Labor to ban non-compete clauses for workers earning under $190,100

The draft law, announced by Assistant Minister for Productivity, Competition, Charities, and Treasury Andrew Leigh, is designed to remove barriers that prevent lower-income workers from moving to higher-paying roles or starting their own businesses.

Research by the e61 Institute cited by the government found the average worker currently bound by a non-compete could see a wage increase of $2,500 under the ban.

The government has long argued that non-compete clauses, which can prevent employees from joining a competitor for a set period after leaving a job, reduce bargaining power for workers who lack the resources to challenge them. The proposed threshold of $190,100 means high-income earners will still be subject to such restrictions.

The move follows broader competition reforms and aligns with similar crackdowns in other jurisdictions, including the United States where the Federal Trade Commission has moved to largely ban non-competes.

Why This Matters

The ban could increase job mobility and wage growth for an estimated millions of Australian workers in middle- and low-income brackets.
It addresses a long-standing imbalance where non-competes are used broadly beyond senior executives, often in sectors where they serve little legitimate business purpose.
The draft legislation will now be open for consultation, with potential for amendments before final passage.

Background

Non-compete clauses have become common in Australian employment contracts, even for roles where employees have limited access to trade secrets or client relationships. The government's action follows a review of competition policy that identified non-competes as a drag on labour market dynamism and wage growth. Similar reforms in the US and UK have prompted debate about the balance between protecting business interests and allowing worker mobility.

Key Perspectives

Government: Argues non-competes unfairly trap workers in low-paying jobs and dampen competition. The ban targets those earning under $190,100, who are deemed to have less bargaining power.

Research bodies (e61 Institute): Provided econometric analysis showing a $2,500 average wage uplift for workers released from non-compete clauses, supporting the policy's economic rationale.

Critics/Skeptics: Employer groups may argue the threshold is too high or that non-competes protect investment in training and intellectual property. The exclusion of high-earners may face challenges from those just above the threshold.

What to Watch

Response from business and employer organisations during the consultation period.
Whether the threshold remains at $190,100 or shifts through parliamentary debate.
Potential state-level variations or federal pre-emption of existing non-compete arrangements.

ZOTPAPER