As part of the Budget process, the Federal Government has announced that from 2027, restrictions will be imposed upon employers who attempt to insert non-competition clauses in their workplace agreements.
A non-competition clause is one in which an employee is restrained, after the end of their employment, from working for, or being involved in, a business similar to that of their employer. These restrictions are usually expressed in terms of a geographical area (where the ex-employee cannot compete) and a time restraint (the period of time after the ending of employment in which the ex-employee may not compete).
These clauses are particularly common in Australian workplaces. They are often considered important to protect the goodwill of a business, and to ensure that customers or clients do not follow the ex-employee to their new place of employment or their new business venture.
These clauses have always been subject to scrutiny by the Courts as to their reasonableness. However, now, the Federal Government will be banning these clauses from workplace agreement from 2027 for employees who earn less than the high income threshold (which is presently $175,000 per annum).
For businesses, it is important to know that these clauses will still be available to be used for employees who earn above the high income threshold.
It is also important for businesses to know that there are other protections that can be drafted into the workplace agreement which will provide further protection of the business goodwill. These include clauses such as:
- Confidentiality: to protect the business’ confidential information and prohibit the removal and unlawful use of this confidential information;
- Non-solicitation: to prohibit the solicitation of staff, customers or clients of the business;
- Intellectual property protection: in respect of work created by the employee during the currency of the employment; and
- Non-competition during the currency of the agreement (as distinct from a non-competition clause after the employment has ended).
Workplace laws are consistently changing. It is therefore important for businesses to take care and seek legal advice in crafting and drafting workplace agreements. Proper legal advice can ensure that businesses are compliant with current workplace laws, but can also ensure that drafted workplace agreements provide the maximum lawful protection that businesses can secure, in order to protect their goodwill and intellectual property.
If you are a small or medium enterprise, and you have any questions or concerns regarding workplace agreements, particularly in relation to non-competition clauses or otherwise, please do not hesitate to contact our Partner, Tony O’Connor, on 07 5570 9380.
