Existing contracts are grandfathered, which makes the months before the start date the time to get them right.
Short answer: Under the draft Banning Unfair Non-Competes Bill, non-competes would stop working for employees earning under the high income threshold and for every casual, and co-worker non-solicitation clauses would be banned for everyone. Existing contracts keep their non-competes until they are changed, and a pay rise may count, so now is the time to get your contracts ready.
Under draft laws released by the Federal Government, a non-compete for any employee earning under the high income threshold would stop working. So would every non-compete for a casual, on any wage at all. So would any clause that stops a departing employee from recruiting their co-workers, whatever they earn. And an arrangement with another business not to poach each other’s staff would become cartel conduct, with criminal penalties attached.
Treasury released the exposure draft of the Banning Unfair Non-Competes Bill on 7 September, and consultation closed on 2 October. It is still a draft, so some of the detail may change before it passes. But the direction is clear, the Government has said the changes are expected to start in 2027, and the question we keep hearing from business owners is a simple one: what will still protect my business once this passes?
What the draft would change
A non-compete is the clause that stops a former employee working for a competitor, or setting up their own competing business, for a set time and within a set area. As the draft stands:
- The high income line. Non-competes would be banned for employees earning at or below the high income threshold, which is $190,100 for the year to 30 June 2027, and for every casual employee whatever they earn.
- No more cascading clauses. Restraints written as a ladder (12 months, then six, then three, or 10km, then 5km, then 2km) would be banned outright, at any salary.
- Co-worker clauses gone for everyone. A clause stopping someone from recruiting their former colleagues would be banned at any salary.
- No-poach deals become cartel conduct. An agreement with another business not to hire each other’s staff, or to hold wages down, would fall under competition law, with criminal penalties.
- Existing contracts keep their clauses, for now. Contracts already signed when the law starts keep their non-competes, but only until they are changed.
Why the contracts you already have matter so much
That last point is where the real opportunity sits for most businesses, and it is also the part that worries me.
Existing contracts are grandfathered, so your current non-competes keep working once the law starts. But any change to a contract after that date brings the whole contract under the new rules, and the explanatory materials say it does not matter whether the change has anything to do with the restraint. A pay rise may count. So may a new title, or new hours. Most businesses give at least one person one of those every year. Which means the protection an owner thinks they have may only last until the next salary review letter.
It also means the contracts you sign before the start date may be the strongest you will ever be able to put in place for those roles. And that is why now is the time to get ready.
The detail may still move, so this is not the moment to rewrite every contract in the business. It is the moment to work out which contracts matter most (the people who hold your client relationships, your key know-how, your team), and to know what you would change in each one. Then, as soon as the final law is settled, you can move quickly and have them signed before the start date. We expect a rush as that date gets closer, and the businesses that have done the thinking early will be the ones that get it done calmly.
What will still protect your business
In Buy, Grow, Exit I wrote that it’s a widely accepted myth that restraints in employment contracts are unenforceable. Set up properly, they can be. What changes under the draft is which ones you can rely on.
For most of your team, the clause that stops someone working nearby is going. What stays is the clause that stops a departing employee approaching your clients (a client non-solicitation clause), along with the clauses that protect your confidential information, your client lists and your IP.
In most of the employment contracts we see, those clauses came from a template years ago. They were written to sit behind the non-compete, as a standard paragraph nobody reads. Under the draft, for most of your team they become the main protection, and they need to be written for the role and for your business.
A great example of why this matters is a pattern we have seen over and over. A staff member with strong client relationships resigns, and on their way out the door they take a copy of the customer database with them. Within weeks the clients are hearing from them at their new employer, or at their new business down the road (sometimes very openly!). The owner pulls out the employment contract and finds a client clause that is vague about what counts as an approach, a confidentiality clause that never mentions the database, and nothing at all about returning or deleting client information. I have seen this bring businesses to their knees.
The lesson is that the clauses which will still be there after the ban need to be strong enough to protect the business by themselves, and paired with practical steps in the business (who can access the client list, and what happens to it when someone leaves).
The no-poach deal that becomes a crime
This one surprised a lot of the owners we have spoken to. Under the draft, an agreement between two businesses not to hire each other’s staff becomes a cartel provision under the Competition and Consumer Act, with criminal penalties. That catches a handshake deal with the business down the road, a clause in a supply or services agreement, and the mutual staff clause that sits in many standard confidentiality agreements.
And there is no grace period. As drafted, once the law starts, an arrangement made before that date can’t be acted on either. If you have one of these in place, it’s worth knowing now.
Our submission to Treasury
We made a submission to Treasury on the draft, as an advocate for the small and medium businesses we work with every day, and as an SME ourselves. We will keep you updated on what comes of it, and on any changes when the Bill is introduced.
Get ready now, then move quickly
A proper review looks at a handful of things:
- Who sits above and below the threshold, and who is casual, so you know which roles lose their non-compete.
- What each contract relies on to protect the business, and whether that clause would survive the ban.
- Whether the client, confidentiality and IP clauses could protect you on their own, and if not, what needs rewriting for each role.
- Whether any restraint is written as a ladder, which the draft bans outright.
- Whether you have any no-poach arrangement with another business, including in a confidentiality agreement, which would be caught from the first day.
- What changes you have coming up (pay reviews, promotions, restructures), so you can time them around the start date.
Doing this properly is not a copy-paste job. The right clause depends on the role, the pay level and what you are actually trying to protect. But the owners who do the thinking this year will go into 2027 with contracts that do what they need them to do.
Common questions
Are non-compete clauses being banned in Australia?
Under draft laws released by Treasury on 7 September 2026, non-competes would be banned for employees earning under the high income threshold, which is $190,100 for the year to 30 June 2027, and for every casual. It is still a draft and may change. The Government has said the changes are expected to start in 2027.
Will my existing non-compete clauses still apply?
As drafted, contracts signed before the law starts keep their non-competes, but only until the contract is changed. The explanatory materials say the change does not need to relate to the restraint, so a pay rise, a new title or new hours may be enough. That makes the months before the start date the time to get contracts right.
What will still protect my business if the non-compete goes?
A clause that stops a former employee approaching your clients would stay, along with the clauses protecting your confidential information, client lists and IP. In many contracts those clauses came from an old template and were never written to protect the business by themselves. What each one needs depends on the role.
Is a co-worker non-solicitation clause banned too?
Under the draft, yes, at any salary. A co-worker non-solicitation clause stops a departing employee recruiting their former colleagues. If your contracts rely on one, it’s worth knowing which roles it affects before the law starts.
Can an agreement with another business not to poach staff be illegal?
Under the draft, an agreement between two businesses not to hire each other’s staff becomes a cartel provision under the Competition and Consumer Act, with criminal penalties. That can include a clause in a supplier agreement or a standard confidentiality agreement, and arrangements made before the law starts are caught once it does.
Should I update my employment contracts now?
The detail may still change, so the useful step now is to work out which contracts matter most and what you would change, then move quickly once the final law is settled and have them signed before the start date. The right clause depends on the role and the pay level.
What to do about it
The cheapest moment to act is before the start date, while your existing contracts can still be updated and signed under the current rules. Book a free 15-minute call and we will talk you through a Legal Health Check, or how we can review your existing contracts ahead of the law starting.
- If you employ staff: Book a free 15-minute call to talk about a Legal Health Check or reviewing your contracts ahead of time.
- If you advise businesses that employ staff: This is worth flagging to any client planning a pay round, a restructure or a contract update in the next year. Book a call for your client.
This is draft legislation and may still change. We will keep you updated as it moves.
