Industry groups have raised concerns about the Australian Labor Government’s proposed ban on non-compete clauses, warning that the move could negatively impact small businesses.
In his Federal Budget address on Tuesday, Treasurer Jim Chalmers announced the government’s plan to eliminate non-compete clauses for workers earning under $175,000 annually. Chalmers argued that banning these clauses would increase job mobility, offering workers greater flexibility to pursue better opportunities without the fear of legal restrictions.
Non-compete clauses are often inserted into employment contracts to prevent employees from joining rival companies or starting competing businesses. These clauses are used to protect trade secrets, intellectual property, and client relationships. According to Chalmers, this measure is in line with the government’s broader efforts to boost wages and income growth for Australian workers.
“A big theme of the Budget is rebuilding wages and incomes, ensuring that people can earn more and keep more of what they earn,” Chalmers explained in an interview with ABC on Wednesday. “Banning non-compete clauses is part of that vision, alongside tax cuts.”
However, industry leaders have expressed reservations about the impact of this policy. Andrew McKellar, CEO of the Australian Chamber of Commerce and Industry (ACCI), questioned the appropriateness of introducing such a policy measure in the Federal Budget. “It’s unusual to see this in a Budget statement. This isn’t a typical Budget measure, it’s a policy decision,” McKellar said. “We believe it’s heavy-handed, particularly since only around one percent of employees are directly affected by non-compete clauses.”
McKellar also raised concerns that small businesses could suffer due to the loss of intellectual property and client relationships when employees move to competitors. “Small businesses invest heavily in training and developing their staff. If an employee can simply leave with valuable knowledge and contacts, it’s a major setback for the business,” he added.
Chalmers defended the move, asserting that non-compete clauses have contributed to stagnating wages and a lack of entrepreneurship. “Non-competes are an obstacle to job mobility and are holding back the creation of new small businesses,” Chalmers said. Data from the e61 Institute and the Australian Bureau of Statistics revealed that about one in five Australian workers are currently bound by non-compete clauses, and job mobility reached an all-time low in 2024.
Opposition figures have also raised questions about the effectiveness of the policy. Shadow Treasurer Angus Taylor expressed caution, calling for further clarification on how the ban would operate in practice. “We want people to have options in the labour market, but we also want small businesses to thrive. This policy raises a lot of questions, and we need more details on how it will work,” Taylor said.
Taylor also highlighted concerns about the impact on various sectors, noting that non-compete clauses are often seen as a way to protect skills and intellectual property in industries such as finance, technology, and even creative sectors like hairdressing.
While the government has consulted with businesses ahead of the ban’s implementation, it is understood that sectors such as financial and insurance services, mining, and technology will be largely exempt from the ban, as workers in these industries generally earn above the $175,000 threshold.
The government’s proposal is set to reshape the landscape of Australian labor relations, but its full impact on small businesses remains a subject of significant debate.
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