Potential Reform For Non-Compete Clauses – A Boost For Competition And Innovation?
Non-compete clauses are commonly included in employment contracts to restrict an employee’s ability to work for or establish a competing business after they have left their job. The aim is to protect businesses after they have invested in employee training and development.
The government have now announced their intention to introduce new legislation to restrict the duration of these clauses to 3 months, finding that unnecessarily burdensome clauses have become a default part of too many employment contracts.
You may have seen our update on general restrictive covenants on 04 May 2023 in which we confirmed that covenants should be drafted to ensure that they are enforceable yet limited to what is reasonable in the circumstances. To avoid any ambiguity the government have now suggested that for non-compete clauses this time period should be limited to a period of 3 months after employment ends.
What does this mean for employees?
The intention of the change should allow up to 5 million UK workers greater freedom to switch jobs, apply their skills elsewhere and earn more.
Will this benefit employers?
Businesses will have a larger pool of talent to choose from. The expectation is that if non-compete clauses are limited the quality and quantity of workers should improve.
In addition, the government has made it clear that this will not interfere with an employers ability to restrict an employee’s activities during paid notice periods or garden leave or the use of non-solicitation or confidentiality clauses.
The government is yet to provide clarity as to whether this change will have retrospective effect on contracts that are currently in place or whether it will only apply to new restrictions entered into after the date the legislation is put in place.
It is unclear when this will come into effect, the government has remained quiet on a timeline of implementation stating it is intended when “parliamentary time allows” but we will share a further update when any additional information is made available.
For any further information regarding the new proposed bill and how this might effect your employment contracts, or if you have a query on another area of employment law, please contact the Employment Law Team.
Amy Hallam
Head of Employment
t: 0114 3496989
e: amy.hallam@brmlaw.co.uk
Ellie Leatherday
Associate
t: 01246 564002
e: ellie.leatherday@brmlaw.co.uk
Jade Taylor
Trainee Solicitor
t: 01246 560587
e: jade.taylor@brmlaw.co.uk
