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Key takeaways
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If a manager, technician or account handler could walk out tomorrow and take your client list with them, and their salary sits at or under $190,100, the restraint you are relying on may not look the same after the reform currently open for consultation.
What the bill actually does
The government’s exposure draft, the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026, does four things. It seeks to ban:
- non-compete clauses for any worker earning at or below the Fair Work Act high income threshold, currently $190,100, and for all casual employees and pieceworkers regardless of what they earn;
- co-worker non-solicitation terms, the clauses that stop a departing employee recruiting your remaining staff, for every national system employee at any income level;
- wage-fixing arrangements and no-poach agreements between businesses, regardless of the worker’s income; and
- “cascading” restraint of trade clauses, the drafting technique that sets a broad restriction first and falls back to a narrower one if a court finds the broad version unenforceable.
Assistant Minister for Productivity, Competition, Charities and Treasury Andrew Leigh has framed the reform around worker mobility: “Workers shouldn’t need their old boss’s permission to take a better job.” It is a fair point. Non-competes have been used well past the point of protecting any legitimate business interest, turning up in contracts for retail staff, junior admin roles and apprentices who were never going to walk out the door with a client list or a trade secret.
The $190,100 line, and who it leaves out
Here is the part that should concern anyone running a client-facing small business, an MSP, or a government subcontractor with specialist staff. For a non-compete term, the bill does not ask whether the restraint protects a genuine interest. At or below $190,100, it removes the question entirely: the term is prohibited outright, and including one is a civil penalty contravention even if the employer never tries to enforce it.
Today, a non-compete stands or falls on reasonableness. A court asks what legitimate interest the business is protecting, whether that is client connections, confidential information or training investment, and reads the clause down to what that interest actually requires. That test does not care what the employee earns. A salon manager on $70,000 who has spent three years building relationships with a book of regular clients can do just as much damage on the way out the door as a $250,000 executive. So can a practice manager, an MSP account lead, or a project coordinator on a defence subcontract who has spent two years inside a client’s environment.
Under the draft bill, at or below the threshold, none of that gets tested for a non-compete term. The reasonableness inquiry is not narrowed. For that class of clause, it is removed.
Cascading clauses: the fallback goes, not just the excess
Courts have long taken a dim view of restraints that reach too far. But cascading clauses were never really about overreach; they were a drafting safeguard against uncertainty. A cascading clause sets out a series of fallback positions (twelve months, then six, then three; a state, then a region, then a five-kilometre radius) precisely so that if a court finds the broadest version unenforceable, the narrower version underneath it still stands. Done properly, the clause still protects a defined interest and goes no further than necessary. Courts have upheld that structure for years, provided the drafting stays sensible.
The bill does not fix bad cascading drafting. It bans the technique altogether. That matters because cascading clauses are what let a court preserve the reasonable core of a restraint instead of voiding the whole thing for uncertainty. Remove the fallback, and a business is left with a single, all-or-nothing restraint. Draft it too broadly, and it fails entirely, with no narrower version left standing behind it. The draft is explicit on this: where a restraint is drafted in a cascading manner, the entire term has no effect, though the rest of the employment contract is unaffected. The definition is narrower than the commentary suggests, catching terms with multiple alternative geographic or time-based restrictions that are subsets of one another, so the drafting question is whether your fallbacks are alternatives or a single defined restraint.
What still survives, and why it is not enough
Confidentiality and intellectual property clauses are unaffected by the bill. That sounds reassuring until you consider what those clauses actually protect. They stop a former employee from disclosing your pricing model, your supplier terms, or your proprietary processes. They do nothing to stop that same employee ringing every client on their phone the week after they leave.
A client list is rarely a trade secret in the legal sense; it is simply relationships, built over years, attached to a name the client trusts. Confidentiality clauses were never the tool for protecting that. Non-compete and client non-solicitation clauses were.
It is worth being precise about what happens to the second of those. The draft does not ban client or customer non-solicitation. The definition of a non-compete term turns on restricting an employee from seeking other employment or being involved in a business or undertaking after their employment ends, and a conventional clause saying “do not approach our clients for twelve months” does not stop the employee from taking the job. Client non-solicits instead sit in the draft’s permitted-restraint category, available at any income level provided the restraint is necessary to protect a legitimate interest such as confidential information or client connections, is reasonable, and is not cascading. Co-worker non-solicitation is different again: it is banned outright and does not get the benefit of that test at all.
That sounds like the protection survives, and for many businesses it will. But two things change for anyone under the threshold. The client non-solicit stops being one tool among several and becomes the only post-employment restraint left, so it has to carry weight it was never drafted to carry. And where it is drafted in the way most restraints in this space are drafted, as a bar on servicing or dealing with restricted clients rather than a bar on soliciting them, it starts to look less like a non-solicit and more like a restriction on being involved in a business in respect of those clients. The exposure draft explanatory materials give the example of a key account manager at a telecommunications provider restrained from working for another business that services the same major customers, and treat that as an indirect non-compete. The distance between that example and a servicing clause is a matter of drafting, not economics. Which side of the line a given clause falls on is not settled by the draft text, and will be worked out by courts after the fact.
There is a further change that has had almost no attention and deserves more. The draft sets out an exhaustive list of the interests a permitted restraint may protect, and there are only two: confidential information, and professional or personal relationships with customers, clients or professional networks. Maintaining a stable workforce is deliberately excluded, reversing Cactus Imaging Pty Ltd v Glenn Peters [2006] NSWSC 717, which had recognised it as a legitimate interest. For a business whose real exposure is the eighteen months it spent making a technician client-ready, that is the interest closest to the point, and it is the one the draft removes for everyone, at every income level.
None of that is an argument against the reform. It is an argument that an employer drafting a restraint today, for a salon manager on $70,000 or an MSP account lead on $110,000, cannot tell from the face of the draft which clauses will hold. And the bill’s own materials still do not explain why income is treated as a proxy for how much damage a departure can do.
What COSBOA is warning, and why it matters beyond hairdressers
The Council of Small Business Organisations Australia has been blunt about where the risk sits. In its submission, COSBOA notes that “small business owners have traditionally relied on non-compete clauses to protect client relationships, safeguard training investments, and preserve confidential business knowledge,” and warns that without safeguards, “there is a real risk of competitors exploiting proprietary information, client lists or training investments, and leaving small businesses with no recourse.”
The sectors COSBOA flags- hairdressing, beauty, trades, childcare, healthcare support, retail, hospitality- are exactly the client-facing small businesses that built their client base on the trust attached to one person. The same logic applies further up the value chain.
An MSP that trains a technician for eighteen months before they are client-ready, or a defence supply chain subcontractor with a project coordinator embedded in a prime contractor’s environment for the life of a contract, carries the same exposure, just with a bigger number attached.
COSBOA is pushing for exemptions covering genuine business sales, joint ventures and partnerships, and businesses with unique intellectual property, plus prospective rather than retrospective application and a longer runway to implement. Some of that is now in the draft. Sale of business and shareholder arrangements sit outside the definition of a non-compete term because they fall outside the employment relationship, and the amendments apply only to arrangements made or varied on or after commencement, so existing contracts are not reopened. What is not there is any exemption keyed to the size of the business or the value of its training investment, which is the part COSBOA was really asking for.
The test is right. Applying it by salary is not
The bill’s own logic is sound in principle: a restraint is only defensible if it protects a defined interest and goes no further than necessary to protect it. That is precisely the test courts already apply, and it is the right one. What the bill then does is assume that only a high-income earner can hold an interest worth protecting, without ever explaining the assumption.
Proportionality is the right standard for a restraint clause. It should be the right standard for the legislation imposing it too. A government asking employers to justify every restraint by reference to a genuine, defined interest should be able to justify a blanket income cut-off the same way. Right now, the exemptions and safeguards small businesses need are promised, not drafted, and that gap is exactly what should be tested during consultation, not discovered after the bill passes. This is one reason cyber, privacy and AI governance, and restraint drafting alongside it, is best treated as an ongoing governance function rather than a one-off compliance exercise.
What to do before 2 October
Earlier this year, DLC Legal acted for a Queensland employer after a departing employee allegedly began contacting existing staff and customers following the end of their employment. The issue was not that the employee had taken proprietary technology, formulas or confidential IP. Rather, the value walking out the door sat directly in the client database and the relationships they had developed through the business. The employer’s concern was that those relationships were being used to encourage employees to join a competing organisation and to indirectly interfere with established customer connections. The matter reinforced the point we see regularly in restraint disputes: for many service businesses, the most valuable asset is not confidential information at all, but the goodwill and relationships built with staff and customers over time.
If your business relies on a non-compete or non-solicitation clause for anyone earning at or under $190,100, work through the following before submissions close on 2 October 2026:
- Work out which roles in your business actually hold client relationships or specialised training investment regardless of salary; that is the group the bill leaves exposed.
- Look at how your client restraints are actually drafted: a clause barring an employee from servicing or dealing with restricted clients may be read as an indirect non-compete, whereas a clause barring solicitation of those clients is more likely to sit in the permitted category.
- Read the exposure draft’s provisions closely rather than the media coverage; the detail of what is permitted and what is carved out matters more than the headline.
- Remember that the threshold moves and your restraints move with it: a non-compete that is valid above the line stops having effect if earnings fall to or below it, and trying to enforce it then attracts a penalty in its own right.
- If the gap between the stated test and the salary cut-off affects your business, put that in writing before 2 October; consultation submissions are the only point where the assumption behind the threshold gets tested before it becomes law.
If you would rather not run this review in-house, DLC Legal’s fractional General Counsel can audit your restraint clauses and prepare a submission. Speak with us before the window closes.
Frequently Asked Questions
Who is covered by the proposed non-compete ban?
On the exposure draft, non-competes would be banned for any worker earning at or under the $190,100 high-income threshold, and for all casual employees and pieceworkers regardless of earnings. Above the threshold, non-competes remain subject to the usual reasonableness test.
What exactly does the draft bill propose to ban?
Four things: non-competes for workers at or under $190,100 (and all casuals and pieceworkers); co-worker non-solicitation clauses at every income level; wage-fixing and no-poach agreements between businesses; and cascading restraint clauses. Confidentiality, IP and client non-solicitation clauses are not banned.
Do the changes apply to existing employment contracts?
No. They are proposed to apply only to arrangements made or varied on or after commencement, so existing contracts are not reopened. Note, though, that a non-compete stops having effect if a worker’s earnings fall to or below the threshold.
Are client non-solicitation clauses still allowed?
Yes. Client non-solicits sit in the permitted-restraint category at any income level, provided they protect a legitimate interest, are reasonable, and are not cascading. Co-worker non-solicitation, by contrast, is banned outright. A clause barring an employee from servicing clients may be read as an indirect non-compete.
What happens to cascading restraint clauses?
The draft bans the technique entirely, not just overly broad drafting. Without a fallback, a restraint becomes all-or-nothing: draft it too widely, and the whole term fails, with no narrower version left standing. The rest of the contract is unaffected.
When do submissions on the draft close?
Submissions on the exposure draft close on 2 October 2026. Consultation is the only stage at which the reasoning behind the income threshold can be tested before the bill becomes law.
Disclaimer
This article is general information current as at the date above, prepared while the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 remains an exposure draft open for consultation. It is not legal advice, and the final legislation, including thresholds, exemptions and commencement arrangements, may differ from the draft described here. You should obtain advice specific to your business and its current restraint clauses before relying on anything in this article, and before making a submission to the consultation.
Sources
- Opening the door to better and higher paying jobs: banning unfair non-competes, Treasury Ministers (Andrew Leigh)
- Reform to non-compete clauses and other restraints, draft legislation, Treasury Consult hub
- Small business warns of risks in government push to ban non-compete clauses, COSBOA
- Exposure Draft Explanatory Materials, Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026, Treasury
- NAT 044/26: Exposure draft legislation to ban unfair non-competes and related restraints, Australian Industry Group
- Labour’s non-compete crackdown has arrived, with plans to keep restrictions for high-earners only, SmartCompany