The Non-Compete Ban Is Still a Draft and Your Clause Still Binds

The federal government released draft legislation on 7 September to ban non-compete clauses for workers earning under $190,100 a year. Submissions close on 2 October. For anyone signed to one of those clauses right now, nothing has changed.

That $190,100 is the Fair Work Act high income threshold, a figure the Fair Work Commission adjusts each 1 July, so the line covers most of the workforce. Treasury cites research by the e61 Institute finding one in five Australian workers sit under a non-compete clause, and the Minister for Employment and Workplace Relations puts the number constrained at more than three million.

The clause that bites hardest is not in the bill

The draft bans the non-compete itself. Four related restraints are only out for consultation: co-worker non-solicitation clauses, no-poach and wage-fixing arrangements between businesses, cascading restraint clauses, and whichever exemptions end up protecting a legitimate business interest.

A non-solicitation clause does different work. It does not stop you working in the trade. It stops you approaching the customers or staff you worked alongside, for a period the contract sets. A hairdresser, mobile mechanic or bookkeeper who takes their book with them is caught by that clause, not the non-compete. The draft would free you to do the same work, while the restraint on the customers you built is still up for discussion.

What the research actually says

The e61 note is more careful than the headline figure suggests. It found workers at firms making heavy use of non-compete clauses are paid 4 per cent less on average than similar workers at similar firms relying on non-disclosure agreements, with the gap opening over the first few years, not at the start. The government translates that into about $2,500 a year for a typical worker.

The authors also say plainly that they cannot fully separate correlation from causation. The clause is a real constraint on a real decision, but the wage figure attached to it is an association drawn from survey and payroll data, not a cheque that arrives when the law changes.

A draft is not a law

Consultation closes on 2 October. After that the legislation still has to be introduced, pass both houses and commence, and none of those dates exist. Until they do, an existing clause is governed by the law as it stands, not by the draft on the Treasury consultation hub.

What to do

Read your own clause before the coverage of it. Most restraints are drafted as a cascade: a ladder of alternatives on distance and time, so that if the widest limb fails the next one down still stands. Which limb you would be arguing over is written in your contract, not in the draft.

Separate the non-compete from the non-solicitation. They are different clauses with different consequences, and only one is in the bill. If your plan rests on taking customers with you rather than doing the same work down the road, the reform in front of Parliament does not reach it.

If a clause has already cost you a move, say so in a submission. A specific account of a job change that did not happen is worth more than another vote either way, and the exemptions are still genuinely open.

If you employ people, work out what your retention rests on. A restraint that may not survive the year is a thin plan. The levers that hold either way are ordinary: pay that stands up to a competitor's offer, customer relationships owned by the business rather than one person, and notice periods long enough to hand over properly.

If you are the one leaving, cost the first six months before you set a date. A vehicle, tools, insurance, software and the gap before the first invoice decide whether the move works, and none change if the clause is struck out. Finance is one line in that plan rather than the plan itself.

The ban is a proposal with a closing date, not an amendment to your contract. The useful move this month is to read the clause you already signed.

This article is general information only and is not financial advice.