"The changes introduced banning non-compete clauses for many workers are unnecessary and will result in predictable problematic consequences for many in industry," said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
"The kinds of non-compete clauses targeted are already unenforceable under the common law unless they are reasonable and protect an employer's legitimate interests. However, the law also recognises that businesses may have legitimate interests that warrant protection and that such protection can be reasonable in many cases. Overriding this longstanding legal position is yet another change that will be celebrated by unions but viewed as a further unwarranted blow to employers.
"The biggest risk arises from the proposed simplistic ban on non-compete clauses for employees earning less than the high-income earner threshold, which is currently $191,100.
"There are many employees earning below $191,100 who are engaged in roles involving access to commercially sensitive or otherwise confidential information. Just think about employees working in sales roles, preparing commercial tenders or privy to confidential production processes or business plans. This applies to a lot more employees than the hairdressers commonly referred to by the Government's spokespeople.
"While it is welcome that the Government has ruled out prohibiting clauses that prevent employees disclosing confidential information, this doesn't currently go far enough. The courts have repeatedly recognised that clauses preventing employees from disclosing confidential information are not sufficient to provide practical protection for an employer when their former staff member moves to a competitor as they are notoriously difficult to enforce.
"The almost blanket ban on such provisions is a heavy-handed approach. It is hoped that the consultation with industry will not just be lip service and will lead to improvements to the flawed Bill. There needs to be a more nuanced approach. The legislation must include a mechanism affording employers practical protection where it is reasonable and they have legitimate interests, regardless of an employee's earnings.
"Ultimately the proposal will make it harder for industry to choose Australia as the destination to undertake any research and development. It will also discourage employers from investing in staff training and skills development if they have no reasonable capacity to prevent employees from taking those newly acquired skills directly to competitors. This will undermine our competitive position internationally and will foreseeably hurt rather than help our already abysmal productivity levels.
"While it is sensible that Government has retained a role for non-compete clauses for employees earning over $190,100, albeit a narrower one, there really is no case for interfering with contractual arrangements between highly paid professionals.
"We will engage with industry over the detail of the proposed change and seek to work constructively with Government to reinforce the range of damaging and unnecessary adverse consequences this will trigger if a modified approach isn't adopted," Mr Willox said.
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