A sweeping change to Australian employment law will void non-compete clauses for most workers from 2027. For builders, the implications run deeper than a contract update.
Most builders have never lost sleep over non-compete clauses.
They sit quietly in employment contracts, protecting the business if a site supervisor leaves and turns up working for a competitor down the road. They feel like insurance. In many cases, they have never been tested.
That is about to change.
From 2027, the Australian Government will ban non-compete clauses for workers earning below the high-income threshold under the Fair Work Act 2009, currently set at $183,100 per year excluding superannuation. For the vast majority of employees in the residential construction sector, that threshold covers almost everyone on the payroll.
Site supervisors. Estimators. Sales consultants. Project coordinators. Scheduling managers. Construction managers earning short of that figure. All of them will be free to walk out the door, join a direct competitor, or start their own operation, without restriction.
The legislation has not yet passed, but the trajectory is clear. Treasury released the Exposure Draft of the Competition and Consumer Amendment (Employee Mobility) Bill 2025 in April last year, public consultation closed in mid-2025, and the final Bill is expected before Parliament in 2026. The target commencement date is 1 July 2027.
This is not a distant policy conversation. It is a countdown.
What Is Actually Changing
Non-compete clauses are contractual terms that prevent employees from working for a competitor or starting a competing business for a defined period and within a defined area after they leave. They have traditionally been justified as a tool for protecting legitimate business interests, client relationships, confidential information, and trade knowledge built up over years.
Currently, whether a non-compete clause is enforceable in Australia depends on whether it is reasonable in its scope, duration, and geographic reach. Courts can, and often do, find them unenforceable if they are too broad. But even weak clauses create a chilling effect: workers hesitate to move, fearing legal action they cannot afford to fight.
More than three million Australian workers are currently subject to non-compete clauses. Construction workers are specifically named among those the Government has identified as particularly affected.
The Government’s own review found troubling evidence of misuse. Minimum wage workers sued by former employers. Workers threatened with legal action simply for taking a better-paying job. The policy language from Treasury is pointed: Australians should not need a lawyer to go to a higher-paying job.
Under the new law, non-compete clauses will be void and unenforceable for workers below the threshold from the commencement date. The reform operates prospectively, meaning existing clauses in current contracts will remain valid until the law commences, after which they fall away unless the employee earns above the threshold or falls within a specific exception.
Exceptions are expected to remain for equity owners, senior executives with access to genuinely sensitive strategic information, and restraints agreed as part of a business sale. For most building businesses, these exceptions will cover a small minority of senior staff, if any.
The Broader Package: No-Poach and Wage-Fixing
The non-compete ban is only part of what is coming.
The Government is also moving to prohibit no-poach agreements and wage-fixing arrangements between businesses under the Competition and Consumer Act. No-poach agreements occur when two or more businesses agree, formally or informally, not to hire each other’s staff. Wage-fixing arrangements involve businesses coordinating to cap what they pay workers.
Both practices have been identified as suppressing wages and limiting worker mobility. Under the proposed reforms, breaching these prohibitions would carry serious civil penalties, potentially up to $50 million, three times the benefit obtained, or 30 percent of annual turnover, whichever is greater.
For builders who operate within informal industry networks, where trades and staff sometimes move between related entities or where rate discussions happen across business owners, the wage-fixing provisions deserve particular attention.
What This Means for Building Businesses
The practical impact on residential builders will be felt on two fronts: staff movement risk and the need to rethink how businesses retain knowledge and relationships.
On staff movement: a senior supervisor who has spent years learning your subcontractor network, your pricing structure, your client handling approach, and your site processes will be able to take that knowledge to a competitor, or go out on their own, with no legal restriction. That has always been partially true, since non-competes were not always enforceable anyway. But the psychological and administrative barrier will be gone entirely.
For businesses that have relied on the threat of enforcement as a deterrent, the ground shifts meaningfully from 2027.
On knowledge and relationships: the reform draws a sharp line between non-compete restraints, which are being banned, and other contractual protections, which remain. Confidentiality obligations, intellectual property clauses, and properly drafted non-solicitation provisions restricting employees from actively poaching clients or staff remain lawful. These are the tools builders will need to rely on more heavily.
The protection shifts from ‘you cannot work for a competitor’ to ‘you cannot take our client list with you.’ That is a meaningful narrowing.
The distinction matters. A broad non-compete clause prevents competition outright. A non-solicitation clause prevents the active poaching of specific named clients but does not stop a former employee from working in the same market. For builders in regional areas where the client pool is limited and relationships are everything, that difference is significant.
What Still Works: The Tools That Remain
Employment lawyers are consistent in their advice: the legal backstop is contracting, not disappearing. It is becoming more targeted.
Confidentiality clauses protecting specific proprietary information, such as pricing models, supplier agreements, client data, and operational processes, remain fully enforceable. If a departing employee takes and uses genuinely confidential material, that remains actionable.
Non-solicitation clauses preventing former employees from actively targeting existing clients or staff can still be included in contracts, though Treasury is consulting on the precise boundaries here and further clarification is expected before commencement.
Garden leave provisions, where an employee is paid their full salary through a defined notice period and not required to work, remain available and can be used to create a practical buffer between a resignation and a competitor start date, provided the employee is actually being paid throughout.
The clear message from legal specialists is that builders should not wait until 2027 to act. Contracts should be audited now. Where non-compete clauses exist, they should be accompanied by strengthened confidentiality and IP protections. Where client and supplier relationships are business-critical, those relationships should be documented in ways that make unauthorised use of that information identifiable and provable.
The Retention Problem Nobody Is Talking About
Here is what the legal conversation tends to understate.
Non-compete clauses have always been a weak substitute for actually retaining good people. They create compliance, not loyalty. A supervisor who stays because they are contractually prevented from leaving is not the same as a supervisor who stays because they are valued, well paid, given autonomy, and can see a future in the business.
The reform does builders a favour in forcing this conversation. If the contractual backstop disappears, the only retention tools that remain are the ones that actually work: competitive pay, genuine career pathways, good culture, and visible leadership.
Phil Barrett, who spent more than two decades scaling Metricon’s regional operations, has spoken to this directly. His view was that building leaders who made themselves irreplaceable were a liability. The strongest businesses are the ones that develop and empower people, not the ones that lock them in.
That philosophy is about to become the industry standard, not by choice, but by law.
The Construction Industry Was Already Named
It is worth being explicit about something. Construction workers are not incidental to this reform. They are specifically named.
The Government’s own media release, issued alongside the 2025-26 Budget announcement, called out construction workers by name alongside childcare workers and hairdressers as examples of lower-paid workers with specialised skills who have been particularly harmed by the misuse of non-compete clauses.
The Victoria’s Labour Hire Authority has already documented at least one case in the construction sector where a provider included a clause requiring workers to pay a fine and cover legal costs if they successfully obtained alternative employment with any other construction business within six months of leaving. That clause applied to all employees, including those engaged for a single day.
Regulators are watching the industry. The 2027 reform is partly a direct response to documented conduct.
What Builders Should Do Now
The legislation is not yet passed, but the direction is settled. Waiting for royal assent before acting is not a strategy.
- Audit every employment contract template to identify existing non-compete clauses and assess their scope.
- Strengthen confidentiality provisions to clearly define what constitutes proprietary information in your business.
- Review non-solicitation clauses with a specialist employment lawyer to ensure they are properly scoped and will remain enforceable.
- Document client relationships, supplier agreements, and operational processes in ways that make proprietary knowledge identifiable.
- Invest in retention. Culture, pay, development pathways, and leadership quality are now the primary tools for keeping key people.
- If you work within a business network, check that any informal arrangements around staff and wages do not inadvertently fall within the no-poach or wage-fixing provisions.
The Good Builder Take
Non-compete clauses have always been a blunt tool. For most building businesses, they have provided more psychological comfort than legal certainty. Courts have regularly found them unenforceable when tested.
What this reform actually does is remove a crutch that should have been supplemented years ago with better employment practices, stronger documentation, and real investment in keeping good people.
The builders who will feel the pinch most are those who have relied on contract clauses to compensate for weaker retention, weaker culture, and less competitive pay. The builders who have built genuine loyalty and clear career pathways will barely notice.
2027 is not far away. The time to look at your employment contracts, your confidentiality protections, and your retention strategy is now.
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GENERAL INFORMATION DISCLAIMER
This article is intended for general information purposes only and does not constitute legal advice. Employment and competition law is subject to ongoing legislative change. Builders and business owners should seek independent legal advice before amending employment contracts or taking any action in response to proposed reforms.
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