Non-compete clauses and other restraints

False

The government announced reforms to worker restraints in the 2025–26 Budget. This includes banning:

  • non‑compete clauses for low‑ and middle‑income workers
  • wage‑fixing agreements
  • no‑poach agreements.

For more detail, read the media release.

You can give feedback on the policy details. We invite views on whether we need to reform other types of worker restraints.

The reforms should take effect from 2027, following consultation and legislation passing parliament.

Non‑compete clauses

Non‑compete clauses are conditions in employment agreements that prevent or restrict a worker from moving to a competitor. They usually specify a period or location the restriction applies to.

Employers may set other post‑employment restraints to protect their information and business interests. They include:

  • non‑disclosure agreements to stop or restrict a worker revealing certain information gained while working for the employer
  • client non‑solicitation clauses to stop or restrict workers asking clients from their employer to become a customer of another business
  • co‑worker non‑solicitation clauses to stop or restrict a worker from asking co‑workers from their employer to work for another business
  • no‑poach agreements between businesses to not hire the current or former staff of their competitors
  • wage‑fixing agreements between businesses to cap wages or conditions without informing workers.

These are different from non‑compete clauses. They can apply at the same time.

Evidence

Prevalence

Non‑compete clauses and other restraints on workers are becoming more common. This is causing community concern.

Data from surveys of Australian workers and businesses in 2023 supports these concerns.

An e61 survey reported 1 in 5 Australian workers have a non‑compete clause. These include lower‑wage workers in childcare, labouring or clerical roles.

1 in 5 Australian businesses use non‑compete clauses (Australian Bureau of Statistics 2023). Most of these businesses apply them to over three‑quarters of their workforce.

In both surveys, almost half of workers and businesses reported the use of a restraint clause.

Effects

Traditionally, employers justify these clauses as:

  • protecting their proprietary knowledge, client relationships and contacts
  • promoting investing in workers’ skills.

Research finds that restraints cause a ‘chilling effect’. It discourages workers from switching jobs. This is because they are unsure how enforceable the employment restraints are. This can still happen when the clause is unreasonable.

Moving jobs allows workers to grow skills and get better wages and conditions. Job mobility makes it easier for new businesses to enter the market. Research finds links between non‑compete clauses and reduced:

  • job mobility
  • wages
  • firm dynamism.

The e61 Institute found workers at Australian businesses with widespread use of non‑compete clauses had lower job mobility. Similar businesses without non‑compete clauses pay workers 4 per cent more on average.

Previous consultation

The Competition Review received responses to its issues paper and questionnaires. This revealed:

  • policy concerns
  • evidence of prevalence
  • impacts on workers, businesses and the wider community.

Resources

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