Employment Restraints Slated for Reform

On August 2023 , the Australian Government announced that non-compete and related restraint clauses in employment contracts would be an area of policy considered by the Competition Review. An Issues Paper was created with the Competition Review requesting submissions. The Competition Review will advise the Government of the outcomes of the consultation sometime by the end of this year (2024). The Issues Paper focused on restraints of trade in the employment context. Approximately 46.9 % of businesses use some form of restraint for their employees and evidence suggests that restraint of trade clauses (particularly non-compete clauses) is adversely impacting employees, and broader economic outcomes – through reduced wages growth, job mobility, and access to skilled employees.

It is expected that there will be some proposed changes to non-compete laws, and potentially to non-solicitation clauses (of clients and co-workers) in line with international changes that have been implemented recently. Potential changes considered could include:

• Banning non-compete clauses or banning of non-compete clauses up to a certain income threshold;

• Possible monetary consideration given to employees who are expected to abide by restraint clauses;

• Less reliance on cascading clauses (geographic area, and time periods of a restraint) to give more certainty to employees as to the terms of their post-employment restraint; and

• Time limits on ‘gardening leave’ and non-solicitation clauses.

We look forward to sharing some of the proposed reforms when the Government releases their response to submissions.