Australian government signals further, and fast, employment law reforms in second term

It is a rare feat for a first-term government to return to power with an increased majority. This mean that employers and employees can expect even more employment law reforms throughout the government’s second term, with the only roadblocks to the government’s agenda now in the senate, where the government will require the support of either the Greens and some of the independent crossbench or the opposition party to pass legislation.

Labor enacted several major reforms in its first term to enhance employee protections, including promoting job security and gender equality, and criminalising intentional underpayments, and outlawing pay secrecy.

There are already strong indications that industrial relations reforms are a top priority for the government.

On 3 June 2025, the Minister for Employment and Workplace, in a meeting with the National Workplace Relations Consultative Council, said that the government will move to act quickly in introducing its promised industrial relations reforms.

Non-competes and no-poach agreements

Treasurer Jim Chalmers, in his March 2025 budget update, announced the government's intention to ban non-compete clauses for low and middle-income workers, beginning in 2027. Non-compete clauses are contractual clauses designed to prevent workers from moving to a competing employer, or from starting a competing business for a specified period after the end of employment. They are meant to be used only where an employee’s move to a competitor would create a particular business risk, however, it has been asserted by commentators that these restrictions are sometimes exploited, leading to an increasing international trend towards their restriction.

The proposed ban would apply to workers earning under the high-income threshold as outlined in the Fair Work Act, which is currently A$175,000 (approx. US$113,155) and about to be increased as of 1 July 2025 to A$180,500 (approx. US$117,800).

“People shouldn’t need to hire a lawyer to take the next step in their career,” Chalmers said, as he pitched the ban as a boost to the income of low and middle-income workers.

This sentiment is echoed internationally, including in the US and Europe, and could result in a greater reliance by employers on lengthy notice periods and the discretion to place employees on gardening leave, where they are required to stay away from work during the notice period. Whether this change will have a significant impact on employers remains to be seen. Seeking enforcement of non-competes in Australia and beyond has always been costly and at times difficult for employers.

The proposal also includes a ban on use of ‘no-poach’ agreements to prevent former employees on the move from taking key colleagues or clients with them for a specific period. The extent of this proposal is currently unclear, but this too is intended to increase opportunities for employees to change to better and higher paying jobs.

Banning no-poach agreements has the real potential to be damaging for employers looking to retain talent and protect client relationships, particularly in competitive industries such as financial services, pharmaceuticals and life sciences, and technology. The risk of former employees enticing their colleagues or clients and customers to follow them may lead to disastrous consequences, in particular for emerging and small businesses.

In the future, employers may also have greater reliance on improper use of confidential business information proceedings including the misuse “confidential information” provisions under the Corporations Act, in an attempt to stifle post-employment conduct.

The changes are subject to consultation which will involve exemptions, transition arrangements and penalties for non-compliance. They are currently proposed to take place sometime in 2027.

Although the ban is likely to be useful in preventing employers who unreasonably utilise restraints of trade, it is unclear whether the ban will have the intended effect of increasing employee wages.

On the other hand, the ban may encourage increased employee retention through training and other incentives. Businesses should begin preparing for these changes by reviewing template employment contracts to consider which employees may pose the highest risk if these proposals become law.

Penalty rates 

Labor also promised to ensure the protection of penalty rates through legislation in response to the recent application by retail employers to the Fair Work Commission (FWC) to vary industry awards to exempt certain employees from penalty rates, overtime and other allowances in exchange for a 25% increase in pay. Penalty rates are higher pay rates that employees are paid for working particular hours or days, for example, work on weekends, public holidays, or overtime.

The Minister for Employment and Workplace has officially notified the FWC that the government plans to legislate for the protection of penalty rates under awards “as soon as possible”.

Workplace flexibility

During the election campaign, the opposition Coalition party’s proposal to abandon working from home in the public sector was withdrawn after backlash. The Albanese government will likely seek to further focus on measures leaning towards a better work-life balance, likely with the support of the Greens and the crossbench, paving the way through the senate.

The government previously introduced laws on the ‘right to disconnect’ outside core working hours during its first term, which have seen little legal impact.

While it is the Greens that have called for national trials of a four-day work week, the government has not discounted this, and there may be a greater willingness on its part to advance a pilot programme, particularly with larger Australian employers. This would align with several other jurisdictions which have advanced this agenda, including the UK and Belgium. The latter’s approach is in the style of compressed hours rather than a 20% reduction in work time.

Given the potential for significant cultural changes in the workplace, business should consider investment in measures for managing remote and flexible workers and be ready for a more challenging environment where working flexibly and disconnecting from work needs to be clearly defined.

Moving forward

The government is likely to find support for worker-focused industrial relations legislation in the senate from the independent crossbench.  Accordingly, with a strong majority in the lower house, the government has a clear pathway for implementing both its election promises and future reforms to Australian employment law and industrial relations.

Given its proactive approach to enacting workplace reforms during its previous term, employers and workers can expect bold and further regulation of businesses.

Co-written by Yuliya Dinte and Nithini Perera of Pinsent Masons.