The Legal Light Justin Stack Non-compete clauses and the law Before calling the federal election, the Labor government announced that if re-elected, it will ban unfair non-compete employment clauses for most workers. These clauses hold back employees from switching to better, higher-paying jobs. "Workers should not be handcuffed to their current job when there are better opportunities available for them," treasurer Jim Chalmers announced at the budget. Non-compete clauses usually ban an employee from working for any of the company's competitors for a set period - sometimes up to twelve months. The clauses can prevent an ex-employee from setting up their own competing business in the same industry or location. Mr Chalmers said one in five Australian employees, that's three million workers, currently have non-compete clauses in their employment contracts, and this trend has been growing. Such clauses previously applied only to highly paid professionals such as bankers, accountants, IT technicians, media celebrities, financiers, engineers, scientists, sport stars and lawyers, where the company worried they would take clients or company knowledge with them. But the use of such clauses has expanded in recent years to include lower paid positions, such as childcare workers, construction workers, even hairdressers. Federal Treasury's Competition Review found the non-compete clause was being used to threaten minimum wage workers with legal action if they switched jobs. The ban on non-compete clauses will apply to workers earning less than $175,000. It won't start until 2027, to allow consultation with businesses and unions on details including exemptions, penalties and transition arrangements. Employment lawyer Geoff Baldwin at Stacks Law Firm said non-compete clauses are generally not enforceable, unless a court rules they are "reasonably" required to protect a legitimate business interest. "Courts look at whether a clause restricting future employment is reasonable or necessary on a case-by-case basis. The clauses can't unduly restrict competition or be against the public interest, and are based on common law precedents," Mr Baldwin said. "There's a difference between an employee leaving and then working in competition; and taking clients, trade secrets or confidential information, which can quite reasonably be prohibited. "But these clauses have also been used to stop people leaving for better-paid jobs, which can harm employees, restricting job mobility and obstructing better wages." Economic research group e61 Institute found people who worked in companies using these clauses earn four per cent less, on average, than those in companies that don't use them. Lower skilled workers bound by such clauses earn ten per cent less over ten years. "Banning these clauses for those below $175,000 will force companies to find other ways to keep their employees, such as increasing pay, broadening skills and providing more support in the workplace," Mr Baldwin said. STACKS LAW FIRM Joshua Crowther Specialist in Wills, Estates & Wealth Protection 02 6592 6592 taree.stacklaw.com.au Partners in life The Legal Light Justin Stack Non - compete clauses and the law Before calling the federal election , the Labor government announced that if re - elected , it will ban unfair non - compete employment clauses for most workers . These clauses hold back employees from switching to better , higher - paying jobs . " Workers should not be handcuffed to their current job when there are better opportunities available for them , " treasurer Jim Chalmers announced at the budget . Non - compete clauses usually ban an employee from working for any of the company's competitors for a set period - sometimes up to twelve months . The clauses can prevent an ex - employee from setting up their own competing business in the same industry or location . Mr Chalmers said one in five Australian employees , that's three million workers , currently have non - compete clauses in their employment contracts , and this trend has been growing . Such clauses previously applied only to highly paid professionals such as bankers , accountants , IT technicians , media celebrities , financiers , engineers , scientists , sport stars and lawyers , where the company worried they would take clients or company knowledge with them . But the use of such clauses has expanded in recent years to include lower paid positions , such as childcare workers , construction workers , even hairdressers . Federal Treasury's Competition Review found the non - compete clause was being used to threaten minimum wage workers with legal action if they switched jobs . The ban on non - compete clauses will apply to workers earning less than $ 175,000 . It won't start until 2027 , to allow consultation with businesses and unions on details including exemptions , penalties and transition arrangements . Employment lawyer Geoff Baldwin at Stacks Law Firm said non - compete clauses are generally not enforceable , unless a court rules they are " reasonably " required to protect a legitimate business interest . " Courts look at whether a clause restricting future employment is reasonable or necessary on a case - by - case basis . The clauses can't unduly restrict competition or be against the public interest , and are based on common law precedents , " Mr Baldwin said . " There's a difference between an employee leaving and then working in competition ; and taking clients , trade secrets or confidential information , which can quite reasonably be prohibited . " But these clauses have also been used to stop people leaving for better - paid jobs , which can harm employees , restricting job mobility and obstructing better wages . " Economic research group e61 Institute found people who worked in companies using these clauses earn four per cent less , on average , than those in companies that don't use them . Lower skilled workers bound by such clauses earn ten per cent less over ten years . " Banning these clauses for those below $ 175,000 will force companies to find other ways to keep their employees , such as increasing pay , broadening skills and providing more support in the workplace , " Mr Baldwin said . STACKS LAW FIRM Joshua Crowther Specialist in Wills , Estates & Wealth Protection 02 6592 6592 taree.stacklaw.com.au Partners in life