Labour Market Arrangements and Competition Law in Australia: Time for Change?

• Published date: 01 December 2024
• Author: Rhonda L. Smith
• Date: 01 December 2024
• DOI: http://doi.org/10.1111/1467-8462.12571

The Australian Economic Review, vol. 57, no. 4, pp. 432–440 DOI: 10.1111/1467-8462.12571

Perspective

Labour Market Arrangements and Competition Law in

Australia: Time for Change?

Rhonda L. Smith*

Abstract

As part of an ongoing review of Australia's

Competition and Consumer Act (CCA) by

Treasury, consideration is being given to

removing the exemption from that law for

conduct related to the labour market. This

article considers whether there is sufficient

justification to do so and, if so, how such

conduct should be assessed under the CCA.

No‐poach agreements are cartel conduct and

other restrictive agreements may substantially

lessen competition in labour markets.

Nevertheless, in some circumstances there

are legitimate reasons for some of these

arrangements. Some suggestions are made

as to how restrictive labour arrangements

could be addressed by competition law.

1. Introduction

In a recent speech, Andrew Leigh, Assistant

Minister for Competition, asked ‘Why have

job switching rates fallen? And why has wage

growth been so slow?’(Leigh 2023). He

suggested that ‘[i]ncreases in employer con-

centration, and larger impacts of employer

concentration on wages could explain both

phenomena’(Leigh 2023). Further, it was

suggested that ‘[m]onopsony power has

weakened workers’outside options and bar-

gaining power, made labour markets less

competitive and, therefore, lowered workers'

wages' (Leigh 2023). In this context the

Assistant Minister drew attention to no‐

poach agreements and non‐compete clauses

in labour contracts.

Ano‐poach agreement, also known as a

non‐solicitation agreement, is an agreement

between employers who are competitors in a

labour market and possibly also in a product

market, in relation to their employment

practices. Frequently it is an agreement not

to employ each other's employees. However,

they may also enable coordination of the level

of pay and other conditions offered to

employees. A non‐compete clause in an

employment contract restricts an employee

from moving to a competitor (that is, a

competitor in the product market) or starting

a business in competition with a former

employer. A non‐solicit agreement is a variant

of the non‐compete agreement. A non‐solicit

agreement is broader in that it prevents the

employee soliciting former clients and/or co‐

* Rhonda L. Smith, Economics Department and Law

School, University of Melbourne, Parkville, Victoria,

Australia. Corresponding author: Rhonda L. Smith,

email rhondals@unimelb.edu.au.

Senior Lecturer and Senior Fellow, Economics

Department and Law School respectively, University of

Melbourne. Email: rhondals@unimelb.edu.au. The author

thanks Professor Jeff Borland and an anonymous referee

for their comments on an earlier draft.

© 2024 The Author(s). The Australian Economic Review published by John Wiley & Sons Australia, Ltd on behalf of The University

of Melbourne, Melbourne Institute: Applied Economic & Social Research, Faculty of Business and Economics.

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