation period

While it is unclear when the new law will be introduced into Parliament and subsequently passed, the Exposure Draft Bill currently imposes a relatively short implementation period. The new prohibitions are proposed to come into effect at the start of the quarter following the commencement of the new law. Given the potentially short implementation period and the application of certain prohibitions to existing arrangements, businesses should commence preparations for the commencement of the new law.

The Government is seeking submissions on its Exposure Draft Bill by 2 October 2026 via the Treasury Consultation Hub. Although the consultation may produce changes to the Exposure Draft Bill, the Government appears to remain on track to seek the enactment of legislation in some form in 2027.