Non-compete clauses are often included in employment contracts. These restrict an employee working for a competitor for a defined period of time after the termination of their employment with their employer.
Government estimates claim that around five million employees are subject to a non-compete clause. In Great Britain, the length is most commonly around six months.
In May 2023 the Government announced plans to introduce a statutory three-month limit on non-compete clauses. I.e. employers could only limit competition of ex-employees for 3 months.
While this may be beneficial for an employee, as it promotes flexibility and innovation. It is important to consider what effect this may have on an employer and what their options might be when it comes to protecting legitimate business interests.
The Government has said that the reforms will not interfere with the below
- Paid notice periods;
- Garden leave;
- Non-solicitation clauses;
- Non-dealing clauses; and
- Confidentiality agreements.
The above list provides employers with something to rely upon in order to continue to protect their business interests. For example, increasing the length of an employees notice period or invoking a contractual right to put them on garden leave.
The three-month limit will only apply to non-compete clauses contained within contracts of employment and worker contracts. They will not apply to ‘wider workplace contracts’ such as partnership agreements, LLP agreements or shareholder agreements.
Employers can insert new clauses into employment contracts for new employees. However, if they wish to amend the contracts of existing employees they will need the employee’s consent to make any amendments.
A tip for employers to begin to prepare for the proposed limitation of non-compete clause is to review their key employee’s employment contracts. This is to see what they say in relation to notice periods, confidentiality and restrictive covenants. This way, employers will know what needs to be amended in their employment contracts when these changes do take place.
Once the proposed changes are made law, this will be a significant change in employment law. It will mean that employers will not be able to enforce non-compete clauses lasting longer than three months. In turn, the Government hopes that this change should increase competition and promote economic growth.
Contact for legal support for employers and employees
Anna is a Trainee currently seated in Attwells Employment Law Department. Attwells offers free initial telephone consultations and competitive fixed fee packages for both employees and employers, alongside award award winning client care. If you require any assistance, please contact Attwells Solicitors Employment Team on 01206 239761
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