Announcement date
7 September 2026
Link to announcement
Opening the door to better and higher paying jobs: banning unfair non-competes
Problem being addressed
Non-compete clauses and other worker restraints are a common feature of employment agreements originally permitted for the purposes of protecting a narrow set of business interests, including trade secrets or other confidential information. There has been an increased use of these clauses, to the point where they are now commonplace across all sectors and income levels in Australia. This proliferation has been shown, through a growing body of international and Australian-specific evidence, to unfairly limit worker mobility and suppress wages, with broader economic costs to productivity, innovation and competition.
No-poach and wage-fixing agreements are agreements between businesses not to recruit or hire each other's employees, or to fix or cap wages or employment conditions. They are generally made without the knowledge or involvement of affected workers and are often secret or leave no paper-trail, making their prevalence difficult to measure. However, a growing body of research suggests that these agreements can suppress wages and earnings, diminish job satisfaction, reduce innovation and output, and distort competition in the labour market. The OECD has identified collusion in labour markets, including no-poach and wage-fixing arrangements, as among the most harmful forms of anti-competitive conduct because it deprives workers of the benefits of competition between employers while reducing overall economic efficiency.
Proposal
In response to the growing domestic and international evidence and the feedback from formal and informal stakeholder consultation, 3 options for reform were considered in depth, including the status quo (Option 1). Option 2 would introduce a partial ban of restraint clauses, and Option 3 would introduce a full ban of all restraint clauses in employment arrangements.
Option 1: Status quo – This option would maintain the existing common law approach in regulating non-compete clauses and other employment restraints of trade.
Option 2: Partial ban of employment restraints of trade (preferred option) – This option targets the restraints of trade which are most harmful to workers and the economy, while retaining some flexibility for businesses to use limited restraints in certain circumstances. This option would:
- ban the use of non-compete clauses for low- and middle-income employees
- ban the use of co-worker non-solicitation clauses
- ban the use of no-poach and wage-fixing agreements, and
- limit the use of remaining restraints of trade, particularly non-compete clauses for high-income employees and client non-solicitation clauses.
Option 3: Full ban of all employment restraints of trade – This option includes a full ban on the use of non-compete clauses, co-worker and client non-solicitation clauses, for all national system workers. It also includes a ban on no-poach and wage-fixing agreements.
The preferred policy approach, Option 2: Partial ban of employment restraints of trade, carefully targets restraints of trade that are most harmful to workers and the economy, while retaining some flexibility for businesses to use some restraints in certain circumstances.
Assessed Impact Analysis outcome
Good practice
Assessment comments
The IA addresses the seven IA questions and follows an appropriate policy development process commensurate with the significance of the problem and magnitude of the proposed intervention. In particular, the IA clearly identifies the policy problems using a wide variety of sources and provides a detailed discussion of the status quo. To be considered Exemplary as per the Australian Government Guide to Policy Impact Analysis, the IA would have benefitted from greater explanation of the extent to which each option achieves the objectives.
Regulatory burden
The Treasury estimates the preferred policy approach will result in a one-off familiarisation cost of $46.4 million.