The right to disconnect has been in the media a lot. But if we look behind the headlines, what impact is it actually going to have?

The new laws give employees a limited right to ignore work-related contact outside of working hours. This right is limited by what is reasonable. It does not:

  • outlaw reasonable out-of-hours contact; or
  • give employees rights to unreasonably ignore work-related communications.

Given the Fair Work Act 2009 (Cth) has always prohibited unreasonable additional work outside of ordinary hours, what – if anything – does the new right to disconnect actually add?

What can employers expect?

There are some new issues to navigate here:

  • Some employees may now wrongly choose to ignore contact that should have been actioned.
  • Employee grievances will include alleged breaches of this new right if they have been contacted out of hours. Disputes and general protections claims will no doubt follow.
  • The circumstances in which out-of-hours contact is reasonable, and when there is a right to ignore it, will be hotly debated in all of these scenarios. Large penalties can apply for getting it wrong.
  • If employees ignore out-of-hours contact, any disciplinary response needs to be managed carefully to minimise risks.

The new law does not require every business to suddenly change existing arrangements or introduce new policies. If out-of-hours contact is already managed reasonably, then the right to disconnect might not have a big impact at all.

That said there could be some “hidden” consequences – for example:

  • While the right to disconnect doesn’t specifically require more payments to be made for out of hours contact or work, unions and employees may use this to claim more benefits.
  • Businesses scared of getting this wrong might:
    • try to standardise working hours to minimise out-of-hours contact, which could pose challenges for flexible working; or
    • err on the side of avoiding contact even if that means going short staffed instead of offering workers a last-minute shift.

Will this change how Australian businesses and workers operate?

Rights to disconnect have existed in some overseas countries for some time. The experience in those jurisdictions has indicated a modest impact, not a wholesale revolution.

Given that Australia has had very few legal cases involving disputes about unreasonable work outside ordinary hours, we will need to wait to see if this new disconnect right has much of an impact after the news cycle has moved on.

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In recent months, I’ve spoken to many HR professionals about all things employee relations or “ER.”

What stood out was the challenging nature of the role of those in ER.

The role of ER has never been more valuable to Australian employers, whose workplaces have never been more regulated.

Yes, compliance is a must, but meeting business objectives is also a must.

ER is at the pointy end of keeping a business out of trouble and getting things done.

The passion with which some very experienced HR leaders spoke inspired our paper Navigating Employee Relations: The Advisor’s Role (available upon request here). This is based on that feedback.

It’s built on four themes: mastery, judgement, strategy, and influence.

Off the back of our paper, Navigating Employee Relations: The Advisor’s Role, I’m writing a series of five blogs in five weeks.

So here’s blog four in our ‘5 of 5’.

One of those themes is “strategy”. Strategic thinking is essential for ER Professionals because it involves looking beyond the immediate, to develop optimal, long-term solutions. Observations on “strategy” and “strategic thinking” are ubiquitous. Formulas abound, very much context driven. Fundamentally, the many takes on “strategy” reveal some core elements: where are we, where do we want to be, and how will we get there?

Being “strategic” is often synonymous with “big picture’’ thinking. It’s the ability to see patterns, themes or connections. It’s the ability to ask: is this a trend, or what can we be doing to guard against this in the future? It’s factoring in company-wide implications for the issue at hand. It’s balancing the long term with the short term. It’s also ensuring that a problem is examined from various perspectives. It’s about looking ahead.” 

– Navigating Employee Relations: The Advisor’s Role

But how do you develop strategic thinking? Strategic thinking requires understanding the broader context, including organisational goals, stakeholder interests, and the interplay of various factors. It’s a skill that can be developed.

It involves asking insightful questions, balancing short-term and long-term implications, and considering different perspectives to make informed decisions. Judgement is key here (see our previous blog – Part 3 – about judgement here).

To enhance strategy, models like SWOT and GROW can be leveraged to guide decision-making and ensure that advice aligns with organisational objectives and values. They are the very type of models that build skill as a strategic thinker. They can provide a lens through which to think about a problem.

Great advisors excel in the skill of “inquiry” by asking insightful questions at the right time to uncover deeper meaning and needs. Advisors are called upon to provide advice. So, it’s natural to want to ‘tell’. But great advisors excel at asking questions first. They are not afraid to ask “why”, “what else”, “how do you see…”, or “what matters most here?”. This is where the advisor turns coach.

Asking questions leads to a better understanding of reality (the current situation) which can provide reason for reconsidering a goal (desired outcome), as can consideration of alternatives (options). It’s about getting clarity. From our paper, comes this basic example to illustrate the point:

Manager: I really want to sack my head of sales (Goal)

You: Okay, why is that?

Manager: Just not performing. Sales are down. Direct reports are complaining about his attitude. I don’t think his head is in the right place. I’m having to pick up the slack. (Reality)

You: Why do you think that is?

Manager: I don’t know. He’s been grumpy, and I don’t think he’s happy with anything.

You: Why is that?

Manager: Don’t know – he’s hard to talk to.

You: What’s the impact of losing him now?

Manager: Terrible. He’s been good in the past. He’ll be tough to replace.

You: So, ideally, he stays, but improves? (Options)

Manager: Yes (New Goal)

I look forward to sharing the last part of this five-part series with you next week.

If you would like a copy of our paper Navigating Employee Relations: The Advisor’s Role or learn more about our ER Mastermind program, please click here.

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In recent months, I’ve spoken to many HR professionals about all things employee relations or “ER.”

What stood out was the challenging nature of the role of those in ER.

The role of ER has never been more valuable to Australian employers, whose workplaces have never been more regulated.

Yes, compliance is a must, but so too is meeting business objectives.

ER is at the pointy end of keeping a business out of trouble and getting things done.

The passion with which some very experienced HR leaders spoke inspired our paper Navigating Employee Relations: The Advisor’s Role (available upon request here). The paper is based on that feedback.

It’s built on four themes: mastery, judgement, strategy, and influence.

Off the back of our paper, Navigating Employee Relations: The Advisor’s Role, I’m writing a series of five blogs in five weeks.

So here’s blog three in our ‘5 of 5’.

This week’s theme is “judgement”.

Judgement calls for what’s “right” in the moment having regard to the principles that matter.

Effective judgement involves a complex process of gathering, assessing, and weighing facts. Judgement involves applying knowledge within a particular context. It is the proper filtering and weighing of knowledge and facts. Therefore, the context needs to be understood, be it internal (the organisation) or external (environmental factors). It’s the cornerstone of moving from an “expert” to an “advisor.”

Our paper Navigating Employee Relations: The Advisor’s Role applies a five step model aimed at flexing the judgement ‘muscle’ being:

1.   Gather the facts

2.   Generate options

3.   Balance the consequences

4.   Apply what matters (or ‘values’)

5.   Review by learning from what happens next.

Good judgement calls for good questions. A mix of closed, open-ended, and evaluative questions will bolster a judgement call.

  • Do we do a deal or not?
  • What is the balance of consequences here?
  • Do we terminate the employment or not?
  • Did this actually happen?
  • What’s the impact here?
  • How likely is this?
  • How do we know?
  • What is missing here?
  • What’s the opportunity here?
  • What matters most here?

Judgement often calls for weighing “strategy” (making progress in line with organisational needs) with “risk” (the downside of things going wrong). These can be difficult to measure in a balanced way. A typical example is the benefits of removing a poor performer on team culture (intangible but certain) versus the risks associated with a claim (more tangible but uncertain).

There are times when risks are overestimated, with the path of least resistance as the preferred course. Conversely, there are times when risk is underestimated with the consequences of not appreciating them at the outset magnified. To quote the Stoic philosopher Seneca:

What is quite unlooked for is more crushing in its effect, and the unexpectedness adds to the weight of the disaster.”

There are short term risk impacts and long-term impacts with the human condition prone to averting the former (industrial action) despite the bigger consequences of the latter (doing a deal that undermines the capacity to manage). Accepting voluntary redundancies is easy in the short term but hard in the long term when we are left with poorer performers.

Risk can be evaluated in terms of exposure (what could happen), impact (the harm), and prospect (or likelihood). In the ER context, there is a menu of typical risks. These are, in no particular order:

  • a legal claim
  • the costs of the defence to a claim
  • reputational impact
  • employee disengagement
  • stakeholder impact
  • employee harm
  • union agitation
  • industrial action
  • productivity impact
  • delay e.g., implementing change
  • business confidence
  • customer discontent.

Understating risk is important, no doubt. But that doesn’t mean becoming obsessed with its avoidance at any cost. Again, judgement is about doing what’s right having weighed all relevant factors. And, the ER advisor needs to be solutions-oriented asking and answering “what can we do” to balance “what can’t we do”.

I want my ER managers providing options, ideas, solutions, they need to do more than present the problems.”

– HR Director, University sector

I look forward to sharing part four of this five-part series with you next week.

If you would like a copy of our paper Navigating Employee Relations: The Advisor’s Role or learn more about our ER Mastermind program, please click here.

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In recent months, I’ve spoken to many HR professionals about all things employee relations or “ER.”

What stood out was the challenging nature of the role of those in the ER.

The role of ER has never been more valuable to Australian employers, whose workplaces have never been more regulated.

Yes, compliance is a must, but meeting business objectives is also a must.

ER is at the pointy end of keeping a business out of trouble and getting things done.

The passion with which some very experienced HR leaders spoke inspired our paper Navigating Employee Relations: The Advisor’s Role (available upon request here). This is based on that feedback.

It’s built on four themes: mastery, judgement, strategy, and influence.

Off the back of our paper, Navigating Employee Relations: The Advisor’s Role, I’m writing a series of five blogs in five weeks.

So here’s blog two in our ‘5 of 5’.

This week’s theme is “mastery”.

The ER Professional is highly skilled, the depth of which is not always well recognised. First and foremost, they are subject matter experts. This expertise draws upon an extensive knowledge bank. Knowing the law and how to apply it has become key. Indeed, the role demands that the ER Professional has the type of knowledge expected of a specialist workplace lawyer without the level of training a lawyer benefits from. To think that the recent changes to the Fair Work Act 2009 (Cth) (also known as “Secure Jobs, Better Pay” and “Closing Loopholes” reforms) comprise 56 areas of amendment and more than 1,000 changes to existing law with 156 references to “reasonable” or “reasonably”. But this is dwarfed by the existing body of law that ER Professionals traverse day in and day out.

Many ER professionals I’ve spoken to of late wish they had a grounding in psychology as well; not surprising given the need to deal with individuals in often challenging circumstances. The ‘how to deal’ has become as important as ‘the what’.

The ER Professional also wears many hats, including coach, counsellor, mediator, negotiator, advocate, and stakeholder manager. For this reason, there is a need to combine a breadth and depth of knowledge, combined with a diverse skill set. It’s not an easy journey. But nothing worthwhile achieving comes easy.

“Make no mistake, this is a hard journey. So passion is a necessary ingredient. You need to have a passion for the subject matter or be intrinsically interested in the content to muster the curiosity and drive needed to thrive. As with any calling, your intrinsic motivation is fundamental. Knowing what you enjoy about what you do is essential.” 

– Navigating Employee Relations: The Advisor’s Role

Mastery is achieved through finding ways to learn, consistent practice, and reflection. “Maps” of knowledge are developed which are deepened over time as new experiences create new opportunities to learn and grow. Mentors are also key, as with any field of endeavour. Good mentors provide pathways and shortcuts.

A strong and diverse network of professionals also significantly contributes to success. The more senior you become, the more this becomes obvious.

“If I look back on my career, there are individuals who, for me, made all the difference. Without them, I wouldn’t be where I am today.”

– Director of People, Manufacturing industry

I look forward to sharing part three of this five-part series with you next week.

If you wish to get a copy of my paper Navigating Employee Relations: The Advisor’s Role or learn more about our ER Mastermind program, please click here.

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In recent months, I’ve spoken to many HR professionals about employee relations (ER).

The challenging nature of the role for those in ER was a common theme.

The role of ER has never been more valuable to Australian employers, whose workplaces have never been more regulated.

Yes, compliance is a must, but meeting business objectives is also necessary.

ER is at the pointy end of keeping a business out of trouble and getting things done.

The passion with which some very experienced HR leaders spoke inspired our paper Navigating Employee Relations: The Advisor’s Role. That paper is based on that feedback.

It’s built on four themes: mastery, judgement, strategy, and influence. We will publish a series of five blogs in five weeks based on these themes.

So, here’s our first blog of our ‘5 of 5 series’ in which I provide an overview of the four themes.

Mastery

The role of an ER Professional is demanding and nuanced, requiring a depth of expertise akin to that of a specialist workplace lawyer. The role encompasses a wide range of responsibilities and skills, including, but not limited to, understanding complex legal frameworks and acting as a coach, mediator, and risk manager. It also requires balancing detailed analysis with strategic thinking.

Mastery is achieved through finding ways to learn, consistent practice, and reflection. “Maps” of knowledge are developed and deepened over time as new experiences create new opportunities to learn and grow. It’s not an easy journey, so passion for the subject matter is critical. Mentors are also crucial, as with any field of endeavour. Good mentors provide pathways and shortcuts.

A strong and diverse network of professionals also significantly contributes to success.

Judgement

For an ER Professional, judgement starts with gathering, assessing, and weighing facts, often in situations where conflicting stories emerge, such as during workplace investigations.

Judgement calls for balancing strategy with risk. Invariably, a preferred path carries risk. So, understanding risk is key. There are short-term and long-term risks, with the more immediate risks often overestimated and the longer-term risks underestimated, given the human tendency to say, “We will cross that bridge when we get there.”

Judgement is also required in the ‘how’ of advising internal stakeholders.

Strategy

Judgement and strategic thinking are closely intertwined, with strategic input adding significant value to decision-making by focusing on optimal solutions beyond immediate concerns.

Observations on strategy and strategic decision-making are ubiquitous. Formulas abound, and they are very much context-driven. A fair reading of the various takes on strategy reveals some core elements: where you are, where you want to be, and how you will get there.

Being “strategic” is often synonymous with “big picture” thinking. It’s the ability to see patterns, themes, or connections. It’s the ability to ask: is this a trend, or what can we be doing to guard against this in the future? It’s factoring in company-wide implications for the issue at hand. It’s balancing the long term with the short term. It’s also about ensuring that a problem is examined from various perspectives. It’s about looking ahead.

Influence  

You can have the best advice, but it’s useless if it doesn’t land. Unclear advice can lead to frustration or even risk. 

It’s hard advising someone you barely know. It’s like advising in a vacuum. So, a degree of connection is required. Let’s call it rapport. Indeed, professional coaches are trained in the need for rapport before advancing a client discussion. This can take time to develop. At its heart, rapport has two ingredients: likeability (people like to work with people they like, and usually, this is people like them) and trust (credibility + reliability).

Advisors need to explore what’s below the surface. There are, or may be, various contexts that you cannot afford to miss: emotional, political, environmental, and situational. There are needs and motivations at play. So, “dig deep” by flexing your curiosity muscle. A manager frustrated with a direct report’s performance demands your understanding. They deal with the employee day to day. They or others in the team are picking up the slack. As you are being told this, it’s natural to start playing the tape in your mind about “valid reason,” “procedural fairness,” “unfair dismissal,” “warnings,” etc. Launch at your peril, especially if you raise the legal hurdles (as is inevitable) without empathy. If the manager feels you need to understand the depth of the issue, your advice will be easily dismissed as not appreciating the gravity of the situation. The advice someone doesn’t want to hear (it’s ‘too hard to dismiss now’) is better received in an atmosphere of understanding and empathy.

If you wish to get a copy of my paper Navigating Employee Relations: The Advisor’s Role or learn more about our ER Mastermind workshop series, please click here.

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As we discussed in our previous blog on non-competes (as well as other types of restraint of trade), the move to add regulation has been gaining momentum since Federal Treasurer Jim Chalmers announced in August 2023 a Competition Review to examine competition laws, policies and institutions.

Whilst the move to ban non-competes in Australia has been inspired by the U.S. Fair Trade Commission vote to ban non-competes, on 20 August 2024, a Federal District Court in Dallas, Texas, struck down the FTC rule, which will now not take effect on 4 September 2024. This decision will probably be subject to review by a Court of Appeal and then up to the United States Supreme Court. It would be ironic for Australia to end up with legal changes inspired by failed efforts elsewhere.

Since Treasury and the ANU proposed changes to the law on non-competes, multiple voices, ranging from government ministers, union officials, lawyers, and academics have been raised in support of this reform, their arguments essentially being employees are severely disadvantaged (or, conversely, the cards are stacked in favour of employers), non-compete provisions have become more widespread, and, economically, they stifle innovation and competition.

We beg to differ. In this article, extracted from the White Paper, Non-compete constraints in Australia: A case for reform (available upon request), we will examine why arguments about the proliferation of non-competes are overblown and why their benefits are being sidelined in this debate.

Digging into the numbers

We do not dispute the figure that one in five employees is subject to a restraint, with survey evidence supporting this proposition. But digging deeper into the evidence, it is unclear whether there has been a proliferation of non-competes to employees in low wage jobs or others who should not be covered (of which more later).

An ANU Crawford School of Government Paper (it was authored by former Fair Work Commission President Dr Iain Ross) and a Federal Government Issues Paper both drew upon data from the ABS and the e61 Institute to suggest that a large proportion of the workforce was subject to a post-employment restraint.

In 2023, an ABS survey reported that about 20.8 per cent of businesses in Australia used a non-compete clause for at least some of their workers. Of those businesses, it reported that 68.2 per cent used non-compete clauses for more than three-quarters of their workers.

Non-compete clauses were used in all industries across the economy, although they are particularly common in knowledge and relationship focussed services industries including finance, real estate, professional services, insurance and healthcare. These statistics are broadly consistent with the e61 Institute’s 2023 online survey of 3,000 respondents about the prevalence of non-competes.

But as the famous 19th American author Mark Twain wrote, “There are three kinds of lies: lies, damned lies, and statistics.” Because while the e61 Institute gives an insight into the numbers, it didn’t collect, and we do not have information, about whether workers observed the non-compete; whether it influenced their decision to seek a new job or not; nor about whether the non-competes were enforceable on their terms. The information cited concerned workers who did not switch jobs because of the ‘chilling effect’ of the non-compete is U.S.-sourced data.

Nevertheless, it is likely that some subset of workers subject to an invalid non-compete observed it because of the ‘chilling effect’ of prospective litigation or lack of resources to obtain advice. But what percentage of the 20 per cent of workers subject to a non-compete observed a restraint that would probably be invalid? We simply don’t know.

What we can estimate is that of the 20% covered by a non-compete, some will observe the obligation because it is reasonable and they acknowledge the situation.

A second subset will negotiate a compromise with their employer that works out for everyone.

A third subset will obey a non-compete to some extent (they often cascade) that is probably invalid because it is not clear whether it is reasonable, they can manage to observe at least some of it and they don’t want to get involved in a dispute.

A fourth subset of the headline 20% will obey some or all of a non-compete which is unreasonable. This fourth subset is the real – quite narrow – scope of the problem which reform proponents touch on. This has been represented as a major issue necessitating a regulatory overhaul based on unsound arguments about Courts ignoring employees interests and issuing injunctions against them just for the asking.

On the vexing issue of low income workers being subject to non-competes, if the data is accurate then this is a cause for concern. From our perspective, there may be merit to an appropriate regulatory response targeting a very specific and narrow problem.

No poaching provisions

Critics of non-competes also argue that the legitimate interests that can be protected by a court, including a stable and well-trained workforce, have expanded. This type of legitimate interest can support a time-bound “no-poaching” clause.

But it’s worth remembering that such clauses have existed at least since early 1990 and recognise the investment needed to achieve a stable, trained workforce as well as the confidential information and customer connections that former employees may hold. For example, in Dawnay, Day & Co Ltd v D’Alphenliv, a non-solicitation provision was held reasonable in the circumstances with the former employer’s need for protection. Such a clause cannot prevent employees from leaving an employer. Rather, it only prohibits a former employee from doing the poaching. Leaving of their own volition or because of information or solicitation from any other channel (including a recruiter) is not an issue.

So, what are the benefits of restraints? Restraint of trade principles have been developed over about 600 years of common (judge-made) law to strike a balance between:

  • Businesses wanting to protect valuable business goodwill, confidential information, important customer connections or a stable, well-trained workforce.
  • Employees’ need to work, earn, and have flexibility to move jobs.
  • The public interest in ensuring competition, free markets and reasonable employer protections.

Importantly, no one set of interests is paramount – all must be considered and balanced in determining whether a restraint is justified by the special circumstances of the case such that it will be valid and enforceable.

We contend that the benefits include incentives for employers to confidently invest in research and development, and staff training, combating the fear that these investments can be quickly lost.

A reasonable non-compete restraint preventing an employee from taking up employment with a rival for a defined and usually short period of time, scope and within a defined geography may be the only feasible way of protecting employer trade secrets or confidential information.

We believe this is particularly relevant considering it can be difficult to define what is confidential information for the purposes of the restraint; a lesser type of restraint may be ineffective given the difficulty of proving solicitation; and the obligations of the employee are made clear in a way that is more forceful than if the matter is left to implication of contractual terms.

In addition, non-compete clauses can provide broader protection than an employer will have under the implied duty of confidentiality, the equitable duty of confidence or even an express confidentiality clause, and a non-compete removes the temptation for a former employee to offer, and for a new employer to solicit, confidential information, as found in Woolworths v Olsen in 2004.

Without a covenant (whether a non-compete or a lesser restraint such as a non-solicitation clause), employees cannot be stopped from canvassing customers after the employment has ceased.

Finally, a reasonable non-poaching or non-recruitment clause can protect an employer’s interests by retaining employees critical to the continued success of the business, employees with access to confidential information, or where employees have significant client connection built up during employment.

We contend these are all valid arguments that, at the very least, deserve to be fully aired while any changes are being considered. To date, it’s the proponents of change that have received all the airplay. This White Paper, we hope, will bring some balance to the debate.

For a copy of the White Paper, Non-compete constraints in Australia: A case for reform, please click here.

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The last two years has seen multiple rounds of changes to employment, industrial and safety laws at federal and state level in Australia.

These represent the most significant changes since the Fair Work Act 2009 (Cth) was introduced. The fact that there have been so many different changes to different laws has made it tough to keep up.

Some of the biggest changes will come into effect on Monday, 26 August 2024. The impact won’t be felt on day one. But there will be impacts in the future and every business needs to be ready.

“Closing Loopholes” context

Before it was elected, the ALP set out its reform agenda. That included:

  • A core focus on “job security”: we have seen multiple laws give effect to this by restricting work types other than permanent employment.
  • “Get wages moving”: we have seen higher costs for business as employee remuneration and benefits have increased.
  • “Improve access to collective bargaining”: multiple reforms have made it easier for unions to force employers into collective bargaining.
  • “Ensure delegates are able to organise”: law reforms have given unions more rights to increase representation in more workplaces.

The Albanese government is delivering on its core policy promises. “Closing Loopholes” is the most recent (but probably not the last) significant law change as part of an overall reform package.

If your business has people working in it, it will be affected by these reforms

The overall reforms, including the “Closing Loopholes” changes, affect every business differently. Some simple examples show how every business that has people working in it will be affected (the “Closing Loopholes” specific changes are marked with *):

1. A business with employees of any type:

  • Right to disconnect*
  • Wage theft & penalty increases*
  • Discrimination changes
  • Sexual harassment & related unlawful conduct
  • Workplace gender equality changes
  • Flexible work requests & disputes
  • Pay secrecy
  • Leave changes

2. A business with casuals:

  • Changed definition of “casual” and changed pathways to casual conversion*
  • New dispute options*

3. A business with fixed term employees:

  • Restrictions on fixed term contracts
  • New dispute options

4. A business with independent contractors:

  • New “employment” definition and changes to “sham contracting” defences*
  • Unfair contracts claims and new minimum conditions for some independent contractors*

5. Labour hire employers / hosts:

  • Labour hire loophole*

6. Businesses with unions in the workplace:

  • Delegate rights*
  • Right of entry changes*
  • Bargaining changes including intractable bargaining determination changes*

You can see a concise summary of some of the key ways that these reforms affect arrangements for businesses that have different types of workers here.

What’s happening on Monday?

The new right to disconnect commences (for small businesses it is on 26 August 2025).

The new casual employment framework commences.

The definition of who is an “employee” under the Fair Work Act 2009 will fundamentally change.

Independent contractors will have new rights and the FWC can start the process of making minimum conditions for different types of contractors who are “regulated workers” or in a road transport “contractual chain”.

The world won’t change on Monday. But it will be a fundamentally different landscape for employment and industrial relations in the months and years to come.

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It seems like death by a thousand cuts. In August last year, Federal Treasurer Jim Chalmers announced a Competition Review to examine competition laws, policies and institutions to focus on reforms that would increase productivity, reduce the cost of living and/or lift wages. Non-compete clauses would be part of this two-year process.

Since then, we’ve had a Government Employment White Paper Roadmap reiterate its intention to investigate non-compete clauses (September 2023) and a Competition Review to discuss non-compete and related clauses (October 2023).

The push for change has gathered momentum this year. The ABS released an employer survey that found 22% of workers were subject to a non-compete clause. Then, in March, Dr. Iain Ross (former Fair Work Commission President) authored an ANU Crawford School of Government paper that concluded that the existing law and practice regarding non-competes was “manifestly unfair and contrary to the public interest”, to be closely followed by a government issues paper, titled Non-competes and other restraints: understanding the impacts on jobs, business and productivity, in April 2024.

These papers and reviews have gone hand in glove with ministerial and union rhetoric that would strongly suggest that the die has been cast – non-competes will be overhauled or even abolished. Certainly, there has been little if any argument to the contrary.

For example, the Assistant Minister for Competition, Andrew Leigh, told the McKell Institute that non-compete clauses were affecting a diverse range of employees – from break-dancing instructors to disability support workers and boilermakers. He added that international evidence suggested they harmed job mobility, innovation and wages growth.

For their part, unions want a total ban on non-competes, with ACTU assistant secretary Joseph Mitchell saying recently that the spread of non-competes had gone “completely haywire” and the Government should take “bold action” on the issue.

In essence, they advance four arguments for change, none of which we believe provide compelling evidence for root-and-branch change. They also cite what’s happening with non-competes in the U.S. (of which more later).

The first argument is that the courts generally treat a former employee’s interests as irrelevant when determining the validity and enforcement of a non-compete clause, with the consequence being most are upheld. The second, and related, assertion is that employers have ready access to Court injunctions because they only need to show a prima facie argument that the non-compete is valid, with a review of the relevant cases suggesting that the “balance of convenience” test is always weighed in the employers’ favour.

The third argument asserts that non-compete provisions have become more widespread, covering many low-income employees who will observe the restraint whether it is valid or not because they lack access to legal advice or the outcome is uncertain.

Finally, there’s the economic argument that non-competes prevent employees moving jobs for wage rises, and stifle innovation and competition by preventing the flow of ideas between firms. In essence, it portrays a system heavily stacked against individual workers and labour mobility.

Those on the reform bandwagon also cite what’s happened in the U.S. where the Federal Trade Commission (similar to the Australian ACCC) has voted to ban new non-competes and limit the enforceability of existing non-competes. What’s only mentioned in the fine print is that the decision was a controversial 3-2 and is being legally challenged.

When dissected, just how compelling are these arguments? In our view, not very. In our White Paper (available here upon request), we contend that the picture presented is either inaccurate or an oversimplification while disregarding the benefits of restraint provisions and failing to appreciate how this area of law operates in practice.

First, it is not accurate to assert that, when determining the validity of or enforcing a non-compete clause, the employee’s interests are irrelevant and only the employer’s position counts. In fact, the well-established legal test is whether the non-compete is reasonable having regard to the interests of both employer and employee, and it’s not difficult to find judicial decisions, recent and historical, that contradict these assertions.

Second, most non-competes are not upheld in Court. Our evidence? The one Australian study to examine the enforceability of restraints found that 54% are not enforced, and outside of NSW (where there is specific legislation making restraints easier to enforce) restraints (including non-competes and other restraints such as non-solicitation clauses) are only enforced 33% of the time – hardly conclusive evidence.

Third, the reasonableness test is criticised for causing uncertainty and confusion, particularly in circumstances where a cascade clause is used. Although this assertion has some validity, it’s overstated. We see the real problem as imprecise drafting and the use of restraints to cover employees who should not be subject to them and who may feel obliged to observe them regardless. Provided there is a sensible and genuine attempt to fashion a cascading clause within a set of narrow circumstances, and to use these instruments appropriately, we think there is a place for them.

Fourth, it is accurate to say that the interests protected by restraints have expanded, but only in one category – an employer’s legitimate interest to maintain a stable, trained workforce. Here the solution could be support for a non-solicitation restraint for a reasonable period within a defined scope and geography. Such provisions have existed since at least the early 1990s and recognise the significant investment that can go into achieving a stable, trained workforce, as well as the confidential information and customer connections an employee may hold.

Finally, the net economic effect of non-competes is debatable and arguably positive rather than negative. One recent U.S. academic paper noted that “contrary to the direction of recent scholarship, popular commentary, and policy activity (sound familiar?), there is little certainty concerning the net efficiency effects of non-competes in general and reasonable grounds to believe they have a net positive effect in certain innovation environments.”

This issue is the zeitgeist of the moment. Suddenly, non-competes are hindering job mobility and wage rises and are a handbrake on productivity, while the tangible benefits of non-compete provisions and other restraints (we will address these in our second article) are ignored.

How else do we explain why the common law relating to non-competes has not been altered by statute except on one occasion where NSW legislation made restraints easier to enforce.

We suggest a carefully balanced policy approach will consider all the research concerning the issues identified. It will recognise that there are benefits to non-competes and other restraints; to business, employees and the economy, together with some disadvantages that must be properly assessed to identify what intervention, if any, is necessary. On this issue – and certainly on the available evidence – the Government should hasten slowly.

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Non-disclosure agreements (NDAs or confidentiality agreements) have come under fire in recent years due to concerns that they silence victims, conceal unlawful behaviour and prevent companies and regulators from understanding the full scope of systemic problems. These are all valid concerns.

However, the part that often gets overlooked when discussing the use of NDAs is that there are good reasons why NDAs are commonly used. It is important to recognise this when we discuss how they should be used in the future.

What’s good about NDAs?

Let’s say workplace relationships have irretrievably broken down. There are allegations (and sometimes counter-allegations) of wrongdoing. NDAs can give people the choice to cease hostilities and walk away if they want to.

What does the alternative look like? If there was no way to guarantee confidentiality:

  • Alleged wrongdoers might feel they have no option but to strenuously defend allegations to protect their reputation and position – as opposed to openly reflecting on how their words or actions have been perceived and seeking to make amends and/or change.
  • Businesses might be forced to defend claims that they consider to have little or no merit – the view might be taken that if the business will be exposed to the reputational damage of the allegations being made public, then its best option is to have those allegations tested in a rigorous legal process.
  • Importantly, victims might be forced into formal and potentially adversarial complaint and/or legal processes – because those represent the only option for resolution for the reasons above.
  • Regardless of the outcome of any investigation, disciplinary and/or legal processes, simply participating in these processes can be traumatising to all the people involved. These kinds of processes often also take some time to conclude, meaning that those people may be stuck in a state of limbo for weeks, months or years.  

The Australian Human Rights Commission recognises this. Its Guidelines on the Use of Confidentiality Clauses in the Resolution of Workplace Sexual Harassment Complaints highlights that “confidentiality provisions can enhance victim-centricity of the response, for example by providing anonymity and privacy where that is the victim’s choice, as well as enabling greater flexibility for the parties to reach a resolution that is faster and less formal than litigation.”

Particularly if the evidence has never been tested in a formal investigation or legal process, there may also be a legitimate interest in parties ensuring that any settlement includes agreed limits on future comments about what can be highly sensitive (but unsubstantiated) allegations.

What kind of steps should businesses think about to ensure NDAs are appropriate?

Drawing on what we have seen overseas and the key themes of the Human Rights Commission’s research and guidance, consider questions such as the following when using NDAs:

  • How can the business ensure the NDA will not inadvertently ‘cover up’ a genuine issue of concern? Even if the allegation was never ‘proven’ or ‘disproven’, is there a process in place to ensure that the fact the allegation was made is accounted for as appropriate in internal data gathering, oversight and decision making?
  • Are there the critical, sensitive allegations or facts for which there is a legitimate reason to restrict disclosure? If yes, can the NDA scope be tailored to reflect that? If not, then check the thinking on why an NDA is necessary.
  • Does this information have an expiry date, after which time it could be partly or fully disclosed?
  • Can partial, deidentified or full disclosure of factual information be permitted in appropriate circumstances e.g., to a doctor or mental health professional when seeking medical treatment, or to a regulator/government agency in the course of an investigation or inquiry or participating in a legal process?
  • Is the business willing to offer free independent legal advice to an individual before the NDA is signed, to ensure they understand and genuinely agree to it? (If that’s not an option, the Commission suggests considering providing them with guidance material and information about freely available community legal services who may be able to help.)

In short, a lot can be done to ensure that NDAs appropriately empower genuine choice.

Any suggestion that NDAs (and by extension, that choice) should be outlawed or extensively restricted may end up harming those most directly concerned.

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The last several months have seen rapid changes in the employment and workplace health and safety space. With such dynamic movement, and then lots of commentary on each of these changes, it’s easy to view all these changes as one big jumble of puzzle pieces. And it can be hard to know what the whole jigsaw looks like.

As Chris Gardner and I mentioned last year in our blog post, HR and safety working together on the new positive duty, one of the corner pieces that keeps the picture in place, is having HR and WHS teams working together. What that looks like is different for each organisation: sharing physical locations, integrating these teams, formal meetings or processes, as needed communication between departments or specific individuals, or maybe an individual solution specific to your organisation. The fundamental point is sharing the crossover information, working together when multidisciplinary issues arise and doing so early. Regardless of how your team does it, it is clear that your workplace health and safety and human resources teams will be grappling with these changes together.

With the ever-increasing focus on psychosocial risks, employment and industrial relations decisions now need to be cognisant of workplace health and safety considerations.

The key takeaway is that it doesn’t matter how many jigsaw pieces there are, the jigsaw is showing an ever-increasing focus and attention on the workplace. In our view, this is going to see a consequential increase in regulatory attention, and possibly enforcement. Agree with them or disagree with them, the changes are coming.

Are you assembling the puzzle or lost amongst the pieces?

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