Andrew Leigh (Fenner, Australian Labor Party, Assistant Minister for Competition, Charities and Treasury) Share this | Hansard source

You have to hand it to the shadow Treasurer. Really, you do have to hand it to him because he doesn't have it himself. The fact is that this bloke has a three-part plan: (1) criticise Labor; (2) pause; and (3) hope no-one asks him for point 3! He's continuing as he has this entire term—a policy-free zone. Tomorrow night, we're going to hear more spin than substance from the Leader of the Opposition—the man whose only serious policy proposal has been that Australians should spend $600 billion on a madcap nuclear fantasy that won't deliver until the 2040s.

In last night's budget, you heard Labor put forward our positive economic plan: a new tax cut for every taxpayer, more energy bill relief, growing wages, even cheaper medicines, cutting student debt, strengthening Medicare, making it easier to buy and rent a home, permanent free TAFE and a fair go for families and farmers. You'll hear much more about that from the other Labor speakers in this debate.

I want to focus my remarks today on non-compete clauses, which are an important part of Labor's competition reforms. The fact is, if you had a competition agenda, then you would be pretty worried about something called a non-compete clause. The clue is in the name. These are affecting real people across Australia. Let me start with a couple of stories.

Charlotte, a 17-year-old, landed her first casual job as a dance teacher. She was forced to quit after experiencing harassment. Months later, she took a job at a different dance studio and immediately received a warning letter from her former employer. It said she'd breached a restraint of trade clause to not work or even volunteer for a competing business for 36 months within a 15-kilometre exclusion zone. Her former employer went so far as to contact the new dance studio.

Or take Mia, a disability support worker who is registered for a National Disability Insurance Scheme provider. Mia was offered a new contract with a lower hourly rate that she'd been on. So she went out on her own as an independent and joined a rival registered provider. Without cajoling, several former clients decided to transfer their care plans over. She then received a letter from her former employer saying she'd breached restraint of trade clauses.

Or there's Patrick, a 21-year-old boilermaker who decided that he would take up a new opportunity working not for a competitor but in-house for a former client. He was branded a troublemaker and sent a letter from his former employer saying he breached his post-employment obligations.

These clauses are spreading across the economy. Once was the time when people would say non-compete clauses only applied to highly paid executives, who were required to take a period of gardening leave. Now it's just about the case that gardeners are being hit by non-compete clauses.

The case against non-competes is in several parts, and I want to take the House through those. First of all, we know that job mobility is important to the whole economy. As people will know from their own careers, some of the biggest wage gains you get come when you switch jobs. Switching jobs is a bit like the run rate in cricket; it is a measure of the health for how the economy is going. Worryingly, it declined under the former government. We know from work by the e61 think tank that workers can increase their wages by thousands of dollars by shifting to a better job. It's a productivity boost too, as workers find a job that's a better match for their talent. Non-compete clauses put sand in the gears of job mobility, which is so critical to a productive and efficient economy.

Second, non-compete clauses are more widespread than we'd thought. When I began talking about this several years ago, some people said, 'We've seen these surveys out of the US that say that 18 per cent of American workers are subject to a non-compete, but that's an American thing.' Then we surveyed Australia with the help of e61 and Australian Bureau of Statistics, and the e61 survey came back showing that 22 per cent of Australian workers were subject to a non-compete—a higher share than in the United States. Non-compete clauses are widespread through the economy.

Non-compete clauses aren't just applying to high-wage workers. They're not just applying to barristers but to baristas. They're not just applying to traders; they're applying to waiters. They're not just applying to auditors; they're applying to janitors. They're not just applying to coders; they're applying to cabbies. They're not just applying to surgeons but to servers. They're not just applying to accountants but to aged-care workers. Non-competes aren't just applying to those folks whose jobs involve guarding trade secrets but also to the bloke whose job is to guard the car park. They're not just applying in the boardroom; they're applying in the mailroom too.

The Australian Bureau of Statistics survey found that most businesses that apply non-compete clauses do so to 75 per cent of their employees or more, and US research found that when confronted with a non-compete clause only a tenth of prospective workers choose to negotiate. Who wants to negotiate a non-compete when you're just starting off your employment relationship? We know too that non-compete clauses can have a chilling effect on workers, impacting labour mobility. These clauses can be complex negotiate out of and complex to handle, and they can often come in the form of cascading causes. One contract which went to court said that the worker was banned from working for a competing employer for 15 months or, if that was, invalid for 13 months or, if that was invalid, for 12 months. And 'competing employers' meant those employers in all of Australia or, if that was invalid, in the state or, if that was invalid, in the metro area. So who's to know what's the true non-compete clause?

US research on this has found that even in places where non-competes have been unenforceable—like California, where they've been unenforceable since the 1870s—non-compete clauses can still have a chilling effect on worker mobility. It's no great surprise when you consider the fact that going to court can cost hundreds of thousands of dollars. People don't litigate their non-competes; they simply sit out, costing the economy and costing workers.

Businesses have better options to protect their interests.

In last night's budget, the Treasurer made clear that we're cracking down on non-compete clauses for those earning under the high-earner threshold of $175,000, but we're not changing the rules on non-disclosure clauses. Employers still have intellectual property protections. There's a statutory protection under section 183 of the Corporations Act which prevents any director, other officer or employee of the corporation from improperly using information obtained in that position for their benefit, the benefit of someone else or the detriment of the corporation. Employers who pay above the $175,000 threshold wouldn't be affected in the first instance by our reforms. And non-competes for the sale of a business aren't affected. We also know that there will still be an ability to constrain workers from working for another employer at the same time—these so-called concurrent non-competes.

There are better options for employers. Indeed, our approach will provide simplicity to employers and employees. It's a red tape reduction mechanism, removing an approach which has been confusing and has led to litigation and replacing it with one which provides simplicity and precision.

No-poach agreements between businesses could also be harmful, and in last night's budget the Treasurer made clear that we're looking at arrangements such as those that franchise chains McDonald's, Domino's and Bakers Delight have that prevent a worker from moving from one franchise outlet to another. I've heard stories of workers who want to move to a McDonald's closer to home, but they've been told they cannot do so because of the so-called no-poach clauses. The employee isn't even a party to these clauses, but they're hurting worker mobility.

Finally, Australia has been well-placed to learn from other countries. Spain, Finland, the UK, the US and Austria are among other countries dealing with non-competes. We put out a Treasury issues paper last year and garnered feedback on that. We've had significant and valuable research from the e61 Institute; the Grattan Institute; the Productivity Commission; and the competition taskforce, ably headed by Jason McDonald and Marcus Bezzi.

I want to acknowledge the work of Dan Andrews, Jack Buckley, Ewan Rankin, Bjorn Jarvis and Iain Ross in working through the issues behind non-competes. Labor wants to unleash ambition, to boost wages, to increase productivity and to put downward pressure on prices. Our non-compete reform will do just that.

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