For years, non-compete terms (NCTs) have been a standard feature of Australian employment contracts, very often signed by employees without legal advice or negotiation. It is usually only later, when the employee leaves employment, that a light can get shone on these clauses if the employee wants to take up new employment within the same industry.
NCTs are contractual restraints in employment agreements that limit an employee from working for or setting up a competing business during their employment, and for period of time after they leave.
ABS data indicates that 20% of employers in Australia use NCTs for more than 75% of their workforce.[1] Additionally, nearly 50% of employers use at least one form of non-compete, non-disclosure or non-solicitation clauses for employees.[2]
On 7 September 2026, the Federal Government released draft legislation in the form of the Treasury Laws Amendment (Banning Unfair Non-Competes) Bill 2026 (Cth) (BUNC Bill). Following consultation, the BUNC Bill is expected to commence in 2027, though a date has not yet been set.
In its key changes, the BUNC Bill prohibits:
These changes apply to ‘employment arrangements’ between an employer and an employee, which can be written or unwritten arrangements, that regulate their relationship as employer and employee.[3] This includes arrangements with respect to:
True independent contractor agreements are not included. However, agreements that are a ‘sham’ to disguise an employment arrangement are likely to attract scrutiny.
The primary target of the BUNC Bill is non-compete terms. Under the BUNC Bill, an NCT is defined as:
‘A term or condition of employment that restricts, prohibits or prevents the employee from, or adversely affects the employee for, seeking to: (a) be involved in any business or undertaking subsequent to the employee’s employment; or (b) commence subsequent employment.’[5]
NCTs will only be banned for employees earning at or below the income threshold (currently $190,100). They will remain available for high-income earners. The high-income threshold is calculated by whether an employee’s annualised full-time equivalent earnings exceed the Fair Work Ombudsman’s high-income threshold, indexed annually.[6]
The NCT definition proposed under the BUNC Bill is broad. It directly captures any ‘term… [that] adversely affects the employee’. This will likely be interpreted to mean that any material restriction on working for a competitor will be invalid.
An example of invalid terms includes clauses which seek to clawback exit payments for a breach of a NCT. In addition, ‘bad leaver’ provisions – which lapse equity entitlements under Employee Share Schemes for a breach of NCTs – may also be prohibited.
The following kinds of clauses are excluded from the NCT definition:[7]
The BUNC Bill also expressly excludes business sale and shareholder agreements from the non-compete ban, leaving the restraints in those arrangements effective.[8] This reflects the position that, where a business or shares in a company are sold, there are additional commercial interests in restraining competition.
The Bill also outright bans clauses that prevent a departing employee from recruiting former co-workers.
Employers typically use these clauses to stop senior employees from taking team members with them, particularly in highly competitive industries.
Unlike the NCT ban, however, there is no high-income earner exception, so these clauses will be banned outright in all employment agreements. This means departing employees, regardless of income earned, will be able to approach former colleagues with post-employment opportunities.
As covered in our article on ‘Restraining Employees: How enforceable are cascading restraints under Australian law?’, under ‘cascading’ restraints, periods of restraint and geographic locations are drafted as alternatives, to enable a Court to strike out restrictions they consider unreasonable in the specific circumstances. Significant judicial authority has developed on the enforceability of cascading restraints, with different treatment arising in different States. These clauses are notoriously contentious and uncertain.
The BUNC Bill ends this uncertainty by making cascading restraints void.
Like non-solicitation clauses, this applies irrespective of income threshold. Employers may still use other restraint of trade clauses for anyone earning over that threshold, but a restraint that is drafted to ‘cascade’ is deemed invalid, meaning employers can only specify a single set of specific conditions that restrain a departing employee post-employment.
In addition, the Bill has separately classified certain conduct as anti-competitive under the cartel conduct provisions of Part IV, Division 1 of the Competition and Consumer Act 2010 (Cth) (CCA). The cartel provisions are enlivened where two or more parties who are (or are likely to be) in competition with each other make, or give effect to, a contract, arrangement or understanding to fix prices or restrict output.
The Bill specifically captures the following agreements, arrangements or understandings between market power competitors:
The proposed changes apply to new employment arrangements and any arrangement varied after a six-month transitional period following commencement of the amendments.[9]
Whilst employment arrangements otherwise currently on foot would not be captured, there is an important proviso. If any amendment is made to the employment arrangements after commencement of the Act, the provisions will apply.
In its current form, this would include any amendment, such as a wage increase. The terms being varied do not need to be restraint of trade terms.[10]
Contraventions carry a maximum penalty for body corporates of:
However other specified restraints, including cascading clauses and unreasonable client non-solicitation clauses, may be taken to have no effect rather than attract civil penalties.[12]
Penalties for the non-poaching and wage-fixing amendments proposed would carry a maximum civil penalty the greater of:[13]
A positive outcome of the BUNC Bill is to help remove the ambiguity that presently plagues the enforceability of NCTs and similar post-employment restraints.
On the other hand, the changes will also affect thousands of Australian organisations, which will need to take stock of how they can protect their businesses as a result of the new regime. A starting point should be an audit of existing employment agreements, and preparation of new forms of agreements going forward.
Please note that the BUNC Bill is not yet law, and a date for its commencement has not yet been set.
Does your business have employment agreements? For specific advice on strengthening your business with respect to these new reforms, feel free to contact us below. Edwards + Co Legal provide corporate and commercial legal advice to modern Australian businesses.
[1] https://www.abs.gov.au/articles/restraint-clauses-australia-2023
[2] Ibid
[3] S 23D
[4] S 23E
[5] S 23E
[6] s 333Z; s 333Y
[7] Competition And Fair Work Legislation Amendment (Banning Unfair Non-Competes) BUNC Bill 2026 Exposure Draft Explanatory Materials, [2.38-2.39]
[8] https://www.gtlaw.com.au/insights/non-compete-reform-implications-for-private-capital
[9] https://www.bakermckenzie.com/en/insight/publications/2026/09/australia-draft-legislation-takes-hammer-to-non-competes
[10] S 143(2)
[11] S 10G; Fair Work Act
[12] s 333ZJ(4)
[13] https://www.gtlaw.com.au/insights/new-$100-million-maximum-penalty-for-competition-and-consumer-law-contraventions
[14] As a result of the Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026 (Act), civil cartel provisions have recently been doubled economy-wide.
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