The federal government will ban non-compete clauses for most employees, including hairdressers, construction workers and childcare centre staff, according to changes announced in the budget that could help households boost their income.
The policy, designed to come into effect from 2027, would apply to workers earning less than the high-income threshold, currently $175,000 a year.
More than 3 million workers are covered by such clauses, according to the government.
Non-compete clauses are often used to restrict high-level employees and executives from immediately switching to a competitor, but a government review found that some employers deployed them to prevent low-paid workers switching jobs.
The treasurer, Jim Chalmers, said non-compete clauses were “holding too many Australian workers back from going to better-paid opportunities or setting up small businesses” and that millions of Australians were “tied up in this unnecessary red tape”.
The Productivity Commission had calculated the change would add about $5bn to the economy, Chalmers said, and other modelling found it could add as much as $2,500 a year to an individual’s wages.
“And so this ticks every box to us. Proper economic reform, competition policy is making our economy more productive and boosting participation at the same time.”
The competition review also heard examples of former employers using the contracts to sue minimum-wage workers.
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“Australians shouldn’t need a lawyer to go to a higher-paying job,” the government said. “Even where non-compete clauses are legally unenforceable, they can lower worker mobility.”
Non-compete clauses can be broad, restricting workers from moving to a competitor or from starting a rival business within a specific geographic location or for a certain time period.
The competition review found the clauses were often used indiscriminately regardless of income level and occupation, including for childcare workers, construction workers and hairdressers.
Government data suggest the changes could raise the wages of affected workers by up to 4%, and boost economic activity.
Australia has enjoyed a prolonged period of low unemployment, leading to increased confidence from workers that they can increase their salary at a different employer so long as their contracts allow them to do so.
The ability to switch to a higher-paying job is particularly relevant during a period of elevated living costs, marked by rising rents, high mortgage repayments and large grocery and utility bills.
The government said it would also close loopholes in competition law that allow businesses to cap workers’ pay and conditions, without the knowledge of affected workers, and use “no-poach” agreements to block staff from working for competitors.
Source: www.theguardian.com