At a glance
- The draft introduced a proposed ban on certain post-employment restraints for employees earning below the high-income threshold.
- Non-competition clauses and co-worker non-solicitation clauses in employment contracts would be prohibited for affected employees.
- Draft legislation is currently open for public consultation, with reforms expected to take effect from 2027.
In March 2025, the federal government announced that it would introduce reforms in respect of post-employment restraints for employees in Australia who earn below the high-income threshold. In September 2026, the Federal Government released draft legislation in respect of the proposed reforms which, if passed, are expected to take effect from 2027.
In summary, the draft legislation would amend the Fair Work Act 2009 to ban the following terms in employment contracts for employees earning below the high-income threshold (currently AUD190,100 base salary):
- Non-competition terms that restrict, prohibit or prevent an employee from leaving the employer and working for a competing business (or otherwise seek to adversely affect the employee for doing so).
- Co-worker non-solicitation terms that restrict or prohibit an employee from recruiting (or attempting to recruit) former colleagues to leave the employer.
The above changes mean that not only would certain restraints be unenforceable, but also that the existence of those terms in employment contracts would be a breach of law, and could expose employers to a civil penalty.
Further, for post-employment restraints that are not prohibited by the proposed reforms, cascading clauses will no longer be permitted.
The draft legislation is currently open for public consultation. If passed, the proposed reforms could significantly impact employers' ability to enforce post-employment restraints in Australia.
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