The Future of Restraint of Trade Clauses in Australian Employment Law

Proposed 2027 reforms may ban non-compete clauses in employment contracts. Learn how this impacts restraint of trade and dispute resolution.

With the re-election of the Albanese government, those under the high-income threshold (being $183,100 per annum as at 1 July 2025) may soon be released from any non-compete clauses in their employment contracts. These proposed employment law reforms, currently planned for implementation in 2027, are part of a broader move to create more employee-friendly competition and workplace laws.

What is a non-compete clause?

A non-compete clause is a type of restraint of trade that seeks to restrict a worker from joining a competitor or establishing a competing business after leaving their role. This clause usually specifies a certain geographic area and/or time period during which the employee is ‘restrained’.

Are they always enforceable?

If a former employer attempts to enforce a non-compete clause, the Court will consider two key factors. First, whether the employer has a legitimate protectable interest—such as confidential information, trade secrets or customer goodwill. Second, whether the clause is no more restrictive than reasonably necessary to protect that interest. If an employer imposes an overly broad restriction—such as banning work in an entire industry or across an excessive geographical area—the Court may find the clause unenforceable.

What do these reforms mean for me?

If implemented, these employment law changes will likely result in a ban on non-compete and restraint of trade clauses in employment contracts for individuals earning below the high-income threshold. As a result, employers and business owners are strongly advised to undertake a thorough employment contract review to ensure compliance.

The proposed changes are still in early consultation stages, and further guidance is expected as the Government works to balance the interests of employees and the broader competition market. Details such as penalties, exemptions, and the impact on independent contractors remain to be confirmed.

If you need legal advice on the operation of a restraint of trade clause in your contract or want to prepare your business for these anticipated employment law reforms, contact the Commercial Dispute Resolution team at Marsdens Law Group today.

Disclaimer: This post is for general information only and does not constitute legal advice. Please seek tailored legal advice before acting on this information.