The Council of Small Business Organisations Australia (COSBOA) has cautioned that the exposure draft of the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 goes much further than the reform originally announced by the Government and could create significant new costs and challenges for small businesses.
The reform initially focused on banning non-compete clauses for employees earning under the high-income threshold. The exposure draft goes further, including a ban on co-worker non-solicitation clauses for employees at all income levels and new rules around no-poach arrangements between businesses.
COSBOA CEO Skye Cappuccio said the organisation supports the intent of removing unreasonable barriers that prevent workers from changing jobs, but the draft legislation needs to recognise the very different circumstances of small businesses.
"Small businesses want workers to be able to get ahead. They compete for good people every day," Ms Cappuccio said.
"But these changes go much further than stopping an unfair clause from preventing someone from taking another job.
"A small business with ten employees can be seriously affected if a senior employee leaves and takes several staff with them."
Ms Cappuccio said COSBOA was also alarmed by how the proposed changes to no-poach arrangements could apply to ordinary commercial agreements, including franchise and service agreements.
"Small business owners should not face serious penalties because they have relied on standard contractual arrangements and the law around those arrangements has changed.
"A café owner with a standard franchise agreement should not risk being caught by laws and penalties designed to deal with serious cartel conduct."
COSBOA is also seeking greater certainty around restraints associated with the sale of a business.
"For many small business owners, their business is the asset they have spent decades building," Ms Cappuccio said.
"When they sell, the goodwill, customer relationships and knowledge built up over those years are part of what the buyer is paying for.
"The Government has said restraints connected to the legitimate sale of a business will be protected. That protection needs to be explicit in the legislation itself."
COSBOA is seeking the following changes to the draft legislation:
- Amend the proposed ban on co-worker non-solicitation clauses so small businesses can still protect themselves from coordinated staff departures.
- Expressly exclude legitimate sale-of-business restraints in the legislation itself, not just the explanatory materials.
- Remove criminal cartel exposure for routine small business contracting and provide a proper transition period for businesses to review and amend existing franchise and service agreements.
- Provide small businesses with a 12-month penalty deferral to give them time to understand and implement the changes.
"The legislation needs to target genuinely unfair non-competes without exposing ordinary small businesses to disproportionate penalties, undermining the value of businesses their owners have spent a lifetime building, or burying them in legal uncertainty," Ms Cappuccio said.
"Small businesses have dealt with relentless changes to workplace laws over the past four years. If the Government makes another significant change, they need enough time to understand it and get it right."
COSBOA will lodge a detailed submission before consultation closes on 2 October 2026 and is urging the Government to address these issues before legislation is introduced.
