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RNA brings you all the recruitment news from around Australia brought to you by Ross Clennett and Adele Last.
Question of the week this week:
'What do you need to consider about your restraint clause when resigning?'
#rna #recruitmentnewsaustralia #recruitmentpodcast
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Transcript
Australia's Employment Trends
00:00:09
Speaker
This is the news for the week beginning the 26th of February 2024. I'm Ross Clennet. Six January employment report noted job ads in Australia had risen month on month in January by 1.3%. Year on year, the decline was 17.5%. All states and territories recorded a month on month increase except WA, which was down 0.2% and Tasmania down 0.3%.
Positive Employment Outlook?
00:00:36
Speaker
According to the JSA Recruitment Experiences and Outlook survey of over 1,000 employers in January this year, the outlook for employment in Australia remains positive. 48% of employers recruited during the month, which is one percentage point higher than last month. 55% of recruiting employers reported difficulty recruiting staff four percentage points higher compared to the previous month. And 24% of employers were forecasting an increase in headcount in the upcoming three month period
00:01:06
Speaker
a jump compared to the 21% reported last month. Only 1% of employers were forecasting a decrease in headcount.
SEEK's Marketplace Merger
00:01:17
Speaker
SEEK announced it had successfully merged its APAC employment marketplaces, including SEEK Jobs DB and Jobs Street. The marketplaces will operate under a single system powered by SEEK's AI technology, while retaining their individual brands.
00:01:33
Speaker
The unification of its employment marketplaces comes 10 years after it acquired JobsDB and Job Street and follows three years of development and an estimated $180 million investment. For employers, the new platform deploys AI models to assess talent suitability and provide highly personalised recommendations by processing data from various sources.
00:01:56
Speaker
The enhancements to the job hunting process for talent include being matched to AI recommended jobs by their skills and experience. Job seekers may be shown a top applicant badge on the job vacancy page they're browsing if they're assessed as having strong suitability for the role to assist their decision to apply or not.
High Tech Group's Financial Report
00:02:14
Speaker
ASX listed IT recruitment and consulting company High Tech Group
00:02:18
Speaker
Reported revenue for the six months ended 31 December 2023 of $34 million, down 16.4% compared to the same period last year. Despite the sales decline, gross profit was up 37.4% and EBIT arose 31% to $4.1 million. High-techs market capitalisation is just over $88 million.
00:02:42
Speaker
Japan-based staffing firm Outsourcing, the 10th largest global staffing firm and owner of local brands, Red Appointments, Clicks, Bluefin, Jigsaw Talent Management, Horizon One, Hoban, Luxe and PM Partners reported a revenue rise of 8.6% for the full year ending 31 December 2023 when compared to the previous year.
Outsourcing Firm's Revenue and Profit
00:03:06
Speaker
although gross profit rose 8.4%, operating profit declined 27.6% on the back of significant impairment losses on Goodwill. A turnaround in EBITDA and an enhanced net cash position were the only positive results from ASX listed recruiter Ignite's 2024 first half results for the July to December 2023 period. Sales and gross profit were both down 9%
00:03:32
Speaker
employee headcount plummeted to 26% to 49% and end-of-period contractor numbers slumped by 15% to 507%. EBITDA for the period was half a million dollars up from a $138,000 loss in the corresponding period last year. The net cash position was $1.85 million up from $234,000 12 months ago.
00:03:58
Speaker
The debtor finance facility was closed after the company's recent entitlement offer raised $3.1 million. Haze ANZ net fees for the July to December 2023 half year decreased by 19% with operating profit down 60% to $13 million due to significant negative currency impacts, the reduction of temps and contractors in the public sector, and by a reduction in hiring in some large enterprise clients.
00:04:27
Speaker
temp net fee income was down 15% and permanent placement income dropped 25%.
Non-compete Clauses: Impact on Mobility?
00:04:34
Speaker
On a group-wide basis, sales dropped 5%, net fees were down 9% and operating profit plunged 66% for the six-month period. One in five employers in Australia are using non-compete clauses according to a new report from the Australian Bureau of Statistics.
00:04:54
Speaker
The report which determined the prevalence of restraint clauses across the country found that 21% of Australian employers are using non-compete clauses, which accounts for 31% of all jobs. According to the ABS survey, the five industries utilizing non-compete clauses most frequently are financial and insurance services, rental hiring and real estate services, electricity, gas, water and waste services, administrative and support services,
00:05:22
Speaker
and professional, scientific and technical services where the recruitment sector sits. There is growing concern internationally that these clauses are increasingly restricting workers from shifting to better paying jobs and maybe hampering business innovation and productivity, Assistant Minister for Employment Andrew Lee said in a statement. According to the ABS, approximately 1% of businesses say that a potential employee turned down a job offer because of a non-compete clause.
00:05:50
Speaker
The Assistant Minister said the government will launch an issues paper for public consultation in April to look into non-compete clauses and their impact on employment. The most prevalent type of restraint clause is a non-disclosure followed by non-solicitation.
Apprentice Scheme Review
00:06:07
Speaker
Minister for Skills and Training Brendan O'Connor has announced a fresh review of Australia's apprentice incentive scheme as low completion rates contribute to skills gaps in the workforce. For apprentices and trainees who started in 2018, only 55.8% completed their apprenticeship or traineeship in 2022, according to data from the National Centre for Vocational Education Research.
00:06:32
Speaker
The review comes after long-running concerns from O'Connor about the effectiveness of Australian apprenticeship pathways. There is no point in boosting the number of apprenticeships if apprentices already in the system are not properly supported and leave before they get their qualification, O'Connor said. We need to fix the leaks in the bucket before we turn the tap on harder.
00:06:52
Speaker
The review will incorporate a national program of online and face-to-face consultations in the next two months, leading up to the deadline for all submissions of the 15th of May 2024.
Wage Growth and Enterprise Agreements
00:07:06
Speaker
Average pay increased by 4.2% in the December quarter when compared to the corresponding quarter a year ago, according to data from the Australian Bureau of Statistics.
00:07:16
Speaker
December's annual wage growth exceeded the September quarter rise of 4.1% annual growth and is the highest recorded annual growth since the March quarter of 2009. Michelle McQuad from ABS said for both the public and private sector, wages growth was driven by organization-wide annual wage and salary reviews. Wage growth for December quarter 2023 saw a higher contribution from jobs covered by enterprise agreements than is typically recorded for a December quarter.
00:07:46
Speaker
Higher growth in the public sector was primarily due to newly implemented enterprise agreements for essential workers in the healthcare and social assistance and education and training industries following changes to state-based wages policies. Annual wage growth was highest in the healthcare and social assistance industry at 5.5%, the highest growth since the start of the series in September 1998. At 3.2%, the financial
00:08:13
Speaker
and insurance services industry had the lowest annual growth in wages.
Staffing Fraud Case Details
00:08:19
Speaker
Two former United States Staffing Company executives pleaded guilty last week to defrauding a bank and investors, the US Department of Justice reported. The scheme caused more than US$70 million in losses. Luis Liberas and his brother Moses Liberas, both residents of Florida,
00:08:36
Speaker
Each pled guilty to one count of conspiracy to commit bank fraud and one count of conspiracy to commit wire fraud, according to the department. Each count carries a maximum of five years in prison. Both defendants agreed to pay a combined $75.5 million in restitution. The brothers used fictitious receivables in order to borrow more than $500 million from a bank through a revolving line of credit.
00:09:00
Speaker
had begun creating fraudulent invoices in 2017 after losing significant business from major clients. Luis Liberas later sold the company in May 2018, knowing the value of the firm was grossly inflated, making approximately $17.5 million from the sale.
Reforming Workplace Culture
00:09:20
Speaker
The Federal Department of Infrastructure has said it's taking steps to reform workplace culture following last year's hottie list scandal.
00:09:29
Speaker
A list that ranked the perceived hotness of female employees at the department was rumored to have been circulated by junior male employees allegedly in the graduate program. While departmental secretary Jim Betts said he was unable to confirm its existence, that didn't mean it did not exist. We have learned some lessons from this and one of those is around having gender balance at all levels and in all cohorts, he said. We will never have a future graduate program where the gender balance is two-thirds male and one-third female.
00:09:58
Speaker
In the months since this story broke, infrastructure has added a respectful workplace program to its four-week induction process and a team charter of acceptable behaviours.
Future Pay Increase Predictions
00:10:10
Speaker
Employees can expect a higher wage increase this year as HR professionals across Australia predict that the mean basic pay increase will hit 3.7% in the 12 months to January 2025. This is up from the previous 2.6% that was expected in the 12 months to October 2024
00:10:27
Speaker
according to the report from the Australian Human Resources Institute. The report, which surveyed over 600 senior HR professionals and decision makers in Australia, also found that recruitment and retention issues remain, with the average employee turnover rate in Australian workplaces in the past year remaining at 14%.
00:10:46
Speaker
To improve recruitment outcomes and boost retention, 37% of employers said they introduced or enhanced flexible working arrangements, the most nominated response. Raising wages and improving benefits ranked eighth, with only one quarter of those surveyed nominating it as an important strategy for improving recruitment and retention. And now your news is up to date for the week commencing 26th of February, 2024.
Understanding Restraint Clauses
00:11:14
Speaker
I'm Adele Last.
00:11:22
Speaker
This week's question of the week is about restraint clauses. We just heard in the news there about the government going to release an issues paper for public comment around the effect that restraint clauses is having on the employment landscape. And I found some interesting case law about this that is reasonably close to home. I haven't targeted recruitment agencies as such because I don't wish to name any names here in this podcast, but
00:11:49
Speaker
I have found a case that's close to us with two employers called Employeeshore and Elmo, who we will probably all be familiar with. They are IT-based learning platforms that you may have even used in your own role. But there was recent case law which outlined a senior sales manager, Mr. McMerchie, who left Employeeshore to join Elmo. He had an extended notice period of three months.
00:12:17
Speaker
He only worked one month of his three months and then he was put on gardening leave, required to be paid to sit at home and not work for anyone else or do any other work in that time. And he did contact his new employer, Elmo, and pass across a list of employees from employee shore. And Elmo then solicited another employee called Mr. Kumaran and employed him subsequently as well.
00:12:44
Speaker
So the case went to court and Mr. McMurtry, by level of his position, was restrained for a nine month period. Mr. Kumram was at a lower level. He was restrained for six months from contacting anyone in the organisation or any clients as such. So it might not be that you're contacting previous staff members, but you may be contacting clients. And that's what I wanted to bring it into light within the recruitment space.
00:13:10
Speaker
of what do we need to consider Ross with respect to restraint clauses when resigning in the recruitment sector?
Legal Advice on Restraint Clauses
00:13:19
Speaker
Well, I've got a little story which probably will set the scene and it demonstrates the things that I wish I'd known. And the first thing was just ignorance about what potentially could happen in the future. When I moved from Sydney to Melbourne,
00:13:38
Speaker
I saw the new position and when I was in the process of my job search, I went a fair way down the path with what would have been regarded as, at the time, a major competitor of my former employer. But I'd never worked in the Melbourne market. However,
00:13:58
Speaker
because my former employer had listed on the stock exchange. And as a result of that, me being one of the so-called key executives, I had signed a very restrictive restraint, which included 12 months working for a competitor in any market in which both companies operate. Now that meant that technically I was in breach of my contract
00:14:28
Speaker
by working for a competitor in the Melbourne market, even though I had no contacts in the Melbourne market, but I was sufficient, or my lawyer said in advising me, or else you're a sufficient seniority that the court may regard you as having intellectual secrets or intellectual property that may be relevant for your competitor in or your potential
00:14:59
Speaker
employer that you might use against your former employer and that knowledge may also be used against them in the Sydney market. So he said you've got to be very careful because that might come back to bite you.
00:15:16
Speaker
And ultimately I didn't finish up accepting that job. I think with the sort of the cloud of that restraint clause hanging over me and because unfortunately my employment with my former employer had ended acrimoniously that the CEO who was quite vindictive
00:15:41
Speaker
I didn't put it past him to use the company money to take me to court. So ultimately, I had a bad experience through my ignorance of restraint clauses. So to answer your question, the three things you need to be very clear about. Firstly, what restraint clauses have you agreed to?
00:16:06
Speaker
Do you understand what those restraint clauses mean? And this is only what a lawyer can tell you. How enforceable might those restraint clauses be? And I would urge people to seek qualified legal advice. In other words, from an industrial relations lawyer who's going to be much more likely to give you an accurate view of those things. Second, don't
00:16:34
Speaker
copy, transfer, take or duplicate any information from your current employer.
00:16:47
Speaker
because any of those steps may be used as evidence that you're attempting to take confidential information and use it to cause your former employer economic harm. And then the third thing is don't contact people who you've been in contact with at your previous employer, because that would absolutely be regarded as solicitation. And that is almost always going to be in breach of your non-compete
00:17:16
Speaker
and you could find yourself sitting on the sidelines with your current employer and or new employer and almost certainly they're not going to fund your legal defence. You're going to have to fund it yourself. So they're the three things that I'd recommend based on my own experience. I know what a lot of recruiters are going to say to this. They're going to say, but what if I don't solicit it? What if I just move companies?
00:17:45
Speaker
I post on LinkedIn that I've got a new job and my old clients reach out to me and connect with me. I haven't solicited them. I haven't contacted them. Am I still in breach of my restraint?
00:17:57
Speaker
Well, the obvious answer to that is I don't know. And my more general answer is it depends on your risk profile. If you're someone who's prepared to risk the fact that your previous employer won't take action against you, or if they do, they lose, then sure, go ahead. But that is risky.
00:18:23
Speaker
And if you're a very conservative person and you want to give your former employer no grounds to take action against you, then I'd say, yes, update your LinkedIn profile. But putting a big status update message saying, I've moved to this company and I'm recruiting these types of roles and I'd welcome your inquiry, I think that's a little bit different and that might not be regarded.
00:18:52
Speaker
so innocently by a court? Yeah, in my own experience, I've always encouraged people who've come from competitor agencies to come and work for me when I was in a managerial position to wait out
Respecting Restraint Periods
00:19:07
Speaker
the restraint. I think that's something to note with these clauses is that there is a period of time and the clauses in the legal
00:19:17
Speaker
In the law say, you know, a company has a right to protect its legitimate interests for a reasonable period of time is what the law says. And obviously that's the questionable phrase there. But, you know, if you've signed the contract and you've agreed to a six month restraint period, then we'll just wait that out. You know, I would never encourage an employee to breach that. And it's very easy to wait it out and do the right thing. And then after such time,
00:19:46
Speaker
If you've made contact with the old client after that, I guess it's all is fair, then you've done the right thing and you can do it with a clear conscience as well. And remember, this stuff all lives forever online. If your employer takes action against you in the courts, that will be somewhere. It's a digital footprint. And for the rest of your life, employers or prospective clients,
00:20:15
Speaker
If they're inclined, they can find that information. It's not something that's just, oh, well, we'll give it a go. I win, I lose. It potentially, if you lose, be a permanent sort of black mark against you. It's a trust issue. You've signed a contract, you've breached the contract, and the court has found you in breach. Like, I don't know, I don't think that's a risk that I would want to take. And ultimately, looking back at that,
00:20:45
Speaker
decision I made 23 years ago, that's probably the decision that I came to. I just didn't want to take that risk. Yeah, your reputation is a very valuable thing, particularly in the recruitment space. And you do only get one once it's dirtied. You can't fix it, unfortunately. So, yeah, interesting situation. We look forward to hearing more about this government paper and what the outcome might be.
00:21:12
Speaker
there may be recommendations that are handed down.
Closing Remarks and Legal Disclaimer
00:21:16
Speaker
And as we've discussed, perhaps changes to the way restraint clauses are enforced. So we look forward to hearing more about that. And remember, as always.
00:21:28
Speaker
I'm sure I don't need to remind you. I'm not a lawyer. Adele's not a lawyer. None of this conversation constitutes legal advice. And if you have any questions about a restraint clause, whether you are an employee or an employer, we would encourage you to contact a qualified legal professional who can give you advice about current employment law.
Call for Reviews
00:21:54
Speaker
Hey, are you liking listening to our podcast, Recruitment News Australia? If you are, it would really help if you could give Ross Kleiner and I a five-star review on whatever podcast app you listen to it on. Please hop onto the review section and give us a review next time you're listening on your favorite episode. And thanks for listening.