Non-compete clauses could slow higher pay, productivity

Australian workers could be missing out on higher pay because of a common clause in contracts that stops employees moving to competitors.

About one in five employers are using what are known as non-compete clauses, according to an entirely new dataset released by the Australian Bureau of Statistics for the first time on Wednesday.

The findings line up with research from think tank e61 Institute that found between one-fifth and one-quarter of workers were covered by non-compete and no-poach agreements.

The clauses protect employers’ information and business interests but Assistant Competition Minister Andrew Leigh says they could be weighing on wages and productivity.

‚ÄúNon-compete clauses are conditions of employment that restrict an employee‚Äôs future ability to work for a competitor or start their own business,‚ÄĚ Dr Leigh said.

‚ÄúThere is growing concern internationally that these clauses are increasingly restricting workers from shifting to better paying jobs and may be hampering business innovation and productivity.‚ÄĚ

The government is looking into the matter via the Competition Taskforce, which was set up last year to dig into Australia’s competition laws, policies and institutions.

The ABS found large businesses were more likely to use non-compete clauses, with two in five using them compared to one in five smaller firms.

But only one per cent of businesses surveyed had a potential employee turn down a job offer because of a non-compete clause and it was not clear from the data how often this was happening because of legal action.

Across sectors, finance and insurance services had the highest use of non-compete clauses, at 39.6 per cent.

In rental, hiring and real estate services industries, 32.6 per cent of firms had used them.

Research by e61 Institute has found the non-compete clauses can now be found in a broad cross-section of the workforce, including customer facing roles such as childcare workers and IVF specialists.


Poppy Johnston
(Australian Associated Press)


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