Non-Compete Clauses Banned: What It Means for Workers Under $175K

So, the Australian Government has announced a ban on non-compete clauses for workers earning below the high-income threshold, currently set at $175,088 per year (the same threshold used for unfair dismissal eligibility and the high income guarantee under the Fair Work Act 2009). Non-compete clauses are contractual provisions that prevent an employee from working for a competitor, starting a competing business, or soliciting clients or staff from their former employer for a specified period after leaving their job. These clauses have been a standard feature of Australian employment contracts for decades, applied to everyone from senior executives to hairdressers, café workers, and junior professionals.

The ban, announced as part of the Government's competition policy reform agenda following a review by the Treasury's Competition Review Taskforce, is designed to boost worker mobility, increase wages through competition for talent, and remove barriers to entrepreneurship. The Government estimates that approximately 3 million Australian workers are currently subject to non-compete clauses, many of them in roles where the clause serves no legitimate business purpose.

The reform aims to take effect from 2027, subject to legislation being passed by Parliament. Keep records.

The ban applies to workers earning below the high-income threshold, which is currently $175,088 per year (indexed annually on 1 July). This threshold captures the vast majority of Australian workers — approximately 95% of employees earn below this level. For workers above the threshold, non-compete clauses remain enforceable, subject to the existing common law test of reasonableness.

The threshold is based on the employee's total annual earnings including base salary, allowances, bonuses, and loadings — consistent with how the high-income threshold is calculated under the Fair Work Act. If your total annual earnings are below $175,088, any non-compete clause in your employment contract will be void and unenforceable once the ban takes effect. Keep records.

This one catches a lot of people out. this applies regardless of your role, industry, or seniority. A café manager on $65,000, a marketing coordinator on $90,000, and a software developer on $140,000 will all be freed from non-compete restrictions.

For employees near the threshold, the calculation date is likely to be when the clause is triggered (that's, when the employee leaves), not when the contract was signed.

If you earned $170,000 when you signed the contract but $180,000 when you resign, the clause may still be enforceable.

When it comes to the Government has indicated the ban will take effect in 2027, subject to legislation passing through Parliament. The exact commencement date will depend on when the bill is introduced, debated, and passed. The ban is expected to apply retrospectively to existing contracts, not just new ones signed after the commencement date.

This is a critical point — if you currently have a non-compete clause in your contract and you earn under the threshold, that clause will become void when the law commences, even if you signed the contract years ago. You will not need to renegotiate your contract or sign a new one.

The clause will simply be unenforceable as a matter of law, overriding the contractual terms. This approach is consistent with how other employment law reforms have been implemented — for example, when the adverse action provisions of the Fair Work Act were introduced, they applied to all employment relationships, not just those formed after commencement. For employers, this means any existing non-compete clauses for sub-threshold employees will need to be removed or replaced with alternative protections (such as strengthened confidentiality or intellectual property clauses) before the ban takes effect.

It's important to understand the distinction between different types of post-employment restraints, because the ban targets non-compete clauses specifically — not all restraints. A non-compete clause prevents you from working in the same industry or for a competing business for a period after you leave. This is what is being banned for sub-threshold workers.

A non-solicitation clause prevents you from approaching your former employer's clients, customers, or employees to take their business or recruit them. These aren't covered by the ban and will remain enforceable if they are reasonable under common law.

A non-dealing clause prevents you from dealing with your former employer's clients even if they approach you. These are also not covered by the ban and remain subject to the common law reasonableness test. Confidentiality clauses prevent you from using or disclosing your former employer's confidential information, trade secrets, or proprietary knowledge. These are entirely unaffected by the ban and remain fully enforceable.

Intellectual property assignment clauses assign ownership of work you created during your employment to your employer. These are also unaffected.

The ban specifically targets the clause that says you cannot work for a competitor — the broadest and most restrictive type of post-employment restraint. Worth checking (more on this below).

When it comes to the ban on non-compete clauses does not leave employers without any protection. Several legitimate tools remain available. Confidentiality agreements and non-disclosure agreements (NDAs) remain fully enforceable and are the most effective way to protect trade secrets, customer data, pricing strategies, and proprietary processes.

Employers can and should ensure these are robust and specific about what information is covered. Non-solicitation clauses, which prevent former employees from poaching clients or staff, remain enforceable if reasonable in scope, duration, and geographic area.

A well-drafted non-solicitation clause targeting specific clients the employee worked with directly is far more likely to be enforced by a court than a blanket non-compete. Intellectual property protections, including assignment clauses and invention disclosure obligations, remain available to protect original work product. Garden leave provisions — where an employee serves out their notice period without attending work but remains employed and bound by their contractual duties — are unaffected and provide a practical buffer between an employee's departure and their start with a competitor. Employers should review their contracts now and transition from non-compete reliance to these more targeted protections, which courts have consistently treated more favourably in any case (check your payslip).

If you're currently bound by a non-compete clause and earn under the threshold, you've two timeframes to consider. Before the ban takes effect (likely 2027), the existing common law continues to apply. Under common law, a non-compete clause is only enforceable if the employer can prove it is reasonable in all the circumstances — considering the duration (courts rarely enforce clauses longer than 12 months), the geographic scope (a nationwide ban for a local business is likely unreasonable), the scope of activity restricted, and whether the employer has a legitimate business interest to protect (trade secrets, client relationships).

Let's break this down. Many non-compete clauses in Australian employment contracts are already unenforceable under this test because they are drafted too broadly. If you want to leave for a competitor now, seek legal advice on whether your specific clause would withstand a court challenge.

After the ban takes effect, any non-compete clause for a sub-threshold worker is simply void. Your employer can't enforce it, threaten you with it, or use it as a basis for legal action. If a former employer attempts to enforce a void non-compete clause after the ban commences, this could constitute unlawful conduct and you should seek legal advice immediately. The Fair Work Ombudsman is expected to provide guidance on the ban's operation once the legislation is finalised.