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Proposed Changes Regarding Non-Compete and Exclusivity Clauses

The government has launched consultations on possible changes to the law regarding the use of post-termination non-compete clauses in contracts of employment and a possible ban on the use of ‘exclusivity clauses’ for low paid workers.

What are the key points?

Consultation on measures to reform post termination non-compete clauses

The government has said that they “want to maximise opportunities for individuals to start new businesses, find new work and apply their skills to drive the economic recovery. For these reasons [they] are seeking views on reforms to non-compete clauses.”

The government are considering and consulting on:

  • Allowing employers to still use post-termination non-compete clauses as a means of protecting their business interests, provided the ex-employee is compensated during the restricted period.
  • Whether they should only consider requiring compensation for non-compete clauses or whether they should consider requiring compensation where other restrictive covenants are used, such as non-solicitation clauses.
  • The level of compensation that could be required during the restricted period, set as a percentage of the ex-employee’s average weekly earnings prior to termination of employment.
  • Placing statutory restrictions on the period of non-compete clauses in contracts of employment so that a non-compete clause would only potentially be enforceable if it did not exceed a maximum period. Currently, where used, the length of a non-compete clause should be reasonable and no longer than necessary.
  • Whether making all post-termination non-compete clauses in contracts of employment unenforceable is a necessary step to boost innovation and competition. This would in effect be a ban on the use of post-termination non-compete clauses in contracts of employment.

Exclusivity Clauses

The government is also consulting on banning the use of exclusivity clauses in contracts which prevent people on low-incomes working for other employers or doing so without the employer’s consent. The ban is proposed to apply to workers whose guaranteed weekly income falls below the Lower Earnings Limit, currently £120 a week.

To allow business to protect their interests where they employ well paid individuals who only work a few hours a week, the government is proposing including an exemption to the proposed ban which would avoid capturing such individuals.

The government has said the proposed change would empower around 1.8 million low paid workers across the UK to top-up their income with additional work.

Both consultations close on 26th February 2021. Kingfisher Professional Services Ltd will keep you updated with any developments in these areas, in the meantime if you have an employment law matter you would like assistance with, please do not hesitate to contact us as we are happy to help.


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