The federal government has released draft legislation to ban non-compete clauses for Australian workers earning less than $190,100 a year, despite strong opposition from the tech sector.

The ban was first announced in last year’s federal budget, and Treasury has now opened a one-month consultation on the draft bill.

Under the proposed reforms, employers would no longer be able to include non-compete clauses in employment contracts that prevent workers from joining a competing business for a specified period.

The ban would apply to workers earning less than $190,100 annually, which is the current high-income threshold under the Fair Work Act.

Non-competes in tech

Non-compete clauses are common across the tech sector, where employees often have access to valuable data, intellectual property and commercially sensitive information.

Research by the e61 Institute found that one in five Australian workers are subject to a non-compete clause in their employment contract.

It also found that banning the clauses could lift the wages of workers by up to 4 per cent, or about $2,500 per year for the average earner.

In the US, research has found that about 18 per cent of all workers are subject to non-compete clauses.

Minister for Employment and Workplace Relations Amanda Rishworth said the legislation would help lift wages and improve job mobility.

“Non-compete clauses drag down wages, handcuff workers and put a handbrake on labour productivity,” Rishworth said in a statement.

“Labor is determined to help boost job mobility for the more than three million Australian workers constrained by a non-compete clause, including childcare workers, construction workers and hairdressers.”

Assistant Minister for Treasury Andrew Leigh told the media that the reforms would also help Australian startups find the talent that they need to grow.

“Australian startup entrepreneurs should be able to hire the workers they need to get their business off the ground,” Leigh said.

Tech sector pushback

The Tech Council of Australia, which represents companies including Apple, Atlassian, AWS, Canva and Culture Amp, has previously warned the government that non-compete clauses play an “important role” in the tech sector.

“Tech jobs tend to be well remunerated and involve a highly skilled workforce that is in high demand,” the lobby group said in a submission to government.

“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.”

While the $190,100 threshold means non-competes could still be imposed on higher-paid tech workers, the submission argued that lower-paid employees can also have access to highly sensitive company information.

“In this critical respect, non-competes offer employers in the tech sector with an important layer of contractual protection that other obligations cannot secure,” the submission said.

“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 reforms have also been opposed by the Australian Industry Group, which said there was “no basis” for the changes.

It argued that non-competes are “essential to support business productivity, business innovation, investments by businesses in employees, business continuity and growth”.

The Australian Council of Trade Unions (ACTU), however, supports the reforms, arguing that non-compete clauses restrict workers’ ability to move between jobs and earn a living.

The ACTU said the clauses can also act as a “brake on competition and innovation to the detriment of workers, consumers and the wider economy”.

The government is also consulting on a proposed ban on co-worker non-solicitation clauses, which prevent employees from hiring former colleagues when they move to a new or competing business.

The consultation also covers no-poach and wage-fixing arrangements.

Consultation on the draft legislation will close on 2 October.