Non-Compete Clauses: What’s Changing by 2027

The landscape of Australian employment law is shifting again. Earlier this year, the Government announced its plan to ban non-compete clauses for low and middle-income employees and consult on how they should apply to higher-income earners. These reforms are expected to take effect from 2027.

The move didn’t come out of the blue. Both the Competition Review and the Productivity Commission have previously highlighted how limiting the use of unreasonable restraint of trade clauses could materially improve wages and mobility for workers. Now Treasury has released a consultation paper, opening the door for employers and employees to have their say.

What Treasury is Seeking Feedback On

The consultation paper is focused on four key areas:

1. Implementation of the non-compete ban - How the proposed ban for lower and middle-income workers should be applied in practice.
2. Additional reforms for post-employment restraints - Whether restrictions should also be applied to high-income employees.
3. Concurrent employment rules - Clarifying how restrictions on side jobs should apply to part-time or casual employees.
4. Wage-fixing and no-poach agreements - Details needed to enforce the proposed ban on wage-fixing and no-poach agreements under the Competition and Consumer Act.

Importantly, Treasury has confirmed that there are no planned changes to restraints of trade that apply outside of employment contracts (for example, when selling a business), or to the ongoing use of confidentiality clauses.

What This Means for Employers

If implemented, these reforms could directly affect how businesses draft, enforce, and update employment contracts. For employers, this may mean:

• Reviewing current agreements to identify clauses that could be impacted by the ban.
• Updating employment contracts before 2027 to ensure compliance.
• Rethinking retention strategies to focus more on culture, career development, and employee value rather than restrictive covenants.
• Monitoring consultation outcomes to stay ahead of any additional reforms, particularly those impacting higher-income staff.

Employers using non-compete clauses as a standard part of contracts may need to reconsider whether they are truly necessary - and whether there are other, more future-proof ways to protect their business interests.

What This Means for Employees

For employees, especially those on low to middle incomes, the proposed changes could mean greater freedom of movement between jobs without being tied down by restrictive non-compete agreements. This has the potential to:

• Increase job mobility and career opportunities.
• Improve wage competition between employers.
• Provide more clarity around side jobs for part-time or casual workers.

Employees in higher-income brackets may still face restrictions, but these could be clarified or narrowed depending on the outcome of the consultation.

Why This Matters

Non-compete clauses and restraints of trade have long been a source of tension between employers and employees. On one hand, they provide businesses with protection over intellectual property, client lists, and commercial know-how. On the other, they can limit an employee’s ability to seek better opportunities and negotiate higher pay.

By signaling a move to limit or ban these restraints for many workers, the Government is sending a clear message: it wants to prioritise fairer wages and greater competition in the labour market.

What Happens Next

The consultation process will run through Treasury, and final reforms are expected to be shaped by industry and stakeholder feedback. With the planned implementation date of 2027, businesses have some time to prepare - but it’s never too early to start reviewing existing arrangements.

At this stage, nothing has been legislated. But if the reforms go ahead, expect to see significant changes in how employment contracts are structured across industries.