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.
“Small business owners have traditionally relied on non-compete clauses to protect client relationships, safeguard training investments, and preserve confidential business knowledge,” said COSBOA Head of Industrial Relations Mike Sommerton.
“Removing these protections without careful consultation will leave many businesses exposed, particularly in industries where trust, reputation and service continuity are essential to survival.”
Safeguards needed
COSBOA is particularly concerned about the impact on industries that are service-driven and often reliant on strong personal relationships between staff and clients, such as retail and hospitality. These industries 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 Sommerton 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 Sommerton 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.”
What’s next
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.
