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With the return of the Federal Parliament this week, it will only be a matter of time before we get to see the legislation proposed to shake-up employment laws, including to the Government’s plan to ban non-compete clauses. The ban is expected to apply to employees earning below $175,000 per year. With change on the horizon, it seems to us like a good time to take a deeper look at what this is all about and how we can be properly prepared.
What are Restraint Clauses?
Restraint of trade clauses limit what employees can do during and after their employment. The most common post-employment restraints include:
- Non-compete clauses – which prevent employees from working for a competitor or starting a competing business
- Non-solicitation clauses – which prohibit former employees from soliciting clients, customers, or other employees after leaving the business.
At this stage, the Government has only proposed banning non-compete clauses, though it has indicated further consultation may be undertaken regarding non-solicitation restraints.
Why the Change?
The Government’s position is that non-compete clauses stifle worker mobility, limit access to higher-paying jobs, and suppress wage growth. The Government also found that these clauses are frequently misused, with even low-wage workers in industries like childcare, construction, and hairdressing facing legal threats for moving jobs.
Importantly, the deterrent effect of these clauses, regardless of whether they would stand in court, has been enough to discourage many workers from pursuing new opportunities. The goal of the reform is to create a fairer and more dynamic labour market where innovation and competition are encouraged.
How can employers prepare?
While non-compete clauses may be phased out for most workers, employers still have several ways to protect their business interests:
- Switch the Focus
Rather than relying on restrictive post-employment restraints, employers should focus on strengthening other contractual and operational protections:
- Confidentiality – A well drafted and robust confidentiality clause can prevent former employees from disclosing or using sensitive information, such as trade secrets, client lists and pricing models, once they leave. Now is a good time to review and update these clauses to ensure they are comprehensive.
- Intellectual Property – Your agreements should clearly state that any inventions, designs, or creative works produced by the employee during their employment remain the property of the business.
- Data and Technology Protections – Review internal systems to ensure critical data, infrastructure, and client information are secure and access is appropriately limited. Both hardware and software policies should be reviewed as part of this process.
- Consider Strategic Gardening Leave
Gardening leave allows employers to keep employees on payroll but restrict their access to clients and confidential information during their notice period. This can help mitigate the risk of immediate competition when non-competes are no longer available.
However, employers should be mindful that this strategy may come under regulatory scrutiny if perceived as a workaround to the ban.
Looking ahead
It won’t be long before we get a look at the details of these changes. It will be a significant shift in how post-employment restrictions will be treated and these reforms will no doubt evolve over the coming years.
Employers should act now to future proof their employment contracts and business practices. Focus on protecting confidential information, intellectual property, and client relationships through enforceable and strategically designed agreements.
Last updated: 23 July 2025
