PRIVATE MEMBERS' BUSINESS

Ms TEMPLEMAN (Macquarie) (18:34): If you're a high-income earner being required to take what is often euphemistically known as gardening leave before you switch to a competitor or set up as a competitor to your original employer it probably isn't a huge surprise, and it probably isn't a huge financial stretch either. You've got the choice. However, if you're on the minimum award wage or even above the award and decide that there's nowhere to move up in the business you're working in, realising that your contract may have a non-compete clause or a post-employment restraint-of-trade clause can be a real shock.

These are terms in a contract that stop or restrict an employee from working in competition with a previous employer for a certain period after their employment with them ends. These clauses may also stop or restrict an employee from working in a particular location or area. Workers who want to switch to a nearby firm can find themselves barred from moving unless they take months off work.

Just sorting out what's what, for a worker, can be tricky. At the moment, the Fair Work Act doesn't set any rules for non-compete clauses in employment contracts. Therefore, the Fair Work Ombudsman can't advise on non-compete clauses.

If someone has questions about a non-compete clause in their employment contract, they have to seek formal advice from their union or get their own legal advice. Right now, more than three million Australian workers are covered by these clauses. Non-compete clauses apply not just to senior executives but to many low-wage workers, including in construction, hairdressing and early childhood education.

The Treasury's competition review heard troubling accounts about the misuse of non-compete clauses, including minimum-wage workers being sued by former employers and workers being threatened with legal action if they switched jobs. Australians shouldn't need a lawyer to go to a higher paying job. Even when non-compete clauses are legally unenforceable, they can still make people feel stuck in their current role.

As my parliamentary colleague Assistant Minister Leigh put it when interviewed on this, a lot of workers don't have $100,000 and a lawyer sitting around waiting to take their case, so even an unenforceable non-compete clause has a chilling effect, stopping workers from moving to a better job because they're scared by the black and white of their employment agreement.

So what's the change? From 2027, Labor's ban on non-compete clauses will apply to workers earning less than the high-income threshold in the Fair Work Act. That's currently at $190,100 a year.

We'll also close loopholes in competition law that currently allow businesses to fix wages by making anti-competitive arrangements that cap workers' pay and conditions without the knowledge and agreement of affected workers. The reforms also ban no-poach agreements, where employers agree not to hire each other's workers. Banning non-compete clauses is about encouraging aspiration, unlocking opportunity, lifting wages and making Australia's economy more dynamic and competitive.

Reforming these anti-competitive business agreements will bring Australia into line with many other advanced nations and ensure a fairer, more competitive job market. I've been an employer in small business for a quarter of a century, and I know how hard it is to lose an employee who has ambitions greater than those your business can provide for. I've invested many hours in training members of a team and watched them grow and blossom, and sometimes they outgrow the role and you don't have the ability to expand to meet their ambition or they see a way that they want to do it differently.

I can see why an employer might want to tie their staff member beyond the time that they want to stay, but that has its downsides too. More than anything, it's reducing the take-home pay for a worker who might get more in another role and reducing the productivity of the country. This important step is just part of the government's broad and ambitious competition agenda, including progressing a national licensing scheme for electrical tradespeople, a tough new merger regime and a new phase of national competition policy to lower barriers for new entrants and new ideas.

By unbinding workers from non-competes, we can restore freedom, fairness and dynamism and give Australians the chance to move forward, not stand still.