Brokers are mostly unfazed by the government’s ban on non-compete clauses for low to middle earners but say non-solicitation clauses are “imperative” and must not be touched.  

Tuesday’s federal budget revealed non-compete contract clauses will be banned for workers earning less than $175,000 a year. The government is also considering extending the change to higher-income workers.

Such clauses prevent or restrict workers from moving to a competing employer or geographic area, or from starting or operating a competing business for a certain duration.

The industry with the highest use of the clauses is financial and insurance services, at 40%, the Australian Bureau of Statistics says.

Industry experts say non-compete clauses are mostly legally unenforceable anyway and the change will not greatly disrupt the broking industry.  

“I don’t actually see where, in the court of law, you would be able to stop people earning a living,” AEI Insurance Broking Group CEO and MD Noel Kelly told insuranceNEWS.com.au today. “It's purely just non-compete. Employees under a threshold ... are able to move from employer to employer.

“I don’t really have any issue with the non-compete. Most of our employees do get jobs within the industry at competitors’ firms and we have no problem with that, so from that standpoint I don’t believe there will be any material impact.”  

National Insurance Brokers owner Abbie Wilson, commenting on LinkedIn, agreed: “I’m currently happy with people working for competitors but not allowing poaching of clients. We all deserve the right to earn an honest income in a field qualified to do so.”  

Radford Lawyers principal solicitor Mark Radford says the change is still worth making.  

“What they’ve found in various studies is that this has an effect on mobility in the workforce because it’s all too confusing. So even if something’s not [legally] enforceable, a person may not be able to make a move because they can’t afford to challenge it, or they’re confused,” he said.

More controversially, the government also plans to consult on non-solicitation clauses and will make changes to prevent ‘no-poach’ agreements that block staff from being hired by competitors.

Non-solicitation clauses prevent a worker from enticing their former employer’s clients to do business with them after leaving a company.  

Brokers say these restraints are vital to protect business operators.  

“If this ban [is expanded and] includes the removal of this clause condition ... then the only way to protect a small business is to use more technology and/or offshore companies to assist with the workload. So it will not boost wages, it will result in loss of employment,” Ms Wilson said.  

Last year, the Federal Court ordered a former AEI Insurance Group account manager to pay $500,000 in damages for breaching his restraint clause by soliciting clients. More than 40 clients moved to a rival brokerage he joined following his resignation.

Mr Kelly says AEI would object to prohibiting solicitation restraint clauses and the idea a former employee “could solicit 56 clients without any backlash”.  

“I believe the 12-month non-solicitation of clients is the most imperative of the [restraint] clauses,” Mr Kelly says. “From an AEI lens, the non-solicitation of clients and staff for a period of 12 months has now been proven in the Federal Court.

“When there's no protection ... why would you bring on staff and train them up?

“You’ve trained and invested in people and there is zero protection for the business. That doesn’t seem fair and adequate as a protection for business owners, in my opinion. You’ve invested lots of time and energy and money into staff, and then the next day they go start a competitive firm and they take all the contacts with them.”

Mr Radford says restraint clauses feature more prominently in insurance because it is a people business.

“Especially in the broking businesses, you’re depending on relationships, and a person with the relationship usually has the client’s trust ... whereas in other things where the relationships with the clients are less consistent, it’s not as important.”