Workplace lawyers reveal the potential impact of non-compete clauses on training, upskilling
The Federal Government's plan to ban non‑compete clauses risks dampening employers' appetite for investing in staff training and development, workplace lawyers have cautioned.
Barry Nilsson, in a recent article, pointed out that non‑compete clauses can influence how much training and upskilling employers provide to employees.
"Such protection arguably incentivises employers to invest in the training and development of their employees, with the confidence that the benefits of that investment will be retained within the business," the firm said in a recent article.
But with the proposed ban on these clauses, the law firm warned that it may also affect the value of investments made in employee training and development.
It said that the shift may result in "reduced incentive to invest in the training and development of employees due to the increased risk that skills, knowledge, and experience acquired during employment may be transferred to competitors."
It may also make it more difficult for employers to retrain employees, as greater job mobility may boost employees' bargaining power in wage negotiations, according to the law firm.
It further warned that it would heighten the risk of intellectual property, confidential information, and client relationships being used by former employees.
"These risks highlight a shift in how employers may need to approach the protection of such interests," the law firm warned.
It urged employers to consider other lawful mechanisms so they can protect their legitimate business interests.
"This may include reviewing the use and scope of non‑solicitation and non‑disclosure clauses, which may continue to provide meaningful protection, as well as considering the role of copyright and the design, adequacy and enforcement of internal information management and data security systems," it said.
Prohibition of non‑compete clauses
The Government's proposed reform would prohibit non‑compete clauses for employees earning below the high‑income threshold, currently $183,100, through amendments to the Fair Work Act 2009 (Cth).
If passed, the changes are expected to take effect sometime in 2027, following the introduction and passage of a draft bill.
Non‑compete provisions are widely used to prevent departing employees from immediately joining a rival or starting a competing business in the same industry, usually within a defined geographic area and time period after employment ends.
These clauses are designed to protect intellectual property, confidential information, and client relationships from being leveraged by competitors.
The government has framed its proposed ban as a pro‑competition and pro‑worker measure. It argues that non‑competes, combined with the threat of litigation, have constrained employee mobility, and suppressed earnings potential.
Treasury estimates suggest that removing restraints for affected workers could increase average wages by up to four per cent and lift gross domestic product by about $5 billion.
Currently, courts in Australia uphold non‑compete clauses where they reasonably protect legitimate business interests and are not contrary to public policy, assessing factors such as duration, geographical reach and necessity, and severing unreasonable provisions where needed.
