Proposed Changes to Non-compete Clauses

As part of a wider package of post-Brexit employment law measures, the Government has announced its intention to limit the length of non-compete clauses to three months. The aim of the proposed changes is to encourage entrepreneurship and innovation, helping boost the economy.

A non-compete clause is one type of post-termination restriction – also known as “restrictive covenants”- that an employer may seek to include in a contract of employment. The primary objective of restrictive covenants is to protect employers’ legitimate business interests. In the case of a non-compete clause, employers’ interests are protected by limiting an former employee’s activities such as by preventing them from working with a competitor, or by starting a competing business. For such clauses to be enforceable, they must be reasonable in scope, duration, and location. The time period for a non-compete clause will vary,-although a period of 6 to 12 months is not uncommon in employment contracts for senior employees.

The government’s announcement makes clear that the changes will not affect other restrictive covenants, such as non-solicitation clauses, and that that employers will still be able to restrict non-competing activities during garden leave or notice periods. What remains unclear however, is whether a non-compete clause can still be offset against time spent on garden leave, as is typically seen in most cases at present. It is also ambiguous is whether the new changes will apply retrospectively to all contracts, as well as the timetable as to when they will come into effect.