Small business warns of risks in government push to ban non-compete clauses

The Council of Small Business Organisations Australia (COSBOA) has raised serious concerns about the Federal Government’s plan to ban non-compete clauses for low- and middle-income workers, warning it could strip small businesses of critical protections and create serious unintended consequences across the economy.

The proposed changes are expected to form part of a consultation process announced by the Government, with legislative reform likely to follow. While framed as a way to improve worker mobility and boost competition, COSBOA says the proposed ban risks harming the very sectors that underpin local communities and small business employment.

COSBOA Chair, Matthew Addison, said the proposal marked a fundamental shift in workplace regulation and could significantly undermine the ability of small businesses to protect their most valuable assets.

“Small business owners have traditionally relied on non-compete clauses to protect client relationships, safeguard training investments, and preserve confidential business knowledge,” Mr Addison said.

“Removing these protections without careful consultation will leave many businesses exposed, particularly in industries where trust, reputation and service continuity are essential to survival.”

COSBOA is particularly concerned about the impact on sectors including childcare, trades, hairdressing and beauty, retail, hospitality, healthcare support and administration; industries that are service-driven and often reliant on strong personal relationships between staff and clients. These industries, COSBOA says, are also highly vulnerable to competitive poaching and have limited capacity to absorb legal costs or invest in alternative protections.

“This is not just about legal contracts, it’s about preserving the value of what small businesses build over years through effort and trust,” Mr Addison said. “Without safeguards, there is a real risk of competitors exploiting proprietary information, client lists or training investments, and leaving small businesses with no recourse.”

The proposed reform comes amid a wave of ongoing regulatory change. COSBOA notes that this marks the 37th major industrial relations change since 2022, all of which apply to small businesses with the same intensity as large corporations.

“Small business owners are doing their best to keep up, but the pace and volume of industrial relations reform is exhausting,” Mr Addison said. “Each new layer of compliance takes time and money; resources small businesses simply don’t have. We’re asking the Government to recognise that a one-size-fits-all approach is not sustainable.”

COSBOA will engage fully in the upcoming consultation process and will strongly advocate for tailored exemptions that reflect the unique needs and vulnerabilities of small enterprises. These include protection for genuine business sales, where a seller agrees not to compete; safeguards for joint ventures and partnerships; and special provisions for businesses with unique intellectual property and confidential systems.

COSBOA is also calling for any reforms to apply prospectively – not retrospectively – so that existing contracts and business arrangements are not voided, and for implementation timeframes to be extended significantly to allow small businesses time to adapt.

“We welcome consultation and will work constructively with Government, but changes of this scale must be carefully considered,” Mr Addison said. “If the goal is to lift competition and support the economy, then the answer can’t be to make life harder for small business owners already under pressure.”

“Small businesses are not smaller versions of big corporates, they need tailored solutions, not blanket bans.”

For more information, visit www.cosboa.org.au.

-ENDS-

About COSBOA

Established in 1979, The Council of Small Business Organisations Australia (COSBOA) is a member based not-for-profit organisation exclusively representing the interests of small businesses. The capability, representation, and reach of COSBOA are defined by a mix of over 50 national and state-based members. COSBOA's strength is its capacity to harness its members' views and advance consensus across policy areas common to many.

Our member organisations work with the COSBOA team to assist us with policy development and guide our advocacy - not just for small businesses but also for the benefit of the Australians they employ. In this capacity, COSBOA makes submissions and representations to the government, including its agencies, on issues affecting small businesses and to pursue good policy.

For more information, visit www.cosboa.org.au