Non-Compete Agreements Australia 2026: Legal Updates & Employee Rights

A non-compete agreement is a contractual clause that restricts an employee from working for a competitor or starting a similar business within a certain time frame and geographic area after leaving their job. These agreements aim to protect legitimate business interests, such as confidential information or client lists, but can also limit career mobility.

In recent years, non-compete agreements have drawn increasing criticism for stifling competition and employee mobility. In 2026, the Australian Competition and Consumer Commission (ACCC) continues its review of employment contract restraints, following international trends—particularly the United States, where the Federal Trade Commission announced a ban on most non-competes in April 2024. While Australia hasn’t gone that far, several developments stand out:

• Federal scrutiny: The ACCC’s 2024–25 inquiry into restrictive employment practices is ongoing, with recommendations expected to encourage narrower drafting and better justification for non-competes.

• State court decisions: New South Wales and Victoria courts are increasingly refusing to enforce broad or vague non-compete clauses, requiring employers to show clear evidence of business harm.

• Industry-specific reforms: Sectors like tech, healthcare, and finance are under particular scrutiny, with professional bodies advocating for standardized, reasonable limits.

These shifts mean that while non-compete agreements remain legal, they are now more likely to be challenged—and potentially struck down—if they’re seen as overly restrictive.

Australian courts assess non-compete clauses based on whether they are “reasonably necessary” to protect a legitimate business interest. Here’s what typically factors into enforceability in 2026:

• Scope and duration: Shorter periods (generally 3–12 months) and smaller geographic areas are favored. Multi-year, nationwide restrictions are rarely upheld.

• Role and access: Seniority and exposure to sensitive information matter. A sales manager with access to key clients is more likely to face an enforceable restraint than a junior admin staffer.

• Consideration: Some states require additional compensation for agreeing to a restraint, especially if it’s added after employment starts.

• Clarity: Vague or ambiguous clauses are often struck out or read down by courts.

Example: In early 2026, a Victorian court refused to enforce a two-year, statewide non-compete against a software developer who had only worked on non-proprietary projects, citing the clause’s excessive breadth and lack of demonstrated business risk.

With legal scrutiny mounting, both employers and employees should approach non-compete clauses thoughtfully:

Employers:

  - Tailor clauses to specific roles and risks—avoid generic, boilerplate restraints.

  - Document the business rationale for each restriction in case of a legal challenge.

  - Consider alternatives like non-solicitation or confidentiality clauses, which are often easier to enforce.

Employees:

  - Negotiate for shorter timeframes and clearly defined geographic areas.

  - Ask for additional compensation if the non-compete significantly limits future job options.

  - Seek written clarification on what activities are actually restricted.

Ultimately, both parties benefit from clarity. With regulators and courts tightening their approach, a well-drafted, reasonable agreement is more likely to be respected—and less likely to end up in a legal dispute.

The ACCC’s 2026 review is likely to result in new guidance, if not outright legislative change, by year’s end. While outright bans (like in the US) aren’t expected in Australia yet, employers should prepare for a future where only the most justified and carefully drafted non-compete clauses survive. For employees, the trend is towards greater mobility and fairer negotiating power.