Proposed non-compete ban, what it means for the ECEC sector

On 25 March 2025, the federal government released its budget for the 2025/26 fiscal year.

Following the release of its Issues Paper in April 2024, which considered the impact of non-competes and other employment restraints, it is clear that promoting job mobility in the labour market remains a focus for the government.

Upon re-election, the government has committed to banning non-compete clauses in employment contracts from 2027 for workers earning less than the high-income threshold (currently $175,000 per year).

Restraint clauses are not limited to senior executives and are more common than many realise.

At present, around 3 million employment contracts in Australia contain non-compete clauses which restrict these workers from moving to work for a competitor or setting up a competing business within a certain geographical area for a set time period after ceasing employment with their former employer.

The government has also committed to close further loopholes on the use of “wage-fixing” and “no-poach” agreements. Under a wage-fixing agreement, two or more businesses agree to fix wages or employment conditions to discourage workers from moving to a higher paying role with a competitor.

Similarly, under a no-poach agreement, businesses agree not to hire workers from certain other businesses, thereby reducing job opportunities for workers. It is not uncommon that workers are not aware of these agreements.

It is projected that the proposed reforms will increase job mobility within the labour market, leading to higher wages for workers and greater economic productivity. The government has also foreshadowed consultation on the use of non-solicitation clauses, which prevent former workers from soliciting clients or workers from their former employer. Should a ban be implemented on non-solicitation clauses, this is likely to be of significant concern for employers seeking to protect their valuable confidential and sensitive information.

While it remains to be seen whether the proposed reforms will pass through Parliament and become law, this is a timely reminder for ECEC providers to consider whether their current use of non-compete clauses is reasonable having regard to the business interests the ECEC business is seeking to protect.