In last week’s Budget, the Government pledged to ban non-compete clauses for most workers, if it’s re-elected.

Non-compete clauses prevent employees from working for industry competitors after leaving a job. More than three million Australian workers are believed to be affected by such clauses.

In a survey of the TDA audience, almost a third of you said you’ve been asked to sign a non-compete clause, and many of you shared negative experiences.

Let’s dive into how these clauses work and why they have become an election talking point.

To kick off, here are the basics: Non-compete clauses prevent employees from working for industry competitors (for a specific period) after leaving a job, and ‘no-poach’ agreements stop staff from being hired by rival companies.

These clauses fall under the broader category of restrictive employment contracts, which include non‑disclosure agreements, and clauses that prevent employees from taking clients with them when they move to a new company.

Employers typically justify these clauses as a way to protect company knowledge, client relationships, and business interests.

In Australia, their use has been growing. A 2024 Government review found that 47% of Australian businesses reported using at least one type of restraint clause in 2023. Of these, 21% included non-compete clauses in employee contracts, most commonly in larger businesses with 1,000+ employees.

Abolishing these clauses has become a government priority after reports of misuse against lower-paid workers, including cases where minimum-wage employees faced legal threats for switching jobs.

The Government argues that the “unfair” use of non-compete clauses prevents Australian workers from accessing better, higher-paying jobs.

It insists that reforming these contracts is about “encouraging aspiration, unlocking opportunity, lifting wages, and making Australia’s economy more dynamic and competitive.”

Without policy intervention, the Government predicts that the use of non-compete clauses in Australia will only grow. Among businesses already using them, 77% said they were “very likely” to continue doing so.

The Government argues that non-compete clauses keep Australian workers “handcuffed” to jobs, “even when better opportunities exist.” It estimates the reforms could increase wages for some workers by up to 4%.

In 2023, about 1% of Australian businesses reported that a prospective employee had turned down a job offer due to a non-compete clause from a previous employer.

Modelling from the Productivity Commission predicts that banning non-compete clauses could boost productivity, add $5 billion to the economy annually, and help reduce inflation.

However, the full extent of non-compete clauses across Australian industries and their impact on the labour market remains unclear. A report from the Competition Taskforce is expected to provide further insights when it’s released, later this year.

We posted a poll on TDA’s Instagram stories earlier this week, and nearly 10,000 of you responded — thank you!

Almost a third of you (31%) said you’ve been asked to sign a non-compete clause at some point in your career.

In an open-response survey, people shared experiences across a diverse range of industries, including sales and marketing, construction, and healthcare.

The details of these contracts varied significantly. Some clauses restricted employees from working at a competitor for six months after leaving a job, while others extended to up to two years.

Others were based on distance rather than time. For example, one junior legal assistant was asked to sign a contract banning them from working for another firm within a 20km radius of their office, if they quit.

Another person, who works in real estate, signed a clause that prevented him from working for a competitor within 50km for six months after termination.

Many respondents said non-compete clauses have been included in every contract they’ve signed, even in junior roles.

The Government’s proposed ban would apply to workers earning less than $175,000 annually — the high-income threshold under the Fair Work Act. If re-elected, the Government plans to implement the bill in 2027.

Before legislation is introduced to Parliament, the policy will undergo consultation to refine exemptions, penalties, and a transition period.

However, the proposal has faced some opposition from business groups. This includes the Business Council of Australia, which acknowledged the “challenges” around non-competes “need to be addressed”, but it said the Government’s ban “is not the way to do it.”

Luke Achterstraat, CEO of the Council of Small Business Australia, said he similarly “doesn’t believe a blanket ban is the right approach.”

“There is a genuine role for non-compete clauses, particularly to protect small businesses,” he said.

“Just like with trademarks and with copyright, we do actually need to have some degree of protection for small businesses – that when they’re building these assets, and they’re building these client bases, that there are those protections.”

Despite this opposition, the Government has hinted at further legislative reforms to restraint clauses – including extending the ban to high-income earners and cracking down on client and co-worker non-solicitation clauses. The Government also plans to close legal loopholes that allow restraint clauses to cap employee wages and working conditions while enabling ‘no-poach’ agreements.

With these potentially anti-competitive business practices now in the spotlight, it’ll be interesting to see how these conversations continue after the election.

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This week, we talk about the new innovation helping to keep more people safe, plus, the birth of a new baby cub, and an incredible community initiative to get more actors on stage!

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