United Kingdom: Government proposals to limit enforceability of non-compete clauses

09 Jun 2023    1 minute read
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In brief

Non-compete clauses have become a common feature in employment contracts; they aim to protect employers by preventing departing employees from joining rival companies or starting their own competitive ventures for a specific period. The UK government, however, has announced it intends to limit the enforceability of non-competition clauses in contracts of employment and worker contracts in the UK to a maximum of three months.

In a briefing published by Thomson Reuters Regulatory Intelligence, Anne-Marie Davies discusses the effect of such a change. 

Contents

Key takeways

  • Critics argue that non-compete clauses can be unfair to employees and unduly restrict their professional development, and can be bad for the wider economy by limiting competition and innovation. The UK government opened a consultation in 2020 to explore measures to strike a better balance between protecting employers' interests and ensuring fair competition and employee mobility. That consultation offered two broad options: to require payment for non-compete clauses, or to ban such restrictions. Ultimately, the government decided against both options in favour of a three-month limit on the duration of such clauses.
  • The limit would apply only to non-compete clauses in employment contracts. Other contracts, or forms of post-termination restriction, would be unaffected.
  • The government has said legislation will be introduced when time allows. It is possible this will not be before the next general election. However, employers should consider how they would be impacted, which will include a review of how far non-competes are used within their business at present.
  • Aside from garden leave clauses, it would be advisable for employers to consider what other protections they have agreed, or can agree, with their employees. Other post-termination restraints such as non-solicitation and non-dealing clauses may still be used to protect trade secrets, confidential information, and client relationships. It would therefore be sensible for employers to ensure that they include a full suite of well-drafted post-employment protections in their employment contracts.
  • The proposed restrictions may also see a greater focus on whether departing employees have breached confidentiality obligations or other express or implied contractual obligations such as the obligations of fidelity and trust and confidence and an increased use of springboard injunctions.

This briefing was first published by Thomson Reuter's Regulatory Intelligence. 

Click here to access the full article.

Contact Information
Rachel Farr
Senior Knowledge Lawyer
London
rachel.farr@bakermckenzie.com

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