By: Sian Gilbert and Charli Kearney
At a glance
- The Albanese Government plans to ban non-compete clauses for employees earning under $175,000, with changes expected to take effect in 2027.
- Businesses will need to consider stronger confidentiality and non-solicitation clauses, and tailor restraints for senior or high-risk roles.
- The change may reduce some litigation but increase disputes around confidentiality and IP breaches, prompting a need to review EPL policy coverage.
Introduction
In a major shake-up across employment law, the Albanese Government has proposed banning non-compete clauses for most Australian employees earning under the high-income threshold of $175,000, with a goal to boost job mobility, wage growth, and economic dynamism.
Expected to take effect in 2027, the reform will have significant implications for how employers protect sensitive information and manage key relationships, and may also shift risk dynamics for insurers.
What’s changing?
The Government’s proposal is part of a broader competition policy agenda aimed at fostering a more dynamic labour market. Under the proposed changes, non-compete clauses would be unenforceable for employees earning less than the high-income threshold under the Fair Work Act (currently $175,000, indexed annually from 1 July).
While the final details are yet to be settled, key questions remain:
- Will certain roles or industries be exempt?
- What penalties will apply for non-compliance?
- How will other restraints, like non-solicitation or confidentiality clauses, be treated?
What are non-compete clauses?
Non-compete clauses typically prevent a departing employee from joining a competitor or starting a similar business for a set time and within a certain geographic area. Although Australian common law already limits their enforceability, these clauses are still common in employment contracts, especially in roles involving access to strategic or sensitive information.
What this means for employers
For many employers, this reform will mark the end of a familiar risk-management tool. With non-competes off the table for a large portion of the workforce, businesses will need to rethink how they protect intellectual property, trade secrets, and customer relationships. This means:
- Prioritising well-drafted confidentiality and non-disclosure agreements,
- Reviewing and segmenting employment contracts to apply tailored restraints only to those in senior or high-risk roles, and
- Developing alternative talent retention strategies that don’t rely on broad restraint clauses.
Employers should begin reviewing their contract templates now to ensure protections are enforceable and fit for purpose in a post-non-compete environment.
What this means for insurers
The implications for insurers are twofold. On one hand, a decline in non-compete litigation may reduce employment practices liability (EPL) claims and associated costs.
On the other, removing non-competes could lead to an increase in disputes over breaches of confidentiality, intellectual property misuse, and post-employment solicitation – particularly in high-stakes sectors.
To mitigate these risks, insurers may want to work with insureds to:
- Strengthen contractual protections, particularly around confidentiality,
- Identify key personnel and implement knowledge protection strategies, and
- Provide training to managers on lawful post-employment conduct and risk mitigation.
It may also be timely to review policy wordings, limits, and exclusions to ensure EPL coverage remains aligned with this evolving risk landscape.
Conclusion
This proposed ban on non-compete clauses marks a significant shift in Australia’s employment and competition law landscape. It will reshape how businesses approach talent management and legal risk, and how insurers assess and underwrite those risks.
Wotton Kearney’s Workplace and Safety team are keeping a close eye on developments and is here to help employers prepare. From reviewing your contracts to training your teams, we’re ready to help you navigate the road ahead.
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