Wed 24 May 2023

Non-compete restrictions to be limited to three months

New legislation is intended to curb the use of non-compete restrictive covenants while enabling businesses to compete and innovate.

The UK Government consulted on reform to post-termination non-compete clauses in contracts of employment between December 2020 and February 2021.  No formal response to the consultation has been published but a policy paper was published in May announcing the UK Government's intention to legislate to limit the length of non-compete clauses to three months.  It is anticipated that this will affect 5 million UK workers.  A non-compete clause prevents an employee from engaging, for a period of time, in any business that competes with the ex-employer's business.

The policy paper explains that this limitation applies only to post-termination non-compete clauses.  It will not interfere with an employer's ability to use (paid) notice periods or gardening leave, nor will it impact on confidentiality clauses.  Non-solicitation clauses that restrict employees from approaching their former employer's customers, clients or suppliers will also be unaffected.  The policy paper does not specifically address non-dealing clauses - these differ from non-solicitation clauses in as much as they restrict the employee from carrying on business with their former employer's customers, clients or suppliers irrespective of who contacted whom - but it is thought that these will also be unaffected.  Restrictions under the public sector Business Appointment Rules (that exist to prevent former civil servants and ministers from profiting from their knowledge of and contracts within Whitehall) will also be unaffected. 

In terms of implementation, this legislation is to be introduced in the UK Governments favourite timescale - " when Parliamentary time allows".  So when (or potentially if) this legislation will take effect is an unknown.

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