Australian Government Unveils Ban on Non-Compete Clauses for Most Workers
Synopsis
The Albanese government moves to ban non-compete clauses for workers earning under $190,100, arguing the rules unfairly restrict wages and job opportunities.
Key Highlights
- Draft legislation will outlaw non-compete clauses for those earning less than USD 190,100 a year.
- Research from e61 Institute estimates that the ban will raise salaries across affected workers by $2,500 a year on average.
- Non-solicitation clauses will also be prohibited under the law, with no-poach clauses and wage-fixing arrangements subject to review.
- The consultation period on the draft legislation will be open until October 2nd.
Australian Draft legislation will prohibit non-compete clauses for workers who earn less than $190,100 a year. The clauses, which can stop workers in specialist areas from moving to a competitor, limit the choices of low-paid employees with less bargaining power, the Albanese government has argued.
Such clauses can unnecessarily prevent construction workers, hairdressers and childcare workers from finding new jobs or better pay. According to research from the e61 Institute, this ban would increase the annual income of an average worker currently held by a non-compete agreement by $2,500.
Ministers: Clauses inhibit labour force and efficiency
Labor’s Assistant Minister for Productivity, Competition, Charities and Treasury Andrew Leigh said no worker should need permission from a previous employer to start a new role. Non-compete clauses are “a lock on opportunity,” he said, keeping wages down and keeping people from seeking out the jobs where they could get paid more, and it was something the government was removing.
Minister for Employment and Workplace Relations Amanda Rishworth said non-compete clauses lower wages, limit the ability of workers to move between jobs and harm labour productivity.
High-Income Workers to Remain Exempt
The government has accepted that non-compete clauses could still be justified in relation to high-earning, senior employees who generally have greater negotiating power when entering into a contract. In order to protect these arrangements, the government proposes prohibiting non-compete clauses for employees earning less than $190,100 (the Fair Work Act high-income threshold and a 30% increase from July 2022) when they leave.
Other Clauses Also Under Review
Along with normal non-compete clauses, the draft legislation will outlaw non-solicitation clauses, which prevent employees from luring coworkers to work for another competing company. Also under investigation are no-poach clauses, provisions in an agreement with one business that avoid solicitation of each other’s clients or customers, and wage-fixing arrangements.
Cascading restraint-of-trade clauses, which contain wide-ranging initial restrictions, with cascades allowing narrower restrictions if the first are held unenforceable, are also part of the reforms being contemplated.
Business Concerns and Next Steps
Opponents of the plan have countered that such clauses can safeguard both how much time and money companies expend on staff, and protect against the loss of large numbers of employees, or clients. The government will consult on the appropriate carve-outs and exemptions in circumstances involving a genuine business interest to mitigate these concerns.
The consultation on the draft bill will close on October 2.
Source: Smart Company
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