In March of this year, the Government announced its intention to ban non-compete clauses for low- and middle-income employees and consult on the use of non-compete clauses for those on higher incomes. The Government has indicated that the reforms in this area will take effect from 2027. This didn’t come as a complete surprise as the Competition Review had already published an issues paper on the topic, and the PC had also issued a report indicating that limiting the use of unreasonable restraint of trade clauses would have a material impact on wages for workers.
Treasury has since issued a consultation paper, seeking feedback in the following key areas:
· How the proposed ban on non-compete clauses should be implemented;
· Whether additional reforms are required to the use of post-employment restraints, including for high-income employees;
· Whether changes are needed to clarify how restrictions on concurrent employment should apply to part-time or casual employees; and
· Details necessary to implement the proposed ban on no-poach and wage-fixing agreements in the Competition and Consumer Act.
The Treasury makes it clear that the Government is not planning to change the way the rules apply to restraints of trade outside employment arrangements (e.g., on the sale of a business) or alter the use of confidentiality clauses in employment.
If the proposed reforms are implemented, employers and workers may need to review agreements. We will keep you updated as further details emerge.