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Huge push to ban work rule that can cost thousands for 4 million Aussie workers

ACTU assistant secretary Joseph Mitchell is calling for Australia to abolish non-compete clauses in work contracts.

ACTU assistant secretary Joseph Mitchell next to person quitting their job
ACTU assistant secretary Joseph Mitchell is calling for Australia to abolish non-compete clauses in work contracts. (Source: ACTU/Getty)

The ACTU is pushing for Australia to ban non-compete clauses from being written into work contracts. According to government data, at least one in five Aussies (or four million workers) are locked into an agreement that prevents them from working with a competitor or starting their own business.

ACTU assistant secretary Joseph Mitchell told The Australian Financial Review businesses had recently gone “completely haywire” on some workers with some non-compete rules. Recruitment expert Graham Wynn explained to Yahoo Finance this rule is meant to protect businesses if someone jumps ship.

"Companies will say in their agreements or contracts, if you leave this organisation you cannot contact our clients or competitors within a three, six or 12-month period," he said.

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"It's designed to stop people leaving the company and taking a whole list of clients with them, or pinching business from them ... that's what it's designed to do."

In some cases, a non-compete clause can also stop people from working with a competitor at the same time as their current profession.

From an employer's view, non-competes allow them to hold onto staff and clients as well as protect their intellectual property.

From an employee's perspective, it can impact their ability to get a new job if they're not allowed to work for a competitor, and it could prevent them from making money as a side hustle.

But Wynn said there's a "grey area" in the rules that allow an employee to inform clients they are moving to a different company while they're still employed at their current business and that doesn't infringe on a non-compete contract. It's only if you contact clients after you've left that causes legal headaches.

He added that businesses can pay a departing employee a sum of money to uphold the non-compete after they're gone.

Mitchell said the ACTU will be campaigning for this type of work rule to be abolished and cited some people are being prevented from working for up to 12 months.

But he added that the ACTU's push isn't just confined to full-time workers.

The union will also try to ban non-compete clauses for part-time and casual staff, as well as those who work in the gig economy.

“If a business is not providing you with full-time hours, and you’re a contractor, part-time or casual, we don’t think it’s reasonable they have a veto right over where else you work,” Mitchell explained to the AFR.

In an op-ed for The Monthly, Assistant Minister for Employment Andrew Leigh agreed that non-compete clauses were doing more harm than good.

"A growing body of evidence suggests the increasing use of non-compete clauses is harming job mobility, innovation and wages growth," he said.

He added: "Contesting one of these clauses in court can cost tens, if not hundreds of thousands of dollars. Workers may be too afraid to risk unemployment or a court dispute, and won't move to a better-paying job.

"Worker enquiries to employment lawyers about restraints of trade are common, but are rarely continued beyond initial letters or reminders. Understandably, workers often adjust their behaviour to avoid further escalation."

Wynn highlighted another rule that is embedded into work contracts that are tricky to manage and that's notice periods.

A workplace might tell an employee that they have to give a minimum of four weeks' notice if they're resigning.

But the recruitment expert said there's nothing really stopping you if you wanted to bail earlier. He said most awards will state that you have to give one week of notice for every year you've been at that company.

He said to be careful around this because some businesses could try and deduct your annual leave payout if you try to resign before your notice period, but it's worth having a conversation to see if you can quit earlier than what's stated in your contract.

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