'This proposal is a disincentive'
Employers across Australia have expressed concerns over the government's latest proposal to ban non-compete clauses for employees earning below $175,000 annually.
The Ai Group, which represents more than 60,000 businesses, said in a statement that the proposed abolition is "deeply concerning."
"It will undoubtedly lead to the difficult renegotiation of employment contracts and litigation where employers will seek to protect their intellectual property and customer base built up over years of risk and effort which will now be threatened," said Ai Group chief executive Innes Willox in a statement.
"This proposal is a disincentive to hire, train and upskill workers."
The Australian Chamber of Commerce and Industry (ACCI) also said it was disappointed over the government's proposal.
"Banning the use of non-competes for anyone earning less than $175,000 a year means employers cannot ensure that the majority of employees do not unfairly use intimate knowledge of advantages or assets at a new employer," said ACCI chief executive Andrew McKellar in a statement.
The ACCI, citing data from the Australian Bureau of Statistics, pointed out that only one per cent of employees turned down employment due to non-compete clauses.
"Given this small cohort, banning their use for employees on less than $175,000 a year is heavy-handed," McKellar said. "I urge the government to preserve the legitimate use of non-compete clauses to protect genuine business interests - the policy does not achieve this balance."
The Australian government said there are more than three million Australian workers covered by non-compete clauses, including childcare workers, construction workers, and hairdressers.
The proposal to ban these clauses comes amid cases of "misuse of non-compete clauses" that were discovered by the Treasury's Competition Review.
Among these incidents are minimum wage workers being sued by their former employers, as well as workers being threatened with legal action if they switched jobs.
"Australians shouldn't need a lawyer to go to a higher paying job," said Treasurer Jim Chalmers in a statement. "Our changes will make it easier for workers to switch to a better job and will boost wages."
According to the government, banning non-compete clauses can also lift wages by up to four per cent of about $2,500 per year for a worker on median wages.
It can also reduce inflation, improve productivity, and add $5 billion or 0.2% to the GDP annually.
"These changes will spur new business entry and competition. Non‑compete clauses are a handbrake on business creation and a speed bump on aspiration," Chalmers said.
The Business Council of Australia, however, noted that prohibiting non-compete clauses may not be right approach.
"We think that the better approach is education, not regulation," BCA chief executive Bran Black told ABC News Breakfast.
According to Black, there are already legal precedents that inform what employers and employees can and can't do in different situations. But he also acknowledged that this "very sizable body of case law" previously decided by the courts may not be easily accessible to the public.
"So, the better way of getting around that is by making sure they have access through an online service, good website, a service that they can call into and get advice," the BCA chief said.
"We don't accept the proposition that the best solution in all circumstances is regulation. This is a good instance in which we can solve a problem with appropriate education."
