Most trade business employment contracts have a clause in them, usually near the back, that says if the employee leaves they can't work for a competitor or start their own business within a certain radius for a certain number of months. Nobody reads it at signing. It gets remembered exactly once: the day a good leading hand resigns and the owner starts wondering how many customers are going with them.
That clause is on the way out for most of your team.
In the 2025–26 Budget the Government announced it will ban non-compete clauses for workers earning less than the high income threshold in the Fair Work Act, along with wage-fixing agreements and no-poach agreements between businesses. Treasury's own summary is that the reforms should take effect from 2027, following consultation and legislation passing parliament, and that they will operate prospectively to give businesses and workers time to adjust.
The announcement named the sectors it had in mind, and construction was on the list alongside childcare and hairdressing. This is not a white-collar reform that will pass over trade businesses.
What is actually being banned, and for whom
The line is drawn by income. The ban applies to workers earning less than the Fair Work Act high income threshold, which the Government put at $175,000 when it made the announcement in March 2025. That threshold is adjusted every 1 July, and from 1 July 2026 it sits at $190,100.
For a trade business, that number effectively means everyone. Your apprentices, your tradespeople, your leading hands, your estimator, your office manager and almost certainly your operations manager all fall under it. If you employ someone earning north of $190,100, the Government has said it will consult further on how non-competes should work for high-income workers, so that's an open question rather than a settled one.
Two related things are being dealt with at the same time. Wage-fixing agreements — where businesses quietly agree to cap what they'll pay for a particular role — are being outlawed, as are no-poach agreements between businesses not to hire each other's staff. In some trades those arrangements are informal and long-standing, the sort of thing agreed over a beer at an industry night rather than written down anywhere. Written down or not, they're being brought squarely into competition law.
The Government has said it will consult further on client and co-worker non-solicitation clauses, which have not been banned and are a separate thing from non-competes. That distinction matters more than almost anything else in this article, and we'll come back to it.
The uncomfortable part: it probably wasn't protecting you anyway
Before you get too annoyed about losing the clause, it's worth being honest about how much work it was doing.
Australian courts have never treated a non-compete as automatically enforceable. A restraint has to go no further than is reasonably necessary to protect a legitimate business interest, and a clause drafted to stop a second-year sparkie working anywhere within 50 kilometres for two years is not that. Enforcing one means engaging a lawyer, going to court, and proving both the legitimate interest and the reasonableness of the restraint, against a former employee who almost certainly cannot pay your costs even if you win. Most small trade businesses would never spend that money, and the ones that get as far as a quote from a solicitor usually don't spend it twice.
Treasury's own framing acknowledges the gap between the clause and reality: even where non-compete clauses are legally unenforceable, they can lower worker mobility. That's the actual mechanism. The clause works as a deterrent on people who don't know it's likely unenforceable, not as a legal remedy you were ever realistically going to use.
The prevalence figures back that up. Treasury cites survey evidence that around one in five Australian workers are covered by a non-compete clause, and Australian Bureau of Statistics data from 2023 showing around one in five Australian businesses use them, with most of those businesses applying them to more than three-quarters of their workforce. That is not a targeted tool being used to protect genuine commercial secrets. That's a default clause in a template contract, applied to everyone from the apprentice up.
So the reform doesn't take away a shield most trade businesses were using. It takes away one they thought they had.
What actually protects a trade business
Here's the thing the non-compete was standing in front of, and the reason losing it feels frightening: in a lot of trade businesses, the customer relationship genuinely does live with the individual rather than the company.
The customer has your leading hand's mobile number, not the office number. The job history is in his head and in his phone, not in a system. The quote came from his email address. He knows the site, the access codes, the property manager's name and what the client said last time about the switchboard. If he leaves and takes that with him, no contract clause is going to bring it back — because the asset was never actually the business's to begin with.
That's a systems problem wearing a legal costume, and it's fixable. The relationship becomes the business's when the business is the thing the customer deals with: enquiries come through one number and one inbox, quotes go out on business templates from a business address, job history and photos and site notes live in a job management system rather than a phone, and follow-ups happen because the system prompts them rather than because one bloke remembers. That's the same underlying problem we work through in the service business tech stack, just with higher stakes attached.
The legal protections that survive are the narrower, more defensible ones, and Treasury lists them separately from non-competes for exactly that reason: confidentiality and non-disclosure obligations covering things like your pricing structure, margins, supplier terms and customer lists, and client non-solicitation clauses that stop a former employee actively approaching your customers. Those are different instruments, they're aimed at a specific harm, and they're a good deal more defensible than a blanket ban on working in the trade. Get a proper employment lawyer to look at what's in your contracts now, because "we downloaded a template in 2019" is a common answer and not a good one.
Gold nugget. Run the walk-out test on every key person, and write the answers down. For each employee, ask: if they resigned this afternoon and started their own business tomorrow, what could they take that I cannot replace? Not "would they" — "could they". The answers are always concrete and always fixable: the customer only has his mobile number, the quotes go out from his personal email, the last three years of job photos are on his phone, only he knows what we charge that builder. Each of those is a one-hour job to close, and closing them is worth more than any clause in a contract, because it works whether or not the person is decent about it and whether or not the law lets you enforce anything. Most owners find four or five items and can clear the lot in a week.
The other thing in that announcement, if you employ sparkies
Buried in the same media release is something that matters to electrical contractors specifically: the Government said it is progressing a national licensing scheme for electrical trades, so people in electrical trades can work across state and territory borders without reapplying for a separate licence or paying additional fees.
For anyone running electrical work across borders, or trying to hire from interstate, that's a real change to the labour pool you can recruit from — in both directions. It cuts both ways, and it's one more reason the answer to retention is going to be retention rather than restriction. If you're building an electrical business into the demand we've written about in the electrification boom, a wider hiring pool is mostly good news, provided you're the sort of employer people stay with.
Retention is now the strategy, not the fallback
Strip away the legal layer and what's left is the thing that was always true. People leave trade businesses because the work is disorganised, because the expectations are unclear, because nobody has told them what good looks like, and because there's no visible path from where they are to where they want to be. Very few of them leave because a competitor waved slightly more money at them, and the ones who do usually had one of the other four reasons already.
Treasury cites research finding that businesses similar to those using non-competes widely, but which don't use them, pay their workers around 4 per cent more on average. Read that as a warning rather than a statistic: if your wage rates have been sitting under the market and the clause was quietly holding the door shut, that door is opening in 2027 and the bill arrives all at once. Better to find out now what your key people are actually worth than to find out the year the clause stops working.
We've written before that most staff performance problems are really systems problems, in the real reason your staff aren't performing. Retention works the same way. The businesses that hold people are the ones where the day runs properly, the jobs are scoped, the tools are there, and somebody is having an actual conversation about the next step. That's structural work, and it's the same work that makes the business less dependent on any one person in the first place — which is the entire point of the shift from tradie to CEO.
None of this is legal advice, and the detail will move as the legislation is drafted and passes parliament. What isn't going to move is the direction. If your plan for keeping your customers when a key person leaves is a paragraph in a contract, you have somewhere between now and 2027 to build a better one.
Working out how dependent your business is on individual people — and what it would take to fix that — is one of the first things we look at in the Business Health Check, a fixed-price review of your numbers, your systems and your pipeline with a written plan of what to fix first. The free five-minute scorecard is a good place to start if you want a rough read before committing to anything.