Ordinary workers earning less-than-average wages are facing restrictions preventing them from working in the same industry or even within Australia due to non-compete clauses in their employment contracts. The federal government believes these clauses are turning the national economy into a version of the Monopoly board game.
In a striking example, a health worker earning under $80,000 discovered a clause in their contract that indefinitely barred them from taking a job in the same industry in Australia and New Zealand. Similarly, a laundromat manager who was made redundant was informed she could not work in the same industry in her town, despite never signing such a clause. A young graduate engineer earning $63,000 found a clause preventing them from working anywhere else in Victoria for 12 months if they left their company.
Government’s Plan to Ban Non-Compete Clauses
The government plans to ban most non-compete clauses, which affect up to half of all workers, by 2027. These clauses often include restrictions on working in a similar industry and non-disclosure requirements. In a speech to the Sydney Institute, Assistant Competition Minister Andrew Leigh will reveal that the government has identified numerous such restraints on low- and average-pay workers as part of its 2027 ban plan.
Leigh will highlight the development of “cascading clauses,” where multiple restrictions are inserted into work contracts. If one clause fails to prevent a worker from moving, another may succeed. These clauses might restrict workers from employment within a similar industry in a specific state, region, or even a five-kilometer radius of their current workplace.
“From the point of view of a worker reading their contract, the message is unmistakable: you are boxed in. Faced with a clause that looks like it was drafted with a dartboard, most people simply will not risk moving at all,” Leigh will say.
Opposition from Businesses
Some large businesses, particularly those employing specialists or those with access to company intellectual property, have opposed the government’s non-compete clause ban. They argue it could result in losing valuable staff or company secrets to competitors. However, Leigh contends that these clauses have permeated the entire economy, impacting childcare workers, bricklayers, retail workers, and nurses, thus suppressing wages, limiting job mobility, and stifling the spread of ideas.
Leigh will argue that these clauses restrict overall productivity and diminish competition in key economic sectors.
“We want an economy that looks less like Monopoly, where one player wins the lot, and more like Lego, where everyone can build and create. And unlike Monopoly, an economy built on Lego doesn’t end with someone flipping the board in frustration,” he will say.
Economic Impact and Research Findings
Research in Australia suggests that individuals with non-compete clauses earn 4 percent less, or about $2,500 a year, compared to those without such clauses. A recent study from the United States indicates that banning non-compete clauses could increase average wages by between 3.5 percent and 13.7 percent. The study found that women and non-white workers face double the wage penalty caused by non-competes compared to other workers.
Submissions on the government’s plan revealed that many non-compete clauses affect people with no trade secrets to protect. In many cases, the clauses are so broad that they appear to have been copied from other employers.
Looking Forward
The government’s move to ban non-compete clauses aims to foster a more dynamic and equitable job market. By removing these barriers, the government hopes to enhance job mobility, increase wages, and stimulate economic growth. As the 2027 deadline approaches, businesses and workers alike will need to adapt to the changing regulatory landscape and embrace the opportunities that a more open labor market presents.
