Workers’ pay could rise by $4,300 a year with non-compete ban, union argues
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More than 3 million workers could gain up to $4,300 a year in extra pay under proposed laws banning non-compete clauses for low- and middle-income earners, according to new union analysis.
Last month, the Albanese government released draft legislation to ban non‑compete clauses for Australian workers under $190,100 a year (the Fair Work Act high‑income threshold).
Minister for Employment and Workplace Relations Amanda Rishworth said that “non‑compete clauses drag down wages, handcuff workers, and put a handbrake on labour productivity”, while Assistant Minister for Productivity, Competition, Charities and Treasury Andrew Leigh argued that “workers shouldn’t need their old boss’s permission to take a better job. Non‑compete clauses can act like a padlock on opportunity, holding down wages and keeping people from jobs where their skills are worth more.”
What the changes mean
Speaking recently on The Legal Brief, Kingston Reid employment law partner Emily Baxter explained that the proposed changes to workplace restraints would significantly limit employers’ ability to prevent employees from competing with them or recruiting colleagues after leaving.
Under the flagged amendments to the Fair Work Act, most employees earning at or below the high-income threshold would gain a workplace right to be free from non-compete clauses. These clauses currently allow employers, subject to existing legal restrictions, to prevent departing employees from working for competitors for a specified period or within a particular geographic area.
The reforms are intended, Baxter said, to promote competition and make it easier for workers to move between employers, and would be significant in that Australia has not previously imposed this type of broad restriction on non-competes.
The impact, she said, would be particularly relevant to low- and middle-income workers, with the government highlighting examples such as hairdressers being prevented from moving to another salon.
“The proposed change essentially means that there will be more open competition,” Baxter said, with workers able to “move more freely between employers”.
The reforms would also ban co-worker non-solicitation clauses outright, preventing employers from restricting departing employees from recruiting colleagues to join a competing business. Unlike the proposed non-compete ban, this protection would apply regardless of an employee’s income.
Importantly, Baxter said the proposed restriction would extend beyond employees to include “contractors, volunteers, a whole gamut of different types of workers that an employer might use”.
Union perspective
In its submission to Treasury, Australian unions have urged the government to resist pressure from big business to weaken the draft proposals.
The Australian Council of Trade Unions (ACTU) applied the e61 Institute’s 2024 estimate that banning non-compete clauses could lift affected workers’ wages by 4 per cent. Based on average full-time earnings in May 2026, that would mean an increase of around $4,300 a year.
The figure is, therefore, an application of an existing estimate to current earnings data, rather than a forecast of what any individual worker would receive.
ACTU secretary Melissa Donnelly said that such clauses have held back workers from better-paid roles.
“Non-compete clauses are holding back more than 3 million working Australians from landing a better-paid job. Removing these unfair restrictions could increase affected workers’ pay by 4 per cent, or around $4,300 a year for a full-time worker on an average wage,” she said.
She also argued that the restrictions carried a wider economic cost.
“Not only are these clauses keeping workers trapped in jobs they don’t want, [but] they are also limiting Australia’s productivity and innovation. Workers with valuable skills are being handcuffed to lower-paid jobs. Hairdressers, early childhood educators, tradies and many other workers are currently unable to move into more productive jobs where their skills and talent can be put to better use,” she said.
Donnelly said the burden of the clauses fell on workers who had to seek permission or legal advice to change jobs.
“Working people shouldn’t have to pay for a lawyer or get their boss’s permission to take the next step in their career. Workers deserve the freedom to pursue a better job and a better life. Non-compete clauses deny that opportunity for too many people,” she said.
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