CATEGORY 116 AUSTRALASIAN DENTIST COLUMNISTS Your non-compete clause may soon be worthless Carl Burroughs By Joanna Oakey, Aspect Legal, and Carl Burroughs, Professional Practice Sales On 7th September, the Federal Government released draft legislation that, if passed, will change the way dental practices protect their value: the Banning Unfair Non-Competes Bill. Consultation on the draft ran until 2 October, and the changes are expected to start in 2027. Aspect Legal is already reviewing employment agreements for practice owners with the draft in mind, and the same question keeps coming up: what will still protect the practice once this passes? For most practice owners, the non-compete is the clause the whole employment contract leans on. It is the reason you feel comfortable introducing a new associate to your patient base, and the reason a buyer feels comfortable paying for that patient base when you sell. Under the draft, for a large part of your team, that clause stops working and in some cases having it in the contract at all becomes a breach. The two of us have worked together for more than 25 years, and between us we have seen dental practices from most angles: marketing them, owning them, building and selling a group of them, and on the legal side, working with owners on their contracts, teams, acquisitions and sales. In most of the practice contracts we see, the non-compete is the clause doing all the work, yet the contract itself has not been reviewed in years, and certainly not with this legislation in mind. This is the year to do it. What the draft actually does The draft is still being consulted on, so some of this may change, but as it stands: u The $190,100 line. Non-compete clauses are banned for employees earning at or below the high income threshold, which is $190,100 for the coming year, and for every casual employee whatever they earn. u No more cascading restraints. Clauses drafted as 12 months, then 6, then 3, or 10km, then 5, then 2, are banned outright. The whole clause fails, not just the outer ring. u Co-worker clauses go for everyone. Clauses that stop a departing employee recruiting their co-workers are banned at any salary, and “co-worker” is defined to include contractors, labour hire staff, apprentices and volunteers. u Deals between practices become cartel conduct. Agreements between practices not to hire each other’s staff, or to hold wages, fall under competition law with criminal exposure, and arrangements already in place are caught. u Existing contracts hold only until they change. Contracts already signed when the law starts keep their clauses until they are next varied, and the trigger may be smaller than you think (more below). Why this matters more in a dental practice Ask most owners who their patients are loyal to and the answer is the dentist. When that person leaves, the first question at reception is where they have gone. The non-compete was the clause that stopped a departing clinician setting up two suburbs away, where the patients could simply follow them. Look at who sits under the $190,100 line in a typical practice: hygienists, oral health therapists, the practice manager, nurses and front desk, and a fair share of associates. Associates engaged as contractors rather than employees are a different question again, and the answer depends on exactly how the arrangement is set up. Either way, for most of the people who hold patient relationships in your practice, the noncompete is going. What is left to protect those relationships is the patient non-solicitation clause, and the clauses covering patient records and confidential information. In most practice contracts we see, those clauses came from a template years ago and were never written to protect the practice on their own. From next year, that is exactly what they will need to do. Joanna Oakey FOR SALE For more details contact us today www.practicesales.com.au | 1800 375 227 Four-Surgery Dental Practice, Prime Shopping Centre Location HIGHLY PROFITABLE, NEW ENGLAND
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