Non‑compete clauses stop employees from joining competing companies or starting their own rival businesses. Some work contracts include these rules that affect employees after they leave their job. In theory, these clauses can encourage companies to train employees and come up with new ideas. But in practice, these clauses often make it harder for workers to change jobs. This can reduce competition and productivity.

This study looked at the link between non‑compete clauses and wages in Australia. The findings support government action to reduce harmful uses of non‑compete clauses.

Key findings

• Many employers use non‑compete clauses. Companies often use them where they don’t make sense. This suggests some companies use them to stop workers from changing jobs or to save time or money, rather than to protect real business ideas.
• Employers should pay workers more for the loss of job opportunities. The study finds that workers with these clauses usually don’t get higher pay in return.
• Problems like unfair bargaining power and lack of information may make things worse. These clauses put workers who cannot negotiate well or do not understand them at the greatest risk.