Aussie non-compete ban set to shake up workforce

Millions of Australian workers could soon gain greater freedom to change jobs under a sweeping workplace reform that is being described as a "structural reset" for business, according to a report by Yahoo Australia.

The federal government plans to ban non-compete clauses for employees earning below the Fair Work high income threshold. The changes are due to take effect from 2027.

More than three million workers are expected to be affected.

Worker mobility

Australia's labour market relies on bargaining power, skills transfer, client relationships and competition. That is why the proposed ban is being viewed as far more than a simple contractual change.

The reform is expected to have a significant impact across industries, particularly childcare and personal services, where restraint clauses are less likely to be enforceable in protecting "legitimate business interests".

In many cases, the cost of legal action outweighs any potential benefit for employers.

Paper value

Despite often being difficult to enforce, non-compete clauses can still influence worker behaviour.

The clauses mainly deter competition through their "paper value", making employees hesitate before breaching them.

As a result, many workers avoid pursuing new opportunities even when the restrictions may not hold up legally.

Competition push

Treasury’s Competition Taskforce found restraint clauses are becoming increasingly common across the workforce, including among lower-paid employees.

The taskforce said evidence suggests these clauses discourage workers from switching jobs, even when the restrictions are unenforceable.

The planned ban is aimed at boosting competition, improving labour mobility and giving workers greater confidence to pursue new roles without fear of legal consequences.