‘Devil is in the detail’: Is the non-competes ban bad for business?

With the Albanese government claiming that the move to ban non-compete clauses is one of its top policy priorities, one lawyer touches on its potential implications.

In a recent episode of the HR Leader Podcast, host Jerome Doraisamy spoke to law partner Fay Calderone from national law firm Hall & Wilcox to discuss the recently announced proposal to ban non-compete clauses for workers who earn less than the high-income threshold ($175,000).

Calderone spoke on some of the objections that employers and lawyers have had to the proposed policy brought forward by the Labor government, which hopes to address cost-of-living circumstances.

“I think we need to contemplate the objections that are going to be raised and look at that person’s specific circumstances and really consider, do you need that non-compete clause?” she said.

“It really is important that the drafting is solid and that it contemplates the specific circumstances of the business and the legitimate interests we’re trying to protect against the position and the confidential information and connection that the employees have. The devil will be in the details.”

With the devil being in the details when it comes to this proposed policy, Calderone argued that having the Fair Work threshold as the overarching cut-off for the non-competes ban may not be the best way of orchestrating the policy.

“Should it be the high-income threshold, or should it be the last 12 months average earnings? I understand it’s an easy reference point, but I think when we’re looking at protecting business interests or legitimate business interests, connections to customers, connection to confidential information, just pointing to that as a single reference point – I don’t think it’s enough,” Calderone said.

“[With consultations,] we might be able to get the nuance we need. I understand the cost-of-living pressures, but looking behind the curtain, there is a lot of economic uncertainty, and this is not a plane we want to be building while it’s in the air in terms of business protection.”

Despite the consultations potentially offering the nuanced outlook on the proposal that is needed to protect business interests, Calderone still believes there are valid concerns hovering over the ban.

“If this is going to get through, and they do have the numbers to get this through Parliament, I do think we need to really build out a framework that is better than what has been proposed, or definitely the detail has to address some of the concerns that have been raised because they are valid concerns,” Calderone said.

“I am also concerned about what will happen to businesses, smaller businesses, if changes get through that compromise their viability and that … But like I said, I’m not here to make these statements so that the hairdresser can’t compete.

“I’m here to make these statements because I’m worried that we will have unintended consequences on our economy, on Australian businesses and, in turn, Australian workers if this is not executed properly.”

A similar sentiment was echoed by Charles Lethbridge, a commercial litigation partner at Attwood Marshall Lawyers, who argued that non-compete clauses exist for good reason – also calling for better consultations as the proposal continues.

“Non-compete clauses exist for good reason – they help protect client relationships, sensitive commercial information, and business goodwill,” said Lethbridge.

“If removed without a proper alternative, employers risk having staff walk away with valuable contacts and trade secrets.

“Removing these protections could devalue goodwill in professional practices, impacting valuations and succession plans. We encourage the government to consult further with legal and business experts to ensure the reforms don’t unintentionally harm the very workers and businesses they aim to support.”

Kace O'Neill

Kace O'Neill is a Graduate Journalist for HR Leader. Kace studied Media Communications and Maori studies at the University of Otago, he has a passion for sports and storytelling.