Can your employer stop you working for a competitor?

A non-compete clause limits where you can work after you leave a job. The Fair Work Act sets no rules for them today. What the Government's draft ban would do for employees at or under the high income threshold, when it would start, and its status on 8 October 2026.

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A non-compete clause, also called a restraint of trade clause, is a term in an employment contract that stops or limits you from working for a competitor, or in a particular area, for a period after you leave. As at 8 October 2026 the Fair Work Act sets no rules for these clauses, and whether one can be enforced is decided under the general law. The Government has released a draft bill to ban non-compete clauses for employees earning $190,100 or less. That bill is still a draft and is not law.

What is a non-compete clause?

The Fair Work Ombudsman describes a non-compete clause, or post-employment restraint of trade clause, as a term that stops or restricts an employee from working in competition with a previous employer for a certain period after their employment ends. It may also stop or restrict you from working in a particular location or area.

The Government's explanatory materials for its draft bill give common examples:

  • a clause stopping you from working for a competing business within a set distance of your employer's office
  • a clause stopping you from starting a business in the same industry for a set period
  • a clause stopping you from recruiting former co-workers to another business, known as a co-worker non-solicitation clause.

Treasury's September 2026 announcement cites e61 Institute research finding that one in five Australian workers is subject to a non-compete clause.

Are non-compete clauses enforceable in Australia now?

The Fair Work Act doesn't set any rules for non-compete clauses in employment contracts, and the Fair Work Ombudsman can't advise on them. It suggests getting legal help if you have questions about one in your contract.

The Government's explanatory materials set out the general law as it stands. The starting point is that a restraint that applies after your job ends is void and unenforceable, because it is presumed to be against the public interest. A restraint can still be enforced if it is reasonable and goes no further than needed to protect a legitimate business interest. Courts have accepted protecting confidential information and client relationships as legitimate interests, and maintaining a stable workforce has also been accepted.

Many contracts use cascading clauses, which list several alternative areas or time periods so that at least one is more likely to be enforced. A court has to cut back the unreasonable parts. In NSW, a state law lets courts read down a restraint to the extent needed to make it valid and enforceable.

The explanatory materials also say the cost of going to court means many restraints are never tested, and many employees stay in jobs because leaving may lead to court action.

What is the proposed ban on non-compete clauses?

On 25 March 2025, the Government announced it would ban non-compete clauses for workers earning less than the high income threshold in the Fair Work Act. It said that following consultation and passage of legislation, the reforms would take effect from 2027 and operate prospectively.

On 7 September 2026, it released exposure draft legislation, the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026. Under the draft:

  • employees whose annualised full-time equivalent earnings are equal to or less than the high income threshold get a right to be free of non-compete terms. The threshold is $190,100 from 1 July 2026
  • casual employees and pieceworkers get the same right whatever they earn
  • co-worker non-solicitation clauses are banned for all employees, whatever they earn
  • an employer faces civil penalties for including a banned term, and the term is unenforceable
  • an employer can also be penalised for enforcing, or threatening to enforce, a non-compete term that has stopped having effect
  • agreements between businesses not to poach each other's staff, or to fix wages, would be brought under competition law.

The draft also counts as a non-compete a term that makes you pay your employer a significant amount, repay bonuses earned during your employment, or lose a severance package if you join a competitor.

What would still be allowed under the draft?

The explanatory materials list arrangements that are not non-compete terms under the draft:

  • confidentiality and non-disclosure agreements that are appropriately drafted and targeted. A confidentiality clause so broad that it stops you taking another job would count as a non-compete
  • retention payments, such as a bonus deferred until you have worked a minimum period, or stock options offered after probation
  • agreed reasonable notice periods
  • garden leave, where you stay on your full salary between roles
  • restraints in a sale of business agreement, and some shareholder agreements
  • terms authorised by another Australian law.

Where one of these still restrains you after you leave, it would have to meet the same tests as a permitted restraint, set out below.

For employees above the threshold, a restraint would still be allowed. It would have to be necessary to protect confidential information or client relationships, be reasonable, and not be a cascading clause. Maintaining a stable workforce would no longer count as a reason. A restraint that fails these tests would have no effect, and the rest of the contract would stand.

If you earn above the threshold when you sign, and your earnings later fall to or below it, for example because the threshold rises, the draft says the non-compete stops having effect. If your earnings later go back above the threshold, it has effect again.

When would the ban start?

The draft bill sets no fixed date. It would start on the first 1 January, 1 April, 1 July or 1 October after the bill receives Royal Assent. Penalties for including a banned term in a contract would only apply after the first 6 months, for arrangements made on or after the start.

Date Step
25 March 2025 Government announces the ban, to take effect from 2027 after consultation and legislation
7 September 2026 Exposure draft bill and explanatory materials released
2 October 2026 Treasury consultation closes
To be set The draft starts on the first 1 January, 1 April, 1 July or 1 October after Royal Assent

As at 8 October 2026 the bill is a draft that has not passed Parliament, so the ban is not law and the general law above still applies. The details could change before the bill is introduced or passed.

What if your contract already has a non-compete clause?

Under the draft, the ban would apply to new contracts and arrangements made on or after the start date, and to existing ones varied on or after it. A restraint in a contract made before the start would keep applying unless the arrangement is varied. A variation agreed by you and your employer, even one unrelated to the restraint, would bring the new rules in.

Until a law passes, the clause in your contract is judged under the general law. The Fair Work Ombudsman points people to a lawyer, a community legal centre, a union or an employer organisation, and to the law society in your state for help finding a lawyer.

If you are planning to resign, read the restraint clause before you hand in your notice and get advice on it if it would stop you taking the job you want. Our guide to resigning covers notice periods and final pay, and our guide to changing careers covers what a move can mean for your pay.

This is general information, not legal advice. Whether a restraint can be enforced depends on its exact wording and your circumstances, so get legal advice about your own contract.

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