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April 05, 2024
Feedback wanted: The Australian Government is investigating non-compete and restraint clauses.
The Australian government is soliciting public feedback on the use and consequences of non-compete and related restraint clauses within workplaces.
An issues paper was released by the government on the 4th of April 2024 to gather information and opinions and to assist the Competition Review’s examination of such clauses.
Non-compete clauses represent a form of restraint of trade clause designed to restrict employees from joining a competitor or establishing a competing business.
In Australia, 46.9% of businesses report employing some form of restraint clause, which also extends to non-executive personnel, according to data from the Australian Bureau of Statistics (ABS).
Among these, 20.8% of businesses admit to implementing non-compete clauses for some of their workforce, with 68.2% indicating their usage for more than 75% of employees.
The issues paper, drawing upon international evidence, notes the increasing prevalence of non-compete clauses within workplaces.
“This evidence also indicates that while benefiting certain businesses, restraint of trade clauses are negatively affecting workers, other businesses, and broader economic outcomes – resulting in suppressed wage growth, limited job mobility, and restricted access to skilled labour,” reads the paper.
Upon releasing the paper, the government emphasized the necessity of striking a suitable balance to ensure that non-compete and associated restraint clauses do not impede competition, productivity, and wages.
“Hence, the government is seeking feedback to ascertain whether reform may be warranted in this domain,” stated the Treasury in a release.
“Stakeholders are encouraged to participate in the consultation process by submitting their opinions. Both businesses and employees with their own perspectives and experiences regarding these clauses can also provide feedback through a brief questionnaire.”
Submissions and responses to the questionnaire are to be received until the 31st of May.
This consultation follows the government’s announcement in 2023 that the Competition Review would investigate non-compete and associated clauses in employment contracts.
