What does the 2025 Australian Federal Election mean for employers?

The 2025 Australian federal election held on 3 May 2025 resulted in a major victory for the Labor Party, led by Prime Minister Anthony Albanese. This election marks the first time since 2004 that a sitting Prime Minister has been re-elected, and the first for a Labor leader since 1990.

In the Albanese government's second term, the Senate's new composition will see the Greens, Labor, and the Australian Council of Trade Unions (ACTU) driving the agenda for upcoming changes to Australian workplace laws. This outcome is expected to have several implications for employers, particularly in terms of industrial relations, wage policies, and employment regulations.

Background

In the last three years, the Albanese government has enacted considerable industrial relations reforms. These include the Secure Jobs, Better Pay Act (2022), the Closing Loopholes Legislation (2023 to 2024), the right to disconnect laws (2024), and most recently, the criminalisation of wage theft (2025). Summaries of these reforms can be found in our previous articles (Secure Jobs, Better Pay Act, Closing Loopholes No. 1, Closing Loopholes No. 2, Right to Disconnect and Criminalisation of wage theft).

The Minister for Employment and Workplace Relations of Australia, Murray Watt, has announced no major industrial relations or employment reforms are planned. Rather, the Labor government will focus on consolidating existing measures, with future changes to be gradual and widely consulted. However, Minister Watt has commissioned an independent review into the impact of the Secure Jobs, Better Pay reforms. The draft report, released in January 2025, identified several areas for improvement, such as fixed term contract limitations and gender equity measures. Further amendments may be considered now that the Albanese government has been resoundingly re-elected.

1. Ban on non-compete clauses

Perhaps the most significant change proposed by the Albanese government is to ban non‑compete clauses.

While there are currently only skeletal details about this reform, the following key aspects have been proposed:

• Non-compete clauses will be prohibited for workers earning less than the high‑income threshold prescribed under the Fair Work Regulations 2009 (Cth), being $175,000 per annum for the 2024-25 financial year.
• Prohibit businesses from fixing wages via arrangements that place a cap on workers' pay.
• Prohibit businesses from imposing ‘no‑poaching’ agreements to prevent workers from being hired by competitors.
• The reforms could also affect non‑solicitation clauses for clients and co‑workers, and non‑compete clauses for high‑income workers.
• The laws are proposed to take effect from 2027 and operate prospectively, with a transitional period to be confirmed.

On its face, the proposal presents a welcome change for workers, where they seek to move more freely between jobs without the hindrance of a non-compete clause that may apply to them. Labor has foreshadowed an advantageous economic impact that will flow from the reforms.

The precise scope of the reforms is not yet clear. The laws appear to target not only employees, but 'workers', which casts a much broader net across Australia. The impact may therefore stretch beyond the employment relationship and potentially affect independent contracting, labour hire arrangements and other contractual arrangements. This could include sales of business where a purchaser seeks to restrain a vendor after settlement, and give rise to other issues if the purchaser employs the vendor after settlement.

The reforms could mean a significant erosion of protections afforded under the restraint of trade doctrine as it exists in Australia, which aim to protect different types of business interests. Statutory reforms to diminish restraints of trade in Australia are novel, so their precise impact is unclear.

Similar reforms have recently been enacted into law in the USA. From 1 January 2024, the State of California introduced laws that render non-competes unlawful. While those laws are still in their infancy, there are various questions that have been considered in California, which may also arise in Australia. Some of these questions are discussed below.

How the proposed laws interact, and may impact, other jurisdictions

• In the USA those laws operate by force of California law, and there are varying opinions on whether those state-based laws can extend to work done outside of California.
• In New South Wales, there is a statutory regime which supplements the common law (judge-made law) restraint of trade doctrine in the form of the Restraints of Trade Act 1976 (NSW). Generally speaking, where a law of the Commonwealth conflicts with a State law, the law of the Commonwealth prevails to the extent of the inconsistency. Depending upon on the precise nature and scope of the proposed prohibitions at the Commonwealth level, they may impact the New South Wales statute.
• Issues also arise on the question of enforceability where a worker may travel in and out of Australia in the course of their employment or performs work remotely overseas. Questions that have arisen in the USA include whether the laws apply:
  • to employment contracts formed outside the relevant jurisdiction;
  • whether the worker needs to reside in the relevant jurisdiction;
  • whether the worker needs to perform work in the relevant jurisdiction; and
  • whether the employer needs to operate their enterprise in the relevant jurisdiction.

How the proposed laws interact, and may impact, other employee obligations and employer interests

• Non-compete clauses generally operate for a specified period of time after the employment relationship ends. There are however various other obligations that can 'follow' an employee after their employment ends with an employer. These can include duties to not use confidential information or intellectual property of the former employer.
• Exiting employees can present a key risk for some employers, and particularly in circumstances where an employer finds themself unable to rely on any restraints. Confidential information of an employer may be placed at higher risk if employees can freely move between competing employers.
• The proposed laws may also impact duties that arise during employment, such as the duty of loyalty by an employee to their current employer. For example, the proposed laws could permit an employee to concurrently perform work for a competitor of their employer, while the employee remains employed by their current employer (much like a casual employee may do).

How the proposed laws interact, and may impact, existing employment contracts

• The new laws may affect existing restraint provisions in a number of ways, which in part is due to how the restraint clauses are drafted. For example, the potential impacts may include any of the following:
  • The new laws will render any non-compete clauses void. For standalone non-compete clauses within a contract, this means that other restraint clauses may remain enforceable under the contract. In other words, the non-compete clause may effectively be 'severed' from the contract while other restraint clauses remain operative.
  • If a non-compete clause is intertwined or contained within the same contractual provision, it may render the restraint clauses void in their entirety. This may necessitate separating non-compete clauses from (for example) non-solicitation obligations for some contracts.
  • The new laws may go even further and not only render any non-compete clauses void, but impose civil penalties upon a person that includes non-compete clauses in their contracts. This may necessitate revisiting and removing non-compete clauses from some contracts, which ordinarily would require the employee's agreement to effect what is essentially a contract variation.

How the proposed laws may impact restraint litigation, particularly injunctive relief, for employers

• Where an employee has exited a business and their former employer becomes aware of a suspected breach of restraints, this can (in some cases) trigger a rapid legal process to protect the business in the form of an injunction application to a court to prevent a breach (or further breaches).
• A business seeking an injunction to enforce a restraint will often also seek to enforce other obligations as discussed above, such as confidentiality obligations where an employer suspects that an employee has taken or intends to use confidential information for the benefit of a competitor. Injunctions were granted in this kind of scenario recently by the Supreme Court of Victoria.
• The proposed laws may render injunctive relief much less suitable for businesses as a mechanism to enforce obligations, as it removes a ground on which a business may argue foreseeable loss arising from the former employee's conduct.

2. Wages, penalty rates and enforcement

The Labor government has emphasised its commitment to ensuring real wage growth as part of its broader strategy to address cost-of-living pressures. The Labor government will call for an "economically sustainable real wage increase" as part of the annual wage review, which is conducted by an expert panel between March to June each year. Labor is seeking for minimum and award wages to be increased by more than the inflation rate.

The Labor government has also been a strong advocate for protecting penalty rates for work performed on weekends and public holidays and plans to legislate this protection into the* Fair Work Act 2009 *(Cth), restricting employers from trading these entitlements for higher base pay during negotiations or award changes.

Further, the Labor government and the Greens advocate for stringent measures to address wage theft and industrial manslaughter on a national scale. They aim to criminalise these offenses under national law, ensuring uniformity across all states, including those that currently lack such legislation.

3. Right to disconnect

The Labor government has committed to maintaining the recently introduced "right to disconnect" laws, with small businesses required to comply by August 2025. These laws protect workers from being penalised for ignoring unreasonable calls or emails outside work hours. Although the impact has been modest so far, the legislation supports the Australian workforce’s demand for better work-life balance and flexibility. With Labor re-elected, these protections are likely to be expanded or strengthened.

4. Multi-employer bargaining

As part of the major industrial relations reforms in 2022, the Labor government introduced the Secure Jobs, Better Pay Act to facilitate multi-employer bargaining, making it easier for employees across different companies within the same industry to collectively negotiate pay and working conditions. The Labor government continues to support multi-employer bargaining, believing that multi-employer bargaining is particularly beneficial in industries such as childcare, cleaning, and aged care.

5. Superannuation changes

From 1 July 2026, employers will be required to pay superannuation guarantee payments at the same time as paying employee salary and wages. While this reform is welcomed by employee advocate groups, it is anticipated to place significant pressure on payroll systems, especially for small and medium-sized businesses.

Also, from 1 January 2025, employees will be paid superannuation on government-funded paid parental leave, which will be administered by the Australian Taxation Office.

6. Gig economy workers

The Labor government has introduced new protections for gig workers to align the gig economy more closely with the standards of traditional employment. In New South Wales, existing tribunals will now have jurisdiction to include gig economy workers such as couriers and food delivery drivers, granting them similar rights to owner-drivers and taxi operators. These new protections complement the recent federal amendments, which expanded the protections for platform-based workers.

What about the Greens?

The Greens have recently influenced government policies on improving workers' rights. Considering their significant presence in the senate, where neither the Labor Party nor the Coalition holds a majority, the Greens' policies hold substantial importance. One notable election proposal is the plan to initiate national trials for a four-day working week. The goal of this four-day week is to improve employee work/life balance and wellbeing and would involve reducing work hours by 20% while maintaining 100% of pay. The Greens propose allocating funding for a new national institute to study the benefits of employees working their ordinary hours over a compressed four-day week and assess how this can be achieved without significant declines in productivity. This policy follows similar trials conducted in the UK, Canada, Germany, and Spain, aimed at creating a healthier and happier workforce through a shorter work week.

Another notable election proposal is 12 days reproductive leave per year and an increase of up to 52 weeks' paid parental leave. The Albanese government is considering a review but has not yet committed to implementation.

What does this mean for employers?

The 2025 federal election results reflect a clear mandate for Labor’s policies centred on economic stability, renewable energy, and social equity. For employers, this translates to a landscape where job security, fair compensation, and worker rights are at the forefront.

As the landscape of employment and employer responsibilities evolves, there are several key takeaways that employers should consider in order to remain compliant and competitive. These include:

• reviewing standard employment agreements for all employees (whether above the high-income threshold or not) with respect to non-compete and non-solicitation clauses. Employers should also consider whether there may be alternatives to these types of clauses, such as retention benefits or bonuses to incentivise employees to stay with the employer
• preparing for minimum wage increases and the preservation of penalty rates, as these will likely impact business operations – particularly employers in award-covered or unionised sectors
• reviewing flexible work policies and remote working arrangements, particularly in anticipation of expanded/strengthened right to disconnect laws
• reviewing internal payroll processes to stay compliant with superannuation laws (and also minimum wage increases)
• revisiting the composition of the workforce – particularly employers who rely more on casual or labour hire workers - in response to rising pressure to convert employees to permanent modes of engagement
• preparing for a broader definition of leave entitlements, including paid parental leave for parents of stillborn children
• expecting greater exposure to criminal prosecution for underpayments and workplace safety breaches
• considering whether more sustainable workplace practices should be adopted, particularly by employers in the energy sector, given the Labor government's strong stance on renewable energy and climate action.

For further information, please contact our experienced workplace relations and safety team.