There is a reasonable principle behind the federal government’s proposed reforms to non-compete clauses. Employees should be able to pursue opportunities elsewhere without being unnecessarily restricted by a former employer, writes Bryan Wilcox, CEO, Real Estate Employers’ Federation.
But there is an equally reasonable principle that needs to sit alongside it: businesses should be able to protect the relationships, commercial interests and goodwill they have invested considerable time and money in building.
For real estate employers, getting that balance right is particularly important.
Real estate businesses are built on relationships. An agency may spend years developing a prospective vendor before a listing eventuates, investing in an employee before they become a high-performing salesperson, or building a rent roll and client base that becomes one of the most valuable assets in the business.
These relationships do not always fit neatly into the definitions contemplated by legislation, which is why any reform needs to be fit for purpose and recognise the commercial realities of our industry.
Under the proposed reforms, employers would generally be unable to enforce non-compete restraints against employees earning at or below the Fair Work Act high-income threshold, currently $190,100. For real estate, there is an added complication because commissions that cannot be determined in advance may not count towards that threshold.
The reforms would also prohibit co-worker non-solicitation restraints, potentially allowing a departing employee to actively recruit former colleagues.
Neither issue should be considered in isolation from the commercial reality of running an agency.
The proposed reforms retain some scope for client non-solicitation restraints where legitimate business interests are being protected, but questions remain around prospective vendors, appraisal relationships, landlords and employer-generated leads.
For an agency owner, these are commercially valuable relationships, often developed through years of prospecting, marketing investment and database development, well before somebody signs an agency agreement.
This is why REEF has made a detailed submission to Treasury, advocating for three important changes to the proposed legislation.
Firstly, commissions and bonuses should be considered when determining whether an employee meets the high-income threshold, particularly where an agent has consistently earned above that threshold.
Secondly, reasonable safeguards should remain to protect employers against former employees actively soliciting their colleagues, recognising the considerable investment agencies make in recruiting, developing and retaining their teams.
Thirdly, client non-solicitation protections should extend to prospective client relationships that an employer has invested in developing, including those an employee has been paid to nurture over a number of years.
These are not arguments against employee mobility or competition. They are about recognising the legitimate commercial interests of employers and ensuring that reform does not unintentionally undermine the businesses that employ and invest in our industry’s workforce.
Employees should have the freedom to pursue new opportunities, just as employers should have reasonable protections for the businesses they have worked to establish.
Good reform should be capable of achieving both.
For real estate employers, the question is therefore not whether the system should change. It is whether the legislation ultimately recognises how our businesses actually operate.
Bryan Wilcox is the CEO of the Real Estate Employers’ Federation.
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