1 in 5 Australian workers covered by non-compete clause

One-half of Australia's workforce is covered by some form of post-employment restraint, according to a report.

An analysis from E61 Institute of a McKinnon survey among 3,000 respondents found that 22% were subject to a non-compete clause, while another 26% were under a non-disclosure of confidential information agreement.

There were also employees who said they signed agreements that restricted poaching of clients (16%) and co-workers (7%).

Among employees covered by a non-compete clause, 18% said it would take effect if they switched employers within the same industry in the future, while 18% said it would "probably" apply to them, according to the report.

NCCs now 'more prevalent'

Non-compete clauses (NCC) are usually imposed to protect an organisation's confidential and propriety information once an employee leaves the company.

Hence, it is "unsurprising" that 39% of managers are subject to such provisions, according to the report.

The survey, however, also revealed that 14% of low-wage workers who lack bargaining power, such as clerical staff and labourers, are subject to post-employment restrictions.

The non-compete clause also now cover outward-facing customer roles, such as childcare workers, yoga instructors, and IVF specialists, in addition to senior roles in law, finance, and business services, according to the report.

"NCC have become more prevalent over time and are now a default option in many employment contract templates. This was not the case 15 years ago," the report said, citing its consultation with legal practitioners.

According to the report, the prevalence of non-compete clauses could reduce employees' outside employment options and wage bargaining power.

Impact of non-competes on job mobility

It also cited the clauses as a potential "source of friction" on "relatively low" job mobility, which is currently at a decade-high of 9.5%, according to data from the Australian Bureau of Statistics (ABS).

"Job mobility in Australia has generally been trending down for decades and reached a record low of 7.5% during the first year of the COVID-19 pandemic," said Bjorn Jarvis, ABS head of labour statistics in a statement.

"While the 2023 figure might be higher and is in fact the highest it's been since the early 2010s, it's still relatively low compared to earlier decades."

The government has yet to implement changes to the use of post-employment restraints as part of their Industrial Relations reforms. However, Assistant Minister for Competition Andrew Leigh already sought the advice of the Australian Competition and Consumer Commission and the Treasury on the competitive impacts of non-compete clauses, as well as any action the government can take in response.