Reforming non-compete clauses

The government has recently announced their intention to reform post-termination restrictions within employment contracts. This would only apply to the non-compete clauses but would seek to restrict them to a maximum of 3 months.

This has come following a government consultation in early 2021 but is currently light on detail.

What is considered to be a non-compete clause?

This reform would catch clauses seeking to prohibit employees from joining a competitor or setting up a rival business for a period of time after they leave employment. At the minute, this can be anywhere between 1 month to 12 months. There are other types of clauses that are often included within post termination restrictions however it does not look likely that these would be caught under this reform.

Why is this being considered?

These reforms could be seen as a boost for employees to give them more flexibility when considering new positions, allowing them to move jobs and increase their income by giving them more scope to consider rival businesses. The reforms are also framed as a positive for employers, giving them increased opportunity to hire new talent free of any restrictions or time limitations.

Is this actually good news for employers?

Recruiting employers will certainly have less to worry about when making job offers, should these reforms take place, as employees are less likely to have lengthy or onerous post termination obligations. However, those employers looking to retain staff may have to look at other measures to prohibit or encourage staff not to jump ship.

What other options do employers have?

Should you have invested time and money into your employees training and development, you may have asked them to sign a training agreement. This would state that if they were to leave within a set period of time, then they would have to pay those training fees back to the business. This can be a good deterrent for employees but also a useful way for the business to claw back part of its investment, should that be necessary.

The most efficient way to maintain staff is to keep them engaged in your business. If they are listened to, happy and valued, this makes them much less likely to look further afield and take advantage of these new reforms.

What about my existing restrictions?

It is currently unknown whether these reforms will only affect new contracts or whether it could invalidate older contracts. It is also unclear whether those existing terms would be completely void or would automatically reduce to the 3-month limit. Employers may need to be ready to enter into new contracts including such an amendment, should these reforms take place.

When will this happen?

These reforms look unlikely to be happening anytime soon, with a potential date of 2024, pending parliaments availability. However, an impending general election could likely change the course of any progress.

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Should you have any concerns about the restrictions within your contracts or feel that they could be tighter, then do not hesitate to get in touch with us at [email protected] or speak to one of our experts on 0333 888 1360