1 May 2025
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For many business owners, noncompete clauses feel like one of the last protections they have when it comes to retaining intellectual property, safeguarding client relationships, and protecting against hard-earned training walking straight out the door.
So when the government announced its plan to abolish noncompete clauses for workers earning under $175,000, the reaction in business circles was swift—and sharp. Our own Peter Switzer has had much to share on the topic. Critics - including Peter - have described it as a potential "free-for-all" in industries where knowledge, data and client rapport are key assets.
But is it really that dire?
To understand what’s in the government’s legislative mind just days out from a Federal Election, Peter Switzer invited Hon. Dr Andrew Leigh MP, the Minister responsible for the legislation and a key voice in the Albanese Government onto Switzer Investing TV to talk about the plan.
Press play on the below video to jump to Peter Switzer's interview with Hon. Dr Andrew Leigh MP:
"These clauses used to be confined to high-paid executives," he said, "but what we found in research from the ABS and E61 Institute is that one in five Australian workers is now covered by a noncompete clause—including low-wage workers."
He went further: "We’ve heard stories of childcare workers, hairdressers, even security guards being blocked from taking equivalent jobs across the street. That’s not protecting IP. That’s punishing ambition."
From the government’s perspective, noncompete clauses are part of a bigger problem. They reduce job mobility, lower wage growth, and weaken Australia’s startup pipeline.
"Noncompetes are a chilling effect on top of every other legal agreement an employer can already use," said the minister.
And he’s right—under existing law, businesses can still protect their competitive edge through:
But Dr Leigh says many employers are using noncompetes as a blunt tool. "Often they’re not enforced—but they still have a chilling effect," he said. "Workers don’t want to challenge them, so they just stay put. That holds back wages and innovation."
Of course, it’s easy to see why many small business owners remain uneasy.
A mortgage broker trains up a new employee over three years. That employee builds relationships with clients and learns the ins and outs of proprietary business processes. Then, after resigning, they open their own shop—often targeting the same client base.
That’s not theoretical. It happens.
Dr Leigh acknowledges the concern but argues the focus should be on enforcing targeted legal protections, not broad bans on competition. "We want employers to use sharper tools that address the real harm—data theft, IP loss, and client poaching—not tools that restrict freedom of movement," he said.
The proposed reform will ban noncompete clauses for employees earning under $175,000, starting in 2027.
Until then, the government says it will consult with business to ensure the law is appropriately scoped. High-income earners will still be subject to negotiated restrictions, and companies will retain all other avenues to protect trade secrets and business interests.
In the government’s view, it’s a rebalancing—not a free-for-all, but a recalibration of risk between employers and employees.
Catch Switzer Investing TV on YouTube where Peter Switzer interviews Australia’s top investors, fund managers and economists every week.
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