Non-compete clauses: the contract clean-up worth starting before the ban

The Government's ban on non-compete clauses is not law yet, but a stocktake of who in your team has a restraint clause, and why, is housekeeping you can do now rather than in a rush later.

The short answer: the ban on non-compete clauses is announced and dated, but it is not law. Treasury's own page says the reforms "should take effect from 2027, following consultation and legislation passing parliament", which means nothing has commenced yet. Your existing contracts still say what they say.

So the useful thing to do now is not to rewrite everything. It is to find out what you actually have. Most small employers issue a contract on day one and never look at it again, and a restraint clause tends to travel from template to template without anyone asking what it is for. People Management Partners sees the same pattern across the small-employer compliance work we have been walking through in recent weeks: the rule changes are rarely the hard part, knowing what is currently in place is.

What a non-compete is, and what it is not

A non-compete clause restricts an employee from going to work for a competitor, or setting up in competition, for a period after they leave. That is the clause the announced ban is aimed at.

It is not the same thing as a confidentiality clause, which deals with your information, or a non-solicitation clause, which deals with an ex-employee approaching your clients or your remaining staff. Those are separate terms and are not the subject of this particular ban. Plenty of contracts bundle all three into one dense paragraph, which is exactly why a stocktake is worth doing before anyone starts editing.

Clause type	What it restricts	Targeted by the announced ban
Non-compete	Moving to a competitor, or setting up in competition, after leaving	Yes. This is the clause the announced ban is aimed at
Confidentiality	Use of your business information	No. Not the subject of this ban
Non-solicitation of clients or co-workers	Approaching your clients or your remaining staff	No. Not the subject of this ban

Where the reform is up to

The reforms were announced as part of the 2025-26 Budget. Alongside non-competes, the Government said it would ban wage-fixing agreements and no-poach agreements between businesses. That second part catches informal arrangements too: a quiet understanding with another local operator that you will not hire each other's staff, or that you will keep rates in line, sits squarely in that territory.

At announcement, the ban was designed to apply to workers earning less than the high income threshold in the Fair Work Act, which was $175,000 at the time, and the Government said more than three million Australian workers were covered by non-compete clauses. That is the point worth sitting with. This is not a clause confined to executives. It is in contracts for hairdressers, technicians, sales staff and administrators.

The Fair Work Act high income threshold moves each year. It is $190,100 from 1 July 2026. Be careful with that figure: it is today's threshold for unfair dismissal purposes, and commentators point to it as the likely peg, but the final legislation has not confirmed what threshold will apply to the ban itself. Use it as a rough sorting line for your stocktake, not as a rule.

Why act before the rules are final

Three reasons, none of them dramatic.

First, timing. If the reforms do take effect from 2027, the window between legislation passing and commencement will be the busiest possible moment to discover you have 40 contracts with a restraint clause in them. Doing the finding-out part now leaves only the deciding part for later.

Second, the clean-up has value regardless of what parliament does. A restraint clause that was never tailored to the role, never explained to the employee and never enforceable in practice is not protecting your business. It is creating friction at resignation, and occasionally deterring good candidates at offer stage.

Third, the no-poach and wage-fixing side of the reform does not depend on contracts at all. It depends on conversations. Those are worth reviewing whether or not you have a single non-compete on file.

A restraint clause you cannot explain is not protecting anything.

The contract stocktake, step by step

This is a one-afternoon job for most small teams. You are building a list, not a legal opinion.

• List every employee with a written contract.
• Flag which contracts contain a restraint clause.
• Note the clause type for each.
• Record each employee's earnings against the current high income threshold.
• List any informal arrangements with other businesses about pay, or about not approaching each other's staff.
• Check whether confidentiality and non-solicitation terms are drafted separately from the non-compete.
• Diarise a review for when legislation passes.

Worked example

Illustrative only. Every number below is invented to show the shape of the one-page summary. None of it is data from a real business.

1. Count the contracts. A hypothetical 12-person business, with 12 written contracts on file.
2. Flag the restraints. Five of the 12 contain a restraint clause.
3. Sort those five. Three are template copies that were never tailored to a role.
4. Check the earnings line. One of the five covers an employee earning above the current high income threshold.
5. Write it up. One page: who, which clause type, which earnings band, and whether anyone can say why the clause is there.

Two things to avoid while you do it. Do not tell staff the ban already applies, because it does not, and do not tear clauses out of live contracts on the assumption you know where the final law lands. Varying an employment contract is its own process with its own consent questions.

What to do with the clean-up when it is done

Keep the summary somewhere you will find it again: which employees have a restraint, what type, what earnings band, and whether anyone can articulate the reason it is there. When legislation does pass, that one page turns a scramble into an hour's work.

If you would like a second set of eyes on what your contracts currently say, or help thinking through which roles genuinely warrant a restraint and which inherited one from a template, bring your contract templates and your stocktake list to People Management Partners and we can work through it with you.

Sources

• Treasury, Non-compete clauses (Competition Review): https://treasury.gov.au/review/competition-review-2023/non-compete-clauses
• Treasury Ministers, Cracking down on non-compete clauses to boost wages and productivity, 25 March 2025: https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/cracking-down-non-compete-clauses-boost-wages-and
• Fair Work Commission, high income threshold and application fee for 2026-27: https://www.fwc.gov.au/about-us/news-and-media/news/increase-application-fee-2026-27

This guide is general information, not legal advice. Requirements change and the detail of your situation matters, so check the current guidance at fairwork.gov.au or get advice before acting on a specific case.