Contractual handcuffs that prevent people on less than $190,000 from moving to a better-paying or more interesting job would be banned under proposed laws to be unveiled by the federal government on Monday.
The ban on so-called non-compete clauses, part of the government’s plans to boost productivity across the economy, follows growing evidence their use by some firms is having a “chilling effect” on workers whose skills may be better rewarded with another employer.
Assistant Productivity and Competition Minister Andrew Leigh said banning non-competes was aimed at making the economy work more efficiently while delivering better wages.
“Workers shouldn’t need their old boss’s permission to take a better job. Non-compete clauses can act like a padlock on opportunity, holding down wages and keeping people from jobs where their skills are worth more. We’re cutting that padlock,” he said.
Research by the Australian Bureau of Statistics has found almost 47 per cent of businesses use some type of non-compete clause. The most common are bans on non-disclosure agreements.
But the bureau found other restrictions, which have a direct impact on workers’ ability to use their skills in a better paying job, are widely employed by businesses including client non-solicitation clauses (25.4 per cent), non-compete clauses (20.8 per cent) and bans on the solicitation of co-workers (18 per cent).
Separate research by the e61 think tank has found that banning non-compete clauses could lift the wages of affected workers by up to $2500 a year.
Submissions to an inquiry into non-competes last year revealed the extent to how they are being used to reduce the ability of employees to move to new jobs.
In one case, a person on less than $80,000 a year was barred from taking a job in the same industry in Australia and New Zealand. In another case, a graduate engineer on $63,000 found a clause in their contract that prevented them from working anywhere else in Victoria for the next year if they left the company.
Bricklayers, nurses and retail workers were revealed to have non-compete clauses that had traditionally been used in high-income professions in which trade secrets may have a particularly high value.
Apart from the draft legislation on non-compete clauses for people earning less than $190,000, the government will also consult on a series of related employment restraints including non-solicitation and no-poach clauses and wage-fixing arrangements.
The government plans to offer “appropriate exemptions and safeguards” to protect what are considered legitimate business interests. This may include the transfer of corporate secrets with some businesses concerned that staff they have trained may take those skills to a competitor or set up their own firm.
Employment Minister Amanda Rishworth said non-compete clauses were hurting the entire economy.
“Labor is determined to help boost job mobility for more than three million Australian workers constrained by a non-compete clause, including childcare workers, construction workers and hairdressers,” she said.
Consultation on the legislation will run until October 2.
Shane Wright is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X or email.From our partners
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