By Scott Coulthart, Partner

The Federal Government’s exposure draft of the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 may be marketed as a ban on unfair non-compete clauses, but buried within the draft legislation is something potentially much more significant: a legislative attempt to rewrite Australia’s restraint of trade doctrine.

For decades, restraint litigation has largely been governed by common law. Lawyers, employers and courts have become accustomed to asking familiar questions:

• Is there a legitimate interest worth protecting?
• Is the restraint reasonable?
• Can an overly broad cascading clause be read down to something enforceable?

If enacted in its present form, the answer to that last question is likely to become “no”, and the list of legitimate interests may become dramatically narrower than many employers currently assume.

Prohibition of High Income Non-competes and All Co-Worker Non-Solicits

The headline reform is that employees earning at or below the Fair Work Act’s high income threshold, currently proposed to be $190,100 for FY2027, would have a statutory right to be free from non-compete clauses. Such clauses would be prohibited and unenforceable.

That is already a significant reform, but there’s more to this Bill.

All co-worker non-solicitation clauses would also be prohibited, regardless of employee income. If your employment contract says you cannot recruit former colleagues after leaving, that provision would potentially become void.

For many technology, professional services and consulting businesses, that may have greater practical impact than the non-compete reforms themselves.

The end of workforce stability as a legitimate interest?

One of the most interesting features of the draft legislation is what it says about legitimate interests.

The explanatory materials state that the reforms are intended to overturn the expansion of the common law reflected in Cactus Imaging Pty Ltd v Glenn Peters and specifically reject the proposition that maintaining a stable workforce is itself a legitimate business interest capable of supporting post-employment restraints.

Instead, the legislation proposes an exhaustive list.

Broadly speaking, the remaining recognised interests would be:

• protection of confidential information; and
• protection of customer, client and professional relationships acquired through employment.

That is a remarkable shift.

For years, employers have routinely argued that restrictions on poaching employees were necessary to preserve workforce stability. The exposure draft appears designed to remove that argument altogether.

Cascading clauses could disappear

Australian lawyers have long relied on cascading restraints in contracts that deal with post-employment obligations.

The typical clause might prohibit competition for:

• 24 months, or alternatively 12 months, or alternatively 6 months; and
• within 20 kilometres, or alternatively 10 kilometres, or alternatively 5 kilometres.

The drafting strategy is centred around the notion that if a court considers the wider restriction excessive, it can sever portions of the clause and enforce a narrower version.

The exposure draft directly targets that practice.  It provides that post-employment restraint clauses must not be drafted in a cascading manner and that a clause containing alternative restrictions designed to preserve at least one enforceable option will be unenforceable.

If enacted, countless precedent employment restraints around Australia may require rewriting.

Parliament enters the restraint business

The most intriguing aspect of the reforms is philosophical.

Traditionally, the common law restraint doctrine has evolved incrementally through judicial decisions. Courts have determined what is and is not reasonable.

This Bill would move much of that discussion from the courts into legislation.

The draft attempts to define:

• what interests may legitimately be protected;
• what restraints are entirely prohibited;
• which employees can be bound by non-competes;
• which drafting techniques are acceptable; and
• when a restraint automatically becomes void.

Whether that creates greater certainty or simply a new generation of litigation remains to be seen.

Lawyers have an uncanny ability to find ambiguity even in legislation intended to eliminate it.

The competition law sleeper issue

The Bill contains another major reform that has attracted far less attention.

It would amend the Competition and Consumer Act to prohibit “no-poach” agreements and “wage-fixing” arrangements between businesses, effectively extending cartel-style prohibitions into labour markets. Businesses that agree not to recruit one another’s employees, or collude about wages and employment conditions, could face civil and criminal penalties.

While exemptions exist for joint ventures, secondments, labour hire arrangements and professional sporting leagues, the message is clear: labour market collusion is being placed in the same regulatory category as traditional cartel conduct.

That development may ultimately prove just as significant as the non-compete reforms.

Final thoughts

This exposure draft goes well beyond introducing a salary threshold below which non-competes no longer work.

The proposed legislation represents a substantial attempt to reshape Australian restraint law. It narrows the concept of legitimate interests. It abolishes co-worker non-solicitation clauses. It bans cascading restraints. It introduces competition law penalties for labour market collusion. And it seeks to replace decades of common law development with a statutory framework.

If enacted, Australian employers may soon discover that they will be required to exercise great restraint on restraint.