On 25 March 2025, the federal government released its budget for the 2025/26 fiscal year. Following the release of its Issues Paper in April 2024, which considered the impact of non-competes and other employment restraints, it is clear that promoting job mobility in the labour market remains a focus for the government.
If re-elected, the government has committed to banning non-compete clauses in employment contracts for workers earning less than the high-income threshold (currently $175,000 per year). At present, around 3 million employment contracts in Australia contain non-compete clauses which restrict these workers from moving to work for a competitor or setting up a competing business within a certain geographical area for a set time period after ceasing employment with their former employer.
The government has also committed to close further loopholes on the use of "wage-fixing" and "no-poach" agreements. Under a wage-fixing agreement, two or more businesses agree to fix wages or employment conditions to discourage workers from moving to a higher paying role with a competitor. Similarly, under a no-poach agreement, businesses agree not to hire workers from certain other businesses, thereby reducing job opportunities for workers. It is not uncommon that workers are not aware of these agreements.
It is projected that the proposed reforms will increase job mobility within the labour market, leading to higher wages for workers and greater economic productivity. The government has also foreshadowed consultation on the use of non-solicitation clauses, which prevent former workers from soliciting clients or workers from their former employer. Should a ban be implemented on non-solicitation clauses, this is likely to be of significant concern for employers seeking to protect their valuable confidential and sensitive information.
While it remains to be seen whether the proposed reforms will pass through Parliament and become law, there are several steps employers can take in the interim to ensure they are prepared for the changing competition landscape:
- review current use of non-competes – review existing employment contracts and determine how many contracts contain non-compete clauses and if there is a trend in their use (for example, lower income earners in specific positions)
- consider reasonableness of existing non-competes – irrespective of a possible ban on non-competes, it is important to be considering the reasonableness of any non-compete clause and what business interests the business is seeking to protect.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
