Non-Compete Clauses Australia 2025 — What's Changing

In late 2024, the Australian Government announced a proposal to ban non-compete clauses for workers earning below a specified income threshold, as part of broader competition policy reforms. The proposal follows recommendations from the Treasury's Competition Review and aims to boost labour mobility, increase wages, and promote competition. Under the proposed changes, non-compete clauses would be unenforceable for employees earning below a threshold — the exact figure is yet to be legislated, but it's expected to align with a median or above-median income level (potentially around $150,000-$175,000).

This would cover the vast majority of Australian workers. The rationale is that non-compete clauses have proliferated far beyond their original purpose of protecting genuine trade secrets and client relationships.

Studies, including work by the e61 Institute, have found that non-compete clauses suppress wages by 2-4% even for workers who never intend to join a competitor, because the mere existence of the clause reduces bargaining power. The reforms are expected to be introduced as legislation in 2025, with implementation potentially from 2026 or 2027.

Until new legislation is passed, non-compete clauses remain governed by common law restraint of trade principles. Under common law, a non-compete clause is prima facie void and unenforceable as an unreasonable restraint of trade — unless the employer can demonstrate that the clause is reasonably necessary to protect a legitimate business interest and goes no further than necessary to protect that interest. Legitimate business interests include trade secrets and confidential information (not just general skill and knowledge), customer and client connections and relationships, and stability of the workforce (in limited circumstances).

The short answer? Courts assess enforceability by examining the duration (shorter is more likely to be reasonable — 3-6 months is common, 12 months is the upper end, and 2+ years is very difficult to enforce), geographic scope (must be limited to the actual area of business operations), scope of restricted activities (must be specific, not a blanket ban on working in an industry), and the employee's seniority and access to confidential information (a CEO has different obligations from a junior employee). If a court finds a non-compete clause is too broad, it may read it down (cascading clauses are common) or strike it out entirely.

Restraint of trade clauses come in several forms beyond non-compete clauses. Non-compete clauses prevent you from working for a competitor or starting a competing business. Non-solicitation clauses prevent you from soliciting clients or customers of your former employer.

Non-dealing clauses prevent you from dealing with former clients even if they approach you. Non-poaching clauses prevent you from recruiting former colleagues.

Of these, non-solicitation and non-dealing clauses are generally more enforceable because they protect a more specific legitimate interest (client relationships) and are narrower in scope. An employer cannot restrict you from using your general skills, knowledge, and experience gained during employment — only genuinely confidential information and trade secrets are protectable. This distinction is important: knowing how to do your job well isn't a trade secret. Industry contacts you developed through your own networking (rather than being handed client lists) may not be protectable either.

If you are asked to sign a restraint of trade clause, you should seek legal advice before signing. You may be able to negotiate the scope, duration, or request additional payment (consideration) for agreeing to the restraint.

Garden leave is an arrangement where an employer tells an employee not to attend work during their notice period, but continues to pay them their full salary and entitlements. The employee remains employed during garden leave, which means their contractual obligations (including confidentiality and non-compete clauses) continue to apply. Garden leave serves a similar function to a non-compete clause because the employee cannot work for a competitor while still technically employed — but it is generally considered more enforceable because the employee continues to be compensated.

Many modern employment contracts include both a garden leave clause and a post-employment restraint, with the garden leave period counting toward the overall restraint period. From the employee's perspective, garden leave is preferable to a non-compete clause because you continue to receive pay.

The short answer? If your employer wants you to not work during your notice period, they should put you on garden leave with full pay rather than simply expecting you to serve a restraint period without compensation. Some courts have found that enforcing a non-compete without any consideration (payment) beyond what the employee was already entitled to may weigh against enforceability.

If your employer asks you to sign a non-compete clause — whether in your initial employment contract, a new contract, or a deed upon termination — there are several things to consider.

Quick version: If your employer asks you to sign a non-compete clause — whether in your initial employment contract, a new contract, or a deed upon termination — there are several things to consider.

• read the clause carefully. Understand the duration, geographic scope, restricted activities, and any cascading provisions
• assess whether the clause is likely to be enforceable under current law — overly broad clauses (e.g., 2-year nationwide ban for a mid-level employee) are unlikely to be upheld
• seek legal advice.

  An employment lawyer can review the clause and advise on its likely enforceability and your options

You're not obligated to sign a non-compete, particularly if it's being introduced after you've already started employment.

If the employer wants you to agree to new restraints, they should provide fresh consideration (additional payment or benefit).

Fifth, if you've already signed a non-compete and are planning to leave, don't assume it is enforceable — many aren't. But equally, don't ignore it.

A court may grant an injunction if your former employer seeks one, even temporarily, which can disrupt your new employment. Get advice before starting with a competitor.

The proposed reforms to non-compete clauses are part of the government's broader competition policy agenda. The Treasury's Competition Review Final Report was released in 2024 and included the recommendation to ban or restrict non-compete clauses for workers below an income threshold. The government accepted this recommendation in principle.

Draft legislation is expected in 2025, with parliamentary debate and passage likely during the year. Implementation may include a transition period to allow employers to amend existing contracts.

Quick version: The final form of the legislation will depend on the parliamentary process, including any amendments made during debate. Key questions that remain to be resolved include the exact income threshold, whether existing non-compete clauses will be retrospectively rendered unenforceable or only new clauses will be affected, how the ban will interact with non-solicitation and non-dealing clauses, whether there will be industry-specific exemptions, and how enforcement will work.

In the meantime, the existing common law framework continues to apply.

If you're currently bound by a non-compete clause, the proposed reforms don't yet change your legal position — but they may affect your employer's willingness to enforce the clause, particularly if it's of borderline enforceability.