The Government has issued a working paper on the reform of non-compete provisions.  It states that this is part of its growth mission, to deliver higher living standards in the UK.  It claims that the main route to doing this is through good productive jobs, stable employment and a thriving business environment.

The Government has proposed that in order to achieve this, it needs to reduce barriers for the businesses, entrepreneurs and investors, including to review the current enforceability of non-compete clauses within employment contracts.

What are non-compete clauses?

Non-compete clauses are often contained within contracts of employment, alongside other restrictions that will apply upon termination of employment, also known as restrictive covenants.  This is particularly relevant for business critical and senior roles.  Non-compete clauses will generally only be enforceable to the extent that they seek to protect legitimate business interests.  The working paper describes non-compete clauses as a clause “restricting an individual’s ability to work for, or establish, a competing business after they have moved on from a job”.  

Why can non-compete clauses be a problem?

Non-compete clauses can be an issue for both employers and workers.  If the employee ignores the clause and works for a competitor within the restricted period, the former employer may seek injunctive action at the High Court to endeavour to enforce it and seek damages.  The losing party will generally bear the winner’s legal costs.  However, this can be very expensive, which may act as a deterrent. 

On the other hand, many employees will assume that the clause will be enforceable and adhere to it even where it was not reasonable.  This could mean they do not move jobs to secure better pay or working conditions.  This can restrict job mobility and put downward pressure on wages, leading to a brake on entrepreneurial activity.

What are the benefits of non-compete clauses?

The main benefit of a non-compete clause is to protect confidential business information, clients and supplier relationships.  Employers may have more confidence to invest in training and upskilling their workforce, with less concern that employees will simply take those relationships or information and use it to the advantage of other competitors.

What is the working paper aiming to achieve?

The paper describes the UK’s labour market as one of persistent low job mobility, weak competition in certain sectors and low innovation.  It credits non-compete clauses as playing a part in that by restricting employee movement, limiting knowledge spillovers and undermining incentives for innovation.

What are the reforms being proposed?

The paper invites views on various options to support the government’s growth mission, which includes:

1.        Introducing a statutory limit on the length of the non-compete clause.

YouGov conducted a poll under the previous government and found that 71% of non-compete clauses are longer than 3 months, with non-compete clauses being seen to last for up to 24 months.  A statutory limit could provide some protection for workers by limiting the time they are unable to work in their area of expertise.

The main argument against this is the risk that it would not meet the objective of protecting workers as it could leave some lower-paid workers facing the possibility of spending up to 3 months unable to work in their field of expertise (believing the clauses to be automatically enforceable).

2.        Introducing a statutory limit on the length of the non-compete clause according to company size

One scenario is that for companies with more than 250 employees, the statutory limit for non-compete clauses could be 3 months, while for companies with fewer employees, the limit could be 6 months.

This would allow the smaller companies to continue to use non-compete clauses for a longer period, benefiting start-ups and scale-ups who would then have an advantage to retain talent and knowledge.

This might mean people working in lower-paid sectors where non-compete clauses have been found (the working paper cites early years providers and the hair and beauty industry) would be left in financial difficulty if they left their employer.

3.        Ban on non-compete clauses altogether

This may support worker mobility, as is found in California and some other US jurisdictions.  It would mean individuals would be free to move jobs and start new businesses, which may remove barriers to recruitment and encourage the diffusion of skills and ideas between companies and regions.

Employers could respond to such a ban by shifting their focus on employee incentives to increase retention, such as increased pay, bonuses, greater flexibility, or utilising garden leave clauses, during which the worker would receive pay. This could be combined with the international approach of France, Germany and Italy who have in place a requirement for mandatory compensation to be paid to workers for the period of the non-compete clause.

4.        Banning non-compete clauses below a salary threshold

This is the principle that non-compete clauses would only be enforceable where a worker earns over a particular salary threshold, if they earn below that it would be unenforceable.

This would help lower-paid workers, who are often not in a financial position to be able to challenge the enforceability of the non-compete clause, or to spend time out of the labour market.  This might therefore boost the market and reduce barriers to recruitment.

There are some difficulties here though, including calculating the appropriate levels of a worker’s pay (and whether this takes into account regional differences). It would also lead to difficulties where an employee has a pay rise (or demotion) which puts them in the alternative bracket.  This also creates further issues arising for example when an employee’s salary increase is made to be conditional on them signing a new contract with non-compete clause.

5.        Combining a ban below a salary threshold and a statutory limit of 3 months

The Government could consider a mix of suggestions, for example a ban below a salary threshold and a statutory limit for those who earn over the threshold.

This might help lower-paid staff and only restricts the higher earners only for a limited period, which would have less of an impact on competition and innovation.

Helpful links

The link to the working paper and details of how to respond (which must be by 18^th February 2026) can be found here: https://www.gov.uk/government/publications/reform-of-non-compete-clauses-in-employment-contracts-working-paper/working-paper-on-options-for-reform-of-non-compete-clauses-in-employment-contracts

Restrictive covenants can be notoriously tricky to navigate.  For advice on drafting or enforcing restrictions, we recommend that specific legal advice is sought.  For more information, please contact KKnox@ortolan.com or jjones@ortolan.com.