Andrew Leigh has warned non-compete clauses have a "chilling effect" on the economy and the "bluntest tool" in the business shed is now under review, as he cites evidence the clauses are harming job mobility, innovation, and wages growth.
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The Assistant Minister for Competition will on Thursday, April 4, during a speech to the McKell Institute in Sydney, release a consultation paper looking into non-compete clauses, which restrict an employee's future work when they leave, amid moves in the US and the UK to place bans or limits on their use in employment contracts.
Separately, Treasury is also holding a two-year-long Competition Review which is considering restraints such as non-compete clauses.
Dr Leigh is to tell the Institute that "gardening leave" is now beyond the best-paid corporate executives and the cost and uncertainty of legal challenge has a huge impact.
"Workers often lack the legal knowledge and resources to bargain and undertake litigation. Contesting one of these clauses in court can cost tens if not hundreds of thousands of dollars. This, in turn, creates a chilling effect," he is expected to say.
![Andrew Leigh, Assistant Minister for Competition, Charities and Treasury. Picture by Karleen Minney. Andrew Leigh, Assistant Minister for Competition, Charities and Treasury. Picture by Karleen Minney.](/images/transform/v1/crop/frm/128375134/272f4a75-8ae3-4de3-883e-2ffe9bc0c173.jpg/r0_239_3715_2336_w1200_h678_fmax.jpg)
"Workers may be too afraid to face the risk of a bout of unemployment or a court dispute and won't move to a better-paying job. Job offers from rivals are declined. Job searching is re-directed to other industries."
This, the member for Fenner argues, then impacts the new employer by losing specific experience, while plans to start a competing business "go out the window", other workers miss out on seeking a new possible employer, and consumers may miss out on lower prices from competition.
Dr Leigh is to say the use of non-compete clauses has become commonplace in Australia.
"This is the bluntest tool in the shed," he is to say in his speech.
"A growing body of domestic and international evidence suggests the increasing use of non-compete clauses is harming job mobility, innovation, and wages growth.
"Non-compete clauses are being applied to hairdressers, early childhood workers, and security guards. Once upon a time, only the best-paid corporate executives were required to spend a period of 'gardening leave' between jobs. Now, gardeners are being forced to take gardening leave."
The new issues paper is seeking the views of employers, employees and more on different restraint clauses for workers such as non-competes, non-disclosure, and non-solicitation clauses.
Non-compete clauses are now banned in a number of US states, including California, although there are exemptions. As part of an innovation drive in the UK, the government is proposing a statutory limit of three months on non-compete clauses.