Next on the Government’s Agenda for Reform? Non-Compete Clauses 

The government has launched a consultation on reforms to non-compete clauses in employment contracts, outlining options such as statutory limits through to a full ban. If you’re getting a sense of déjà vu, the previous government had consulted on this issue and announced that it would introduce a statutory limit on the length of non-compete clauses of 3 months, however no action was taken. 

So, what does your business need to know about this consultation?

1. Why is the government consulting on reforms to non-compete clauses in employment contracts now?
2. What options are being considered?
3. How your business can have its say
4. What happens next? 

Why is the government consulting on reforms to non-compete clauses in employment contracts now? 

Through the reform of non-compete clauses, the government is aiming, amongst other things to support economic growth by improving labour mobility, competition and innovation. There is concern that non-compete clauses can negatively impact businesses, such as start-ups looking to scale up as well as workers who face extended periods of time out of the labour market in their area of expertise.

The government points out that it is often assumed that non-compete clauses are only found in contracts of high earners, but research from the Competition and Markets Authority shows they are common among lower-paid jobs, albeit there is a higher prevalence in senior roles. Furthermore, even if such clauses are unlikely to be enforceable if challenged in the courts, their presence can deter employees from moving jobs, especially given the high costs and risks of legal challenges. Reforms to restrict non-compete clauses could benefit a range of employees and support economic growth.

What options are being considered? 

The working paper outlines a number of possible options for reform, including:

• a statutory limit on the length of non-compete provisions, with a variety of durations discussed

• a statutory limit linked to business size

• restricting the use of non-compete provisions to high earners only

• combining a ban below a salary threshold and a statutory limit of 3 months

• a ban on non-compete clauses 

The government is also interested in hearing views on a number of related matters, including:

• Whether restrictions should be limited to non-compete clauses only or should also apply to other restrictive covenants (common types of restrictive covenants include non-solicitation, non-dealing clauses)

• How the government can ensure that other restrictive covenants, for exampl,e non-dealing clauses, are not used in a way that would have a similar effect as a non-compete clause, if restrictions were limited to non-compete clauses only

• Whether restrictions on non-compete clauses should be limited to employment contracts or whether the government should consider applying them to wider workplace contracts 

• Whether there are any obstacles to bringing claims on restrictive covenants, including non-compete clauses, in the courts 

How your business can have its say 

If you would like to put forward your responses and views you can participate in the consultation here
until 18^th February 2026.

What happens next? 

We’ll need to wait for the outcome of the consultation to see what, if any, steps the government plans to take.  We will of course keep you updated on any developments. In the meantime here are three points about restrictive covenants that your business may find it useful to know:

• Unless you have restrictive covenants in place, once an employee’s employment with you has ended, they will no longer be prevented from revealing confidential information (apart from trade secrets) or from using things which can be considered to belong to your organisation, such as your trade connections. 

• There are different types of covenants, those that are appropriate for a business to use will depend on the circumstances and the role of the employee you are seeking to restrict. Non-competition covenants are usually the most restrictive, these aim to prevent an ex-employee from taking similar employment with a competitor or trading or setting up in a competing business.

• To be enforceable, amongst other things, restrictive covenants must go no further than is reasonably necessary to protect the legitimate business interest that’s been identified. 

Restrictive covenants won’t be necessary or enforceable in respect of every employee, so it’s important to seek advice on the situation in your business if you are considering using restrictive covenants.

Have a HR matter you would like assistance with? Please get in touch.