The head of the Australian Industry Group, Innes Willox, says a proposed ban on non-compete clauses for many workers isn't needed and will likely cause problems for businesses.
Willox argues the clauses being targeted are already unenforceable under common law unless they're reasonable and protect an employer's legitimate interests. "The kinds of non-compete clauses targeted are already unenforceable under the common law unless they are reasonable and protect an employer's legitimate interests," he said. "However, the law also recognises that businesses may have legitimate interests that warrant protection and that such protection can be reasonable in many cases. Overriding this longstanding legal position is yet another change that will be celebrated by unions but viewed as a further unwarranted blow to employers."
Who the ban actually covers
The core concern, Willox says, is the proposed ban applying to employees earning below the high-income threshold, currently $191,100. "There are many employees earning below $191,100 who are engaged in roles involving access to commercially sensitive or otherwise confidential information," he said. "Just think about employees working in sales roles, preparing commercial tenders or privy to confidential production processes or business plans. This applies to a lot more employees than the hairdressers commonly referred to by the Government's spokespeople."
Confidentiality clauses aren't enough
While Willox welcomed the government ruling out a ban on clauses preventing employees from disclosing confidential information, he says that alone doesn't go far enough. "The courts have repeatedly recognised that clauses preventing employees from disclosing confidential information are not sufficient to provide practical protection for an employer when their former staff member moves to a competitor as they are notoriously difficult to enforce."
He's calling for a more targeted approach. "The almost blanket ban on such provisions is a heavy-handed approach. It is hoped that the consultation with industry will not just be lip service and will lead to improvements to the flawed Bill. There needs to be a more nuanced approach. The legislation must include a mechanism affording employers practical protection where it is reasonable and they have legitimate interests, regardless of an employee's earnings."
The risk to R&D and training
Willox argues the change carries broader economic consequences. "Ultimately the proposal will make it harder for industry to choose Australia as the destination to undertake any research and development. It will also discourage employers from investing in staff training and skills development if they have no reasonable capacity to prevent employees from taking those newly acquired skills directly to competitors. This will undermine our competitive position internationally and will foreseeably hurt rather than help our already abysmal productivity levels."
He acknowledged the government has retained a narrower role for non-compete clauses for employees earning above the threshold, but questioned the need for any government intervention in contracts between highly paid professionals. "While it is sensible that Government has retained a role for non-compete clauses for employees earning over $190,100, albeit a narrower one, there really is no case for interfering with contractual arrangements between highly paid professionals."
Ai Group says it intends to keep engaging with government on the proposed changes. "We will engage with industry over the detail of the proposed change and seek to work constructively with Government to reinforce the range of damaging and unnecessary adverse consequences this will trigger if a modified approach isn't adopted."