Non-Compete Agreements Australia 2025: Legal Updates & Employee Rights

Non-compete agreements have long been a staple in employment contracts across Australia, especially in sectors where intellectual property, client relationships, and trade secrets are vital assets. But as of 2025, the legal landscape for these clauses is shifting, with new federal scrutiny and evolving state court decisions reshaping what’s enforceable—and what isn’t. Whether you’re an employer looking to protect your business or an employee weighing your future job prospects, understanding the current climate is crucial.

What Is a Non-Compete Agreement?

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.

2025 Legal Updates: What’s Changing?

In recent years, non-compete agreements have drawn increasing criticism for stifling competition and employee mobility. In 2025, 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.

Enforceability: What Makes a Non-Compete Clause Fair?

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 2025:

• 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 2025, 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.

Negotiating and Navigating Non-Compete Agreements

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 Future: Are Non-Competes on the Way Out?

The ACCC’s 2025 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.