Introduction
The 2025-26 Federal Budget introduced reforms to Australian employment laws, specifically in relation to non-compete and restraint of trade clauses in employment contracts.
These changes have been brought in to attempt to enhance job mobility, foster innovation and address concerns that these clauses and provisions largely and disproportionately impact and disadvantage low and middle income earners.
The proposed changes to the Fair Work Act 2009 (Cth) are set to take effect in 2027 to give businesses and employees time to adjust to the framework.
This article will explore the proposed changes.
Changes to Restraint of Trade Clauses
Restraint of trade and non-compete clauses seek to protect businesses’ legitimate business interests by preventing employees from moving to work with competitors or set up their own competing business.
While these provisions at common law have generally been found to be unenforceable where they do not protect the legitimate business interests of the employer, the Federal government have announced changes to further restrict the enforceability of post-employment restraints.
It is worth noting that these changes only apply to restraints relating to moving to a competitor or setting up a competing business; they do not relate to dealings with clients or suppliers. Although these may also change at a later date.
As to the changes themselves, from 2027 (although no exact date has been set), non-compete clauses relating to moving to a competitor or setting up their own competing business will not apply to employees earning less than the high-income threshold annually contained in the Fair Work Act 2009 (Cth). The current high-income threshold is currently $175,000.00, however this will likely increase prior to 2027.
However, it must be noted that these provisions are still enforceable for contracts entered into prior to 2027 and if so, they will remain enforceable after 2027.
Conclusion
The changes have not yet been legislated so it is unclear the extent of the changes that will be made. However, in bringing on new employees it is important to keep these changes in mind and how they may impact your business.
Staying informed and up to date regarding these changes and their impacts will be key to ensuring compliance.
The information in this article is for general purposes only and you should obtain professional advice relevant to your specific circumstances.
Get in touch
If you or someone you know wants more information or needs help or advice in relation to the enforceability of restraint of trade clauses, please contact us.
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