The national employer association Ai Group has today filed its submission to the Treasury's inquiry into worker non-compete clauses and other restraints.

"Our position is that non-compete and other restraint clauses are an important contracting device for both employers and employees," Ai Group Chief Executive, Innes Willox, said today.

"These are clauses that place limits on the ability of employees to use confidential information that they gain access to at work, to take up work for a direct competitor, or to poach clients or staff from a past employer. The reality is that the law already only enables such clauses to be enforced when they are reasonable and necessary to protect the legitimate interest of an employer.

"The limited protection these clauses provide acts as an incentive to employers to invest in employees and, relatedly, in innovation activities.

"The fact that a clause is in place reduces risks for an employer and in so doing encourages the sharing of valuable information with their employees who are subject to a restraint.

"For example, when a non-compete clause is in place it facilitates the employer sharing with the employee information such as the terms of agreements with clients; strategic plans and marketing strategies; and commercially sensitive information, including trade secrets.

"Non-compete clauses also encourage employers to invest in employee training. Providing this training will often involve a significant investment of time and financial resources from employers and potentially sharing of proprietary processes.

"We know many employers who devote significant resources to training their staff even though they know their competitors will consequently seek to poach those workers, rather than providing comparable training themselves. Employers need reasonable restraints through contracts to enable them to make these investments.

"Restraints also encourage employers to invest in innovation activities which benefit the economy and employees as they are more confident of retaining employees that have the skills and experience to implement the results of that investment. Any changes that reduce an employer's ability to protect its confidential and commercially sensitive information would be a backwards step.

"It is notorious that Australia has an entrenched productivity problem. This is the biggest barrier to delivering improved wages and a more prosperous country. The Government needs to urgently turn this around rather than considering further regulation with the obvious potential to stifle future productivity improvements.

"There are very significant risks that misguided or heavy-handed efforts to constrain the use of such clauses will give rise to a raft of unintended consequences for industry, for employees and for our economy," Mr Willox said.

Ai Group's submission is available here

Information about the inquiry is available here

Media enquiries

Tony Melville – 0419 190 347