In last night’s budget speech, the Federal Government announced that it intended if returned to government, to prohibit ‘non-compete clauses’ prospectively from 2027.

The change would prohibit clauses that prevent or restrict workers from moving (or attempting to move) to a competing employer, or from starting or operating a competing business within a specific geographic location and for a certain duration. These clauses are commonplace employment contracts and are often broad in scope.

The prohibition will only apply to workers earning currently less than the high-income threshold of $175,000.00 per year, which is stipulated in the Fair Work Act 2009.

Although the specifics of this proposed change are relatively scarce, it is important to note that there are notable exceptions to this prohibition.

The proposed prohibition will not allow:

• employees to ‘poach’ existing clients when moving to a competing employer or starting their own business; nor will it allow
• employees to disclose confidential information to competitors, such as client lists and commercially sensitive documents.

We recommend you review any employment agreements that have ‘non-compete’ or ‘restraint’ clauses and ensure that in the future (if the government is re-elected) they only cover the exceptions to this prohibition.  These clauses should always be specifically drafted to meet the particular circumstances of your employees.

If you need any assistance, please contact us.