Insurers and brokers could be significantly impacted by the federal government’s "non-compete" legislation, expected to come into force early next year, employment lawyers have warned.

Law firm McInnes Wilson says the draft Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 went further than many had been expecting.

The main changes are:

•    Ending non-compete clauses for most employees, ie anyone earning less than $190,000. There will be penalties for including a prohibited restraint in a new contract

•    Banning "poaching" restraint clauses. Departing employees will be allowed to recruit former colleagues, no matter what their salary.

•    Ending "cascading" or "step" restraint clauses. Firms will no longer be able to include multiple time period and geographic restrictions in an employment contract to maximise the chance a court will allow some to survive. A single restraint will have to be included.

•    Extending cartel conduct provisions in competition law to include "no-poaching" and "wage-fixing" agreements.

•    Tightening of other restraints including non-solicitation clauses for clients and suppliers.

McInnes Wilson says that for those concerned about their current employment contracts, it likely won’t be unlawful for prohibited restraints to exist for current employees, but after the legislation comes in, it will be unlawful to try to enforce them.

Aaron Dearden, a partner at lawyers Hall & Wilcox told insuranceNEWS.com.au that the changes will have particular impact on the insurance industry, which has historically seen the courts enforce 12-month non-compete restraints on employees joining rival insurance firms due in part to the annual policy renewal cycle.

‘If you’ve got a client business you’re dealing with on a regular basis then a non-compete of 12 months isn’t going to be reasonable because you’re not dealing with them once a year”, he said.

Mr Dearden says that the easing of restrictions on non-competes would lead to more individuals and particularly teams moving firms.

"The ban on non-competes will free up more junior and mid-level staff. But the bigger change for insurers and brokers is the ban on staff poaching clauses, which covers everyone, including the most senior people. It removes one of the main legal barriers to a senior broker or underwriter taking their team with them."

Mr Dearden says smaller brokers in particular, could be affected by the changes, especially if a number of brokers left in a period of a few months.

“If say there’s 20 or less people and your broker walks out and then a month later your two next best brokers walk out, then that’s a significant impact on any small business.

"In a tough economic environment, there are people who will be willing to move for $10-15,000 difference a year so businesses will have to look at that and consider strategies to mitigate against losing extra staff.

“Employers will need to move from restricting people to retaining them. That means paying people to stay, protecting client relationships and confidential information through tightly drafted clauses, and cleaning up their contracts before the penalties apply."

Responses to the Treasury consultation on the non-compete clause reforms end tomorrow.

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