Reforms to restraint clauses – what’s at stake for your business 

Following up on an election promise, the Federal Government is looking to reform the rules around non-compete and other restraint clauses in employment contracts. The aim is to give workers more freedom to move, but there are big implications for small mortgage broking businesses if the rules go too far. 

Non-compete clauses restrict former employees from joining competitors or starting similar businesses within a specified period and geographic area after leaving a business. 

In contrast, non-solicitation clauses prevent ex-employees from soliciting their previous employer’s clients or staff. 

The Government’s changes could impact the way you recruit, retain and protect your business. In our submission, the MFAA made it clear that we don’t oppose restrictions on the use of non-compete clauses within employment contracts, subject to caveats. 

Restraint clauses are an important protection mechanism for broking businesses, and we are advocating for practical, broker-focused reforms: 

• Keep it clear – the definition of a non-compete clause must be clear, and not overly broad that it risks capturing more situations than intended. 

• Hands off contractors – genuine business-to-business contractor relationships must be excluded from any ban. 

• Protect your clients – non-solicitation, intellectual property and confidentiality clauses must stay, so departing staff or contractors can’t walk out the door with your relationships or your know-how. 

• Make transition fair – changes should only apply to new contracts, with simple guidance made available for small businesses. 

Read our submission here.

For tips on protecting your business when someone leaves, check out our resource: What to do when someone leaves your business.