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What are restraint clauses and how do they affect young workers?

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Assistant Treasury Minister Andrew Leigh has raised concerns about an increase in the use of restraint clauses by employers — e.g “non-compete” or “no-poach” agreements.
The Federal Government said it's concerned about restraint clauses creeping into young people's job contracts

The Federal Government says it’s concerned young workers are being held back by agreements in their employment contracts known as “restraint clauses”.

Assistant Treasury Minister Andrew Leigh has raised concerns about an increase in the use of restraint clauses by employers — e.g “non-compete” or “no-poach” agreements.

Leigh said the clauses could see young people working for lower wages and in poorer conditions than they’re entitled to.

So, what are restraint clauses?

Non-competes

Non-compete clauses are included in employment contracts to restrict a worker from moving to a competitor.

Typically, the conditions of a non-compete will apply for a specific period. For example, a marketing assistant who resigns, and is contractually restricted from working at another marketing firm for three months.

An employer may enforce non-competes to protect client relationships and contacts, or knowledge about a business.

“No-poach”

No-poach agreements normally exist between employers, who agree not to hire the current or former staff of another business. This can happen between franchises at major fast-food chains like Domino‘s and McDonald’s.

For example, a McDonald’s worker wants to move to another location to get better pay and conditions. A ‘no-poach’ agreement could stop them from doing so.

More than two-thirds of McDonald’s staff are aged between 14 and 18, while Domino’s hires staff from age 13.

Low-paid jobs

This week, Assistant Treasury Minister Andrew Leigh expressed concern about the prevalence of restraint clauses in lower-paid workers’ contracts.

Speaking at the Mckell Institute in Sydney on Thursday, he cited Australian Bureau of Statistics data showing 40% of large companies (more than 1,000 employees) use non-compete or no-poach agreements.

Young people

Leigh told TDA these clauses risk locking young people into working for an employer “who doesn’t pay them what they’re worth or doesn’t treat them the way they deserve to be treated”.

Leigh also cited one example where a locksmith sued a teenage keycutter for working at a rival company. The teen had signed a non-compete clause at his old job.

“[This] can only have the effect of dampening down the wages of a teenager,“ he said.

Response

The government is considering reforms to restraint clauses. It released an ‘Issues Paper’ — a research piece into a particular topic, like a university essay.

Opposition employment spokesperson Michaelia Cash did not respond to TDA’s request for comment.

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