In August, we outlined the Federal Government’s intention to restrict or ban most non-compete clauses by 2027 and flagged the practical implications for employers and legal teams. You can revisit that explainer here. Since then, the Law Council of Australia has released a public summary of its submission to Treasury. It broadly supports reform to curb misuse of restraints while urging a targeted, proportionate approach that avoids over-regulation. Below we translate what’s new into actions for firms and employers.
Key Summary
- Support in principle: the Law Council backs reform that limits misuse of restraints and improves labour-market mobility and productivity.
- Targeted, not blanket: calls for a clear definition of “non-compete” that excludes confidentiality and IP clauses, with narrow, justified exemptions.
- Practicality: favours using familiar thresholds (for example, the Fair Work high-income threshold) and proportionate civil penalties.
- What employers should do now: triage contracts, uplift confidentiality/IP and non-solicit terms, and design lawful retention options such as garden leave and equity.
Where the Reform Is Heading (Quick Recap)
The Government’s policy direction points to limiting most non-compete clauses for workers below a high-income threshold, alongside action on wage-fixing and no-poach agreements. In our August analysis, we noted that employers should plan for a future where broad non-compete restraints are either unavailable or much harder to enforce. The practical response is to strengthen confidentiality and IP protections, rely on well-scoped non-solicitation provisions, use garden leave where appropriate, and consider retention mechanisms (for example, equity or targeted bonuses) that reward staying rather than penalise leaving.
We also highlighted the likely presence of limited exemptions (for example, sale-of-business contexts or roles involving highly sensitive IP), and the need to prepare for transitional timing—so contracts issued today do not become tomorrow’s risk.
What’s New: The Law Council’s Position
The Law Council’s submission to Treasury supports curbing misuse of restraints to improve workforce mobility and productivity, while urging legislation that is clear, proportionate and workable. Several points matter for employers and in-house teams:
- Definitions that fit the real world: adopt a precise definition of “non-compete” and explicitly exclude confidentiality and IP clauses, so legitimate protections remain intact.
- Use existing thresholds: anchor reforms to a familiar income threshold (for example, the Fair Work high-income threshold) to reduce ambiguity, with nuance for roles where salary may not reflect access to highly sensitive value.
- Proportionate penalties: align consequences with comparable Fair Work civil penalty settings, not competition-law turnover penalties, to avoid over-deterrence and litigation risk.
- Narrow exemptions: allow exceptions only where justified, such as roles that create or access particularly valuable IP or confidential information, or in sale-of-business scenarios.
- Non-solicitation and legitimate collaboration: recognise the ongoing role of non-solicit clauses (appropriately bounded) and that some no-poach arrangements can be legitimate in joint ventures, secondments or consortium bids where they protect genuine collaboration rather than suppress competition.
In short, the Law Council’s stance refines the practical contours: less reliance on broad non-competes, clearer guardrails for what remains lawful, and a pathway that minimises uncertainty for both employers and workers during transition.
What Employers and Legal Teams Should Do Now
You don’t need to wait for the final Bill to reduce risk and lift retention. Focus on four streams of work:
- Contract triage: map current restraint clauses by cohort and role. Where a broad non-compete is doing most of the work, rebalance towards confidentiality, IP, non-solicit and garden leave. Ensure restraint geography and duration—if used at all—are narrow and defensible.
- Policy and process uplift: tighten joiner-mover-leaver processes. Clarify client ownership and matter handover expectations, and restrict access to sensitive data on a need-to-know basis. These controls often matter more than a sweeping restraint.
- Lawful retention design: build positive reasons to stay—equity participation, long-term incentives, training bonds where appropriate and compliant, and well-managed garden leave for senior roles.
- Scenario planning and education: brief partners and line leaders on a post-reform enforcement toolkit. Prepare communications for staff so updates land as predictability and fairness, not fear.
Sector nuances remain: professional services must protect client transitions and work papers; healthcare employers balance continuity of care with practice goodwill; tech and R&D teams prioritise IP and know-how. In each case, specific, proportionate protections outperform broad restraints.
Conclusion
Momentum for restraint reform is real, and the Law Council’s contribution helps shape a targeted, workable path. The safest bet is to shift value into confidentiality, IP management, non-solicit and retention design now—so whatever the final law looks like, your framework is already aligned with the direction of travel.
Disclaimer: This blog is a general overview and should not be construed as professional legal, financial or medical advice.
FAQs
- Will non-competes disappear entirely?
The policy direction points to restricting most non-competes—particularly below a high-income threshold—while allowing narrow, justified exceptions. Final scope depends on the Bill.
- Do confidentiality and IP clauses still work?
Yes. The Law Council advocates that confidentiality and IP protections be clearly distinguished from non-competes so they remain enforceable and central to protection.
- What about non-solicitation and no-poach?
Properly scoped non-solicit clauses are expected to remain useful. Some no-poach arrangements may be legitimate in joint ventures or secondments when they protect genuine collaboration rather than suppress competition.
- What should we change first?
Start with a contract audit, uplift confidentiality/IP and non-solicit provisions, modernise joiner-mover-leaver processes, and design retention that fits your talent market.
