Government consulting on reform of Non-Competes

December 4th, 2020 by Julian Wilson

The Government has today announced an Open Consultation on Measures to reform post-termination Non-Compete clauses in contracts of employment:

The potential reform measures under consultation include:

  • Mandatory compensation from the employer during the term of the restriction
  • Greater disclosure around the Non-Compete at the time of contracting
  • Statutory limits on the duration of the restrictions
  • Making post-termination, non-compete clauses in contracts of employment unenforceable.

On the latter possibility, reference is made to the comparative laws of California and Israel.

The Consultation is said to be founded on the Government’s desire to explore avenues to boost innovation, create the conditions for new jobs and increase competition to support economic recovery from the impacts of COVID-19.

Many will recall that it was only 4 years’ ago, on 25 May 2016, that the Department for Business, Energy & Industrial Strategy published the outcome of its Consultation on Non-Compete clauses stating:

The common view across the majority of responses was that restrictive covenants are a valuable and necessary tool for employers to use to protect their business interests and do not unfairly impact on an individual’s ability to find other work. Common law has developed in this area for over a century and is generally acknowledged to work well.

Having built up a picture of the UK experience via this call for evidence, we have decided it is not necessary to take any further action at this stage.

This Government obviously now takes a different view.

Is it a response to Coronavirus that spurs a desire for reform, or the Government’s aims for a post-Brexit free market economy?

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