Private Member’s Bill Aims to Limit Restraints of Trade

27 September 2022

Helen White’s Employment Relations (Restraint of Trade) Amendment Bill was drawn from the ballot box on 22 September and is awaiting its first reading.

If passed in its current form the Bill would severely limit the rights of employers to introduce and enforce restraints of trade, even for non-solicitation of employees of the employer. For a restraint to be enforceable three tests would have to be satisfied:

The employee’s average weekly earnings would need to exceed the threshold weekly rate.
The employer must have a proprietary interest to protect, the interest would have to described in the agreement, and the restrictions imposed would have to be reasonable.
The employer would have to pay reasonable compensation at the time the employment ends.

The maximum restraint period would be six months.

Impact:

A valid restraint would require the employee to be earning at least three times the minimum adult rate.
That means employees earning less than $2,544 per week ($132,288 per year) would not be able to be subject to a restraint of trade.
The compensation payable for the restraint would need to be more than half of the employee’s average weekly earnings for each week or part week that the restraint is to apply.
That means for an employee on $132,288 per year, with a restraint period of 3 months, the employee would need to be paid at least $16,536 on termination if the employer wanted to enforce the restraint.

There is a fair bit of water to go under the bridge yet, but something to keep an eye on…