Australia’s peak tech lobby group has pushed back against the federal government’s plans to restrict the use of non-compete clauses, saying these play an “important role” in the sector.
The Labor government in last year’s budget announced it would be moving to ban the use of non-compete clauses on workers earning less than the high-income threshold in the Fair Work Act, which is currently $183,100 annually.
A non-compete clause in a contract means an employee agrees not to work for a competitor or start a competing business for a certain period after leaving their job.
Announcing the reform, Treasurer Jim Chalmers said non-competes are “holding too many Australians back from switching to better, higher-paying jobs”, and that no-poach agreements that prevent staff from being hired by competitors would also be scrapped.
According to Australian Bureau of Statistics data, one in five Australian businesses use non-competes, and most apply them to more than three-quarters of their workers.
The federal government is currently consulting on the changes and plans for them to be in place by next year.
Non-competes and tech
Non-compete requirements are popular in the tech sector, where competition over talent is high and information and knowledge are key.
In a submission to government, the Tech Council of Australia, which represents the likes of Apple, Canva, Google, Atlassian and OpenAI, said that non-compete clauses “can serve an important role to tech companies”.
“Tech jobs tend to be well remunerated and involve a highly skilled workforce that is in high demand,” the Tech Council submission said.
“At present, where non-competes are present, they form part of the overall employment contract with the employee, in which employees are paid well for their employment.”
Non-competes are used by tech companies to help protect their intellectual property and client base the industry group said.
“This is particularly the case where the IP generated by a tech company is held in the minds of the employees.
“In this critical respect, non-competes offer employers in the tech sector with an important layer of contractual protection that other obligations cannot secure.
“Tech companies also have significant customer bases and customer lists where trade secrets are easily misappropriated by staff.
“This is why non-competes are particularly important.”
The government’s crackdown will initially only apply to workers on low and middle incomes below $180,000.
Low level work, high level responsibility
But the Tech Council said that in the tech sector, lower-level employees can still access confidential information.
The organisation pointed to an example of a junior software engineer having visibility of the algorithms that power a platform.
“Even relatively junior levels can have access to highly commercial sensitive material in tech companies,” the submission said.
“This means that the restriction on use of non-competes on the basis of remuneration is not appropriate for use in the tech sector.”
For startups, the council said non-competes play a “crucial role” in protecting intellectual property and preventing competitors from acquiring it by hiring staff.
They can also stop founders from launching directly competing firms.
The organisation warned that a “blunt ban” doesn’t properly “protect businesses, especially startups, or recognise the importance of the information that employees, even at relatively junior levels, can access or are privy to”.
The Tech Council also urged the federal government to not apply the ban on non-competes to contractors.
“Contractors are hired for their specific expertise, which often requires them to be privy to highly confidential information, such as intellectual property, unreleased product details and business strategies,” it said.
“Without non-compete agreements, nothing prevents a contractor to start working for a direct competitor, using the knowledge they gained to create a similar product or give the competitor a significant market advantage.”
The Australian Industry Group, the country’s peak industry association, also opposes the changes, saying there is “no basis” for them and that non-competes are “essential to support business productivity, business innovation, investments by business in employees, business continuity and growth”.
In contrast, the Australian Council of Trade Union offered its full support for the reforms, saying that non-competes “restrict mobility and therefore the opportunity for workers to earn a living” and can act as a “brake on competition and innovation to the detriment of workers, consumers and the wider economy”.
* This story first appeared on Information Age. You can read the original here.
