In a media release on 23 August 2023, the Albanese Government announced that a Competition Taskforce had been established to undertake rolling policy projects over a two-year period to review competition laws, policies and institutions and provide advice to the government on how to improve competition across the Australian economy (the Competition Review). A Competition Review on non-compete and restraint of trade provisions in employment and other business agreements is being conducted by a Competition Taskforce.
Key Takeaway Points
- In August 2023, the Albanese Government announced a Competition Taskforce to review competition laws, policies and institutions and provide advice on how to improve competition across the Australian economy (the Competition Review).
- A Competition Review on non-compete and restraint of trade provisions in employment and other business agreements is being conducted.
- The Competition Review is inviting community feedback from workers, employers, and legal and HR professionals to inform the process. Stakeholders in the franchising sector are encouraged to read the Issues Paper and contribute to the consultation process.
- Although the Issues Paper is not industry specific, the policy concerns regarding the use of restraints and other uncompetitive terms in the franchising sector will be specifically considered off the back of a recommendation in the recent Independent Review of the Franchising Code of Conduct.
The Issues Paper
The current focus of the Competition Review is to build a deeper understanding of the impact of non-compete clauses and other restraints on labour markets and the Australian economy, as well as exploring whether reform may be needed.
In an issues paper called “Non-competes and other restraints: understanding the impact on jobs, business and productivity” released on 4 April 2024 (the Issues Paper), the Competition Review is considering policy concerns relating to:
- Post-termination restraints between workers and businesses, including:
- Non-compete clauses which prevent workers from joining a competitor or starting a new business in competition with their current employer for a period of time;
- Non-solicitation clauses which prevent workers from soliciting former customers and co-workers; and
- Non-disclosure clauses which prevent workers from disclosing confidential information relating to their employment; and
- No-poach agreements which involve two or more businesses agreeing to refrain from actively recruiting each other’s workers or to complete prohibitions on hiring each other’s workers; and
- Wage‑fixing agreements which involve two or more businesses agreeing to set a cap on wages and employment conditions (such as health benefits, or non-statutory leave entitlements) for their workers.
The Competition Review considers that the extensive use of restraint clauses impedes wage growth and access to skilled workers, constrains competition and innovation, and hinders Australia’s economic vitality. The Competition Review seeks to examine whether these adverse impacts to the Australian economy outweigh the commercial interests of businesses.
Despite criticism of restraint clauses in recent years, their presence is not uncommon. The Issues Paper references a study from the Australian Bureau of Statistics which found that 46.9% of Australian businesses use some type of restraint clause.
Franchising sector
Although the Issues Paper is not industry specific, the policy concerns regarding the use of restraints and other uncompetitive terms in the franchising sector will be specifically considered off the back of a recommendation in the recent Independent Review of the Franchising Code of Conduct. The Australian Government will also consider whether non-poach and wage-fixing agreements should have a role in prescribed circumstances, including as part of franchise agreements.
Data from the Franchise Disclosure Register suggests that 89.9% of all franchisors impose some kind of restraint of trade on franchisees.
What can you do?
The Competition Review is inviting community feedback from workers, employers, and legal and HR professionals to inform the consideration of whether reform is needed. Stakeholders in the franchising sector are encouraged to read the Issues Paper and contribute to the consultation process.
Responses to the consultation can be done by the following methods:
- using the online consultation form here;
- email to: franchising@employment.gov.au;
- post to: Competition Taskforce Division, Treasury, Langton Crescent, Parkes ACT 2600.
Submissions are due by Friday 31 May 2024.
Additional resources
Online materials relating to the non- compete and restraint consultation can be accessed through the following links:
If you would like to discuss the potential impact of the Government’s response on your franchise, or would like advice on your obligations generally, please contact our Commerce, Franchising and Brands experts.
