Somewhere in most Australian employment contracts sits a non-compete clause, a restraint that tries to stop a departing employee from joining a competitor or setting up a rival business for a set period and within a set area. For decades these clauses have been the default protective reflex, dropped into contracts for everyone from senior executives to reception staff. That reflex is now on a clock. The Australian Government has announced that, from 2027, non-compete clauses will be banned for workers earning below the Fair Work Act 2009 high-income threshold, and the ban is expected to reach back into contracts that already exist. This guide is for employers and their advisers who want to understand what is coming and, more usefully, what to change in the contracts they are drafting right now.
The reform is not yet law. It sits in consultation, with legislation still to be drafted and passed. But the direction of travel is clear enough that drafting as though nothing will change is the riskier choice.
What the 2027 reform actually proposes
The proposal emerged from the Government's competition and productivity agenda and was confirmed in the 2025-26 Budget. In broad terms, it would make post-employment non-compete restraints unenforceable for workers earning under the high-income threshold set by the Fair Work Act 2009, the same benchmark used elsewhere for unfair dismissal eligibility. That threshold is indexed and rises each July, so the exact figure moves, but it currently sits in the vicinity of the low-to-mid $180,000s excluding superannuation. The practical reach is enormous: the overwhelming majority of the Australian workforce earns below that line, which means the clause a business relies on today may protect almost no one after the reform commences.
Two features make this more than a routine tweak. First, the ban is expected to apply retrospectively, so a non-compete already sitting in a current contract for a below-threshold worker would lose its force rather than being grandfathered. Second, the reform travels with companion measures aimed at no-poach agreements between businesses and wage-fixing arrangements, which would be treated as anti-competitive conduct under competition law. An employer who assumes the change only bites on new contracts signed after commencement is likely to be wrong, because the whole point of the retrospective design is to neutralise the existing stock of restraints. The Treasury's own material describes the reform as targeted to take effect from 2027 following consultation and passage through Parliament, which you can read on the Australian Treasury page on non-compete clauses and other worker restraints.
Legal framework: pending reform, current law still in force
Here is the point that matters most for anyone drafting today. The ban is not yet enacted. Until legislation passes, non-compete clauses remain governed by the common law doctrine of restraint of trade, under which a post-employment restraint is presumptively void and enforceable only so far as it is reasonably necessary to protect a legitimate business interest of the employer. Legitimate interests are a narrow set: genuine confidential information, trade secrets, and established client or supplier connections. A restraint drawn wider than needed to protect those interests, whether in duration, geography or scope of activity, is liable to be struck down by a court even under the law as it stands.
So the current position and the coming reform push in the same direction. Even now, a two or three year Australia-wide ban on a mid-level employee is usually unenforceable, because it goes well beyond anything the employer can legitimately protect. What the 2027 reform proposes to do is convert that case-by-case judicial scepticism into a hard statutory line for below-threshold workers, removing the argument entirely rather than leaving it to a court. The Government has signalled that the ban will not extend to non-compete clauses tied to the sale of a business, where a vendor restraint protecting the goodwill being purchased remains legitimate, and that confidentiality and non-solicitation obligations are expected to survive. Because the detail is still in consultation, a prudent drafter treats the 2027 date and the exact threshold as provisional and builds contracts that work whether the reform lands exactly as flagged or in a modified form.
Why you should change your drafting now, not in 2027
The instinct to wait until the legislation is final is understandable and, in this case, expensive. Contracts signed today for junior and mid-level staff will very likely still be on foot when the ban commences, and if the reform is retrospective, any non-compete in them simply stops working. An employer who has leaned on that clause as the primary protection will find the cupboard bare precisely when a key employee walks out the door to a competitor. Rewriting a contract library is slow, and doing it under time pressure in 2027, across every affected employee, is far harder than building the protection in correctly from now.
The deeper reason is that a non-compete was always a blunt instrument. It tries to stop competition itself, which the law dislikes, rather than protecting the specific things an employer is actually entitled to guard. The reform is a prompt to shift from restraining the person to protecting the asset: the confidential information, the client relationships, the workforce stability. Those can be protected by clauses that are expected to remain lawful after 2027, and that are more defensible even today. An employer redrafting now can move protection onto that firmer ground while there is time to do it properly, and can use a compliant Australian employment contract template as the vehicle for the change rather than patching old precedents.
The clauses that will still do the work
Start with confidentiality. A well-drafted confidentiality clause, defining the protected information with specificity rather than reciting a generic catch-all, protects trade secrets, pricing, methods and customer data during and after employment, and nothing in the reform targets it. The weakness in most contracts is not the absence of a confidentiality clause but its vagueness; a clause that protects "all information" protects nothing a court will readily enforce, so the drafting task is precision, not breadth.
Next, non-solicitation. A clause preventing a departed employee from actively soliciting the employer's clients or poaching its staff for a defined and reasonable period addresses the real harm most employers fear, which is the loss of clients and colleagues rather than abstract competition. Non-solicitation is expected to remain available after the reform, and because it targets conduct rather than mere employment, it sits more comfortably within the legitimate-interest framework the common law already applies. For businesses that engage contractors as well as employees, the same logic flows through to the independent contractor and service agreement template, where confidentiality and non-solicitation carry the protective load. Where the information itself is the crown jewel, a standalone non-disclosure agreement for Australian businesses can reinforce the contractual position, particularly around sensitive projects. Beyond the contract, the practical levers matter more than they used to: careful recruitment, restricting access to sensitive systems on a need-to-know basis, and managing notice periods and garden leave so a departing employee is kept away from live information rather than merely promised not to use it.
How to prepare your contracts on Captain.Legal
The sensible first move is to audit which of your current contracts lean on a non-compete for their real protection, and for which employees. If those workers sit below the high-income threshold, the non-compete is the part most exposed to the reform, and the confidentiality and non-solicitation terms are the parts you want to strengthen. Rebuilding the contract on a current template lets you set the protective architecture deliberately rather than inheriting whatever an old precedent happened to contain.
Working through the Australian employment contract generator, you set the role, remuneration and engagement type, and the document assembles the standard terms aligned to the Fair Work Act 2009 and the National Employment Standards. You can calibrate the confidentiality definition to the actual sensitive information of the role, set a non-solicitation period that is defensible rather than aspirational, and decide how heavily to rely on notice and garden-leave provisions for your more senior people. The output downloads in Word and PDF, so you can adapt the restraint provisions employee by employee and revise them as the reform detail firms up. The full range of workplace documents, including offer letters and termination paperwork, sits in the Australian employment templates library.
Common mistakes to avoid
The first and largest error is treating the reform as a 2027 problem. Contracts drafted today will outlive the current rules, and if the ban is retrospective, doing nothing now means holding a stack of contracts whose central restraint quietly fails on commencement. The second is over-reliance on the non-compete in isolation, so that when it goes there is no confidentiality or non-solicitation clause of any substance behind it. A non-compete should never have been the only line of defence, and the reform makes that exposure concrete.
Third, employers routinely draft restraints far too widely even under existing law, with multi-year, nationwide bans on employees who hold nothing a court would recognise as a protectable interest. Such clauses are already vulnerable, and the reform does not rescue them. Fourth, businesses confuse the sale-of-business exemption with the employment context, assuming a restraint that would bind a vendor selling goodwill will bind an ordinary employee; it will not, and the exemption is expected to be confined to genuine business-sale restraints. Fifth, and easy to miss, the companion measures on no-poach and wage-fixing arrangements may expose informal understandings between businesses that were never thought of as contractual restraints at all, so a review confined to employee contracts can leave a competition-law gap unaddressed.
Frequently asked questions
Are non-compete clauses still legal in Australia right now?
Yes. As things stand, non-compete clauses remain lawful and are governed by the common law doctrine of restraint of trade. Under that doctrine a post-employment restraint is presumptively void and enforceable only to the extent it is reasonably necessary to protect a legitimate business interest, such as genuine confidential information or established client connections. The proposed statutory ban has been announced and is in consultation, but it has not yet been enacted, so a properly drawn non-compete can still be enforced today. What is changing is the certainty: from 2027, if the reform passes as flagged, the clause is expected to be void outright for below-threshold workers rather than assessed for reasonableness.
When does the non-compete ban take effect?
The Government has indicated the reform is intended to take effect from 2027, following consultation and the passage of legislation through Parliament. Because the legislation has not yet been drafted in final form, both the timing and the precise detail remain provisional and could shift. Treat 2027 as the target rather than a fixed commencement, and watch for the Bill and its transitional provisions, which will confirm exactly when the ban starts and how it treats contracts already in force. Until commencement, the existing common-law position continues to apply, so restraints in current contracts are neither automatically void nor guaranteed to survive.
Will the ban apply to contracts I have already signed?
That is the expectation. The reform has been described as applying retrospectively, meaning non-compete provisions in existing contracts for workers below the high-income threshold would become unenforceable rather than being preserved as pre-existing terms. This is the single most important reason not to wait, because a clause you rely on today may simply stop working when the ban commences, without any further step by the employee. The final transitional rules in the legislation will settle the point, but drafting on the assumption that existing restraints are safe is the higher-risk approach given what has been announced.
Which workers are affected by the ban?
The proposed ban targets workers earning below the Fair Work Act 2009 high-income threshold, which is indexed and rises each July. Because that threshold currently sits in the low-to-mid $180,000s excluding superannuation, the ban would reach the large majority of Australian employees, from junior staff to many mid-level professionals and managers. Workers earning above the threshold are, on current signals, expected to fall outside the statutory ban, so restraints for genuinely senior, highly paid employees may remain available, subject as always to the common-law reasonableness test. The exact line will depend on the threshold in force when the reform commences.
What can I use instead of a non-compete clause?
Confidentiality and non-solicitation clauses are the practical replacements, and both are expected to remain lawful after the reform. A precise confidentiality clause protects your trade secrets, pricing and client data during and after employment, while a non-solicitation clause stops a departing employee from actively poaching your clients or staff for a reasonable period. These target the specific harm most employers actually fear rather than trying to prevent competition in the abstract, which is why they sit more comfortably within the law. Beyond drafting, garden leave, staged notice periods and disciplined access controls over sensitive information do much of the protective work that a non-compete was once assumed to handle.
Does the ban cover non-compete clauses in a business sale?
No, on current signals. The Government has indicated the ban will not extend to non-compete clauses associated with the sale of a business, where a restraint on the vendor protects the goodwill the purchaser has paid for. That kind of restraint rests on a genuine and long-recognised legitimate interest, and it is treated differently from a restraint imposed on an ordinary employee. The distinction matters in practice, because employers sometimes assume a vendor-style restraint can be repurposed for staff contracts; it cannot, and the sale-of-business exemption is expected to be confined to genuine business-sale scenarios rather than the general employment relationship.
What format can I download the contract in?
Employment documents built on the platform download in both Word and PDF. The Word file lets you tailor the restraint provisions role by role, adjusting the confidentiality definition and the non-solicitation period for each employee rather than applying a single template blindly, which matters as the reform detail firms up over the next couple of years. The PDF gives you a clean copy for signing and record-keeping. Because the law in this area is moving, the ability to revise and reissue contracts easily is itself a form of protection, letting you update your library promptly once the legislation and its transitional provisions are confirmed.