The Albanese Government has announced plans to ban non-compete clauses for workers earning less than $175,000 annually, as part of the 2025-26 Federal Budget. This landmark reform, set to take effect in 2027, aims to boost wages, improve job mobility, and foster competition in Australia’s labour market.

Non-compete clauses, often included in employment contracts, restrict workers from joining competitors or starting rival businesses after leaving their jobs. Currently, over three million Australians, including childcare workers, construction workers, and hairdressers, are bound by these clauses. Treasurer Jim Chalmers emphasised the importance of the reform: “Workers should not be handcuffed to their current job when there are better opportunities available for them”.

The ban will apply prospectively and is expected to raise wages by up to 4%, equating to approximately $2,500 per year for median-income earners. The Government also plans to consult on exemptions and penalties while addressing related issues such as non-solicitation clauses and protections for high-income earners.

Treasury’s Competition Review highlighted troubling cases where low-wage workers were threatened with legal action for switching jobs. Even unenforceable non-compete clauses often deter workers from pursuing better opportunities. The reforms aim to eliminate these barriers, making Australia’s economy more dynamic and competitive.

While unions and worker advocacy groups have welcomed the changes as a win for fairness and wage growth, some business leaders have raised concerns about protecting trade secrets and client relationships. Employers may still enforce non-disclosure agreements to safeguard confidential information.

This policy reflects the Albanese Government’s commitment to empowering workers and enhancing workplace fairness. As consultations continue, businesses are advised to review their employment practices to ensure compliance with future regulations.