Non-compete vs non-solicitation clauses

As part of the 2025 Federal Budget, the Labor government has announced plans to ban non-compete clauses for employees earning less than $175,000 annually, a move set to take effect from 2027. The objective of this policy is to enhance job mobility and wage growth for over three million workers. Labor has also said that it will consult on non-solicitation clauses for clients and co-workers (i.e. employees).

If you run a broking business that has employees or contractors, you may have questions on how this will impact you. 

Many broking businesses already use non-compete and non-solicitation clauses in their employee or contractor agreements.

Understanding Non-Compete and Non-Solicitation Clauses

It’s important to under the difference between non-compete clauses. Non-compete clauses restrict former employees from joining competitors or starting similar businesses within a specified period and geographic area after leaving a business.

In contrast, non-solicitation clauses prevent ex-employees from soliciting their previous employer’s clients or staff.

When are these reforms set to come into effect?

With the Federal Election on 3 May 2025, the incumbent government has made it clear that these changes would not be legislated before the 2025 election and would be pursued in the next term if they remain in office​.

Following further consultation and the passage of legislation, the government plans for the ban on non-compete clauses to take effect from 2027.  It is unclear what the government’s position is on non-solicitation clauses however any regulation around these is unlikely without significant consultation.​ 

The MFAA view

The MFAA generally supports a well-defined prohibition on non-compete clauses, where related to employees moving from one employer to another. 

Our view is that should be limited barriers to the right of workers to choose where and for whom they wish to work. Similarly, any employee who dreams of running their own operation should have the freedom to do so.

However, the MFAA does not support wholesale restrictions on the use of non-solicitation clauses. Non-solicitation clauses are important for any small business, in particular important forbroking businesses. Non-solicitation clauses are vital for preventing former employees from poaching clients or colleagues, thereby protecting your business’s client base, internal talent and value built in a business.

The MFAA will be advocating in any government consultation on non-solicitation clauses along these lines.

What the MFAA recommends

Whilst it is rare for a small business to enforce a non-solicitation clause poaching of clients or staff by a former employee or contractor can have a significant detrimental effect for a business owner.  To that end, for broker businesses, non-solicitation clauses can be very effective in protecting your business. By incorporating well-drafted non-solicitation clauses in all of your employee or contractor agreements, you can protect your business interests while adapting to the evolving legal landscape.

The MFAA has developed a template in conjunction with Denton’s that you can use as a template here:

For a period of XXX following the last day of your employment with XXX, you must not, directly or indirectly, on your own account or for anyone:

(a) deal with, canvass, solicit, approach or accept any approach from, any client of XXX with which you had dealings during the last XXX months of your employment; and/or

(b) induce or encourage, or attempt to induce or encourage, any employee or contractor of XXX with whom you had dealings during the last XXX months of your employment to leave their employment or cease their engagement with XXX; and/or

(c) interfere with the relationship between XXX and any of its clients, suppliers, employees, contractors or agents.

Your obligations under this clause survive the termination of your employment.