If your employment contracts stop a departing staff member from joining a rival business, change is coming, and the window to have a say on the detail is closing fast. On 7 September the federal government released draft legislation to ban unfair non-compete clauses, and submissions on that draft close on 2 October, six days from now.

What the draft bill does

The Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 would stop employers from including an enforceable non-compete clause in the contract of anyone earning under the Fair Work Act's high income threshold, currently $190,100 a year. For workers below that line, a clause stopping them working for a competitor after they leave would simply not hold up. The change is proposed to start from 2027 and apply going forward, so it would not tear up every existing contract overnight.

It goes further than just non-competes

The same package proposes rules on co-worker non-solicitation clauses, which stop a former employee poaching old colleagues, and on no-poach and wage-fixing arrangements between businesses. Exactly how those parts will apply to smaller employers is still being worked through in consultation.

Why small business should pay attention

The small business peak body COSBOA has pointed out that plenty of small operators, including in childcare, trades, hairdressing, retail and health services, rely on these clauses to protect client relationships and the training they have invested in a staff member. The government's case runs the other way: it points to research suggesting a ban could lift wages for affected workers by up to 4 per cent, or roughly $2,500 a year, by making it easier for people to move to a better paying job.

What to do before 2 October, and after

  • If you have a view on how this should work for a business your size, submissions can be made through the Treasury consultation hub until 2 October.
  • Do not rewrite every contract today. This is draft legislation, not law, and it is proposed to start from 2027 on a forward looking basis only.
  • Start thinking about alternatives now. Confidentiality and non-disclosure clauses protecting genuine business information are not part of this ban, and neither are restraints tied to a genuine sale of a business.
  • If retention is really about protecting client relationships, competitive pay, training and a good workplace tend to hold people better than a restraint clause ever did.

This article is general information only. If your business relies heavily on non-compete or non-solicitation clauses, it is worth a conversation with an employment lawyer once the final shape of the law becomes clearer.