This thorny issue, which has seen both Conservative and Labour governments wrestle with its complexities across three consultations in the last decade, seeks to strike a balance between employee mobility and legitimate business protection.
A non-compete clause is the contractual term that prevents an employee from working for a competitor or setting up a competing business for a specified period after leaving their current employer. These are particularly important in contracts for senior executives in founder led, innovative businesses – particularly prevalent in the recruitment market.
The current consultation is exploring various options, including an outright ban, establishing statutory time limits (e.g 3 or 6 months), and potentially differentiated rules for SMEs compared to larger businesses.
Tania Bowers, Global Public Policy Director at APSCo UK said:
“Non-compete clauses serve a vital function in protecting businesses, particularly in a highly competitive environment where intellectual property, client relationships, and team stability are paramount.
The consultation also raises questions about the continued appropriateness of other restrictive clauses such as non-dealing, non-poaching, and non-solicitation of staff and customers – clauses that APSCo members consider more critical to protecting their business.
Our members are not in favour of a statutory limit for non-compete clauses. They agree with the government that a limit could become the accepted norm – an unwelcome unintended consequence. The government is in danger of replacing a well-established body of case law which effectively limits use of non-competes, with a more confused landscape.
Our members consider that any statutory limit, if implemented, should not be less than 6 months. On senior exits by founders, pivotal directors or shareholders, 12 months should be allowable.
Our members have called for clearer guidance on the enforceability of non-compete clauses under existing case law, for employees and employers, with particular focus on SMEs that may not have access to dedicated legal advice. This could also extend to broader guidance on other ways employers can protect their business assets, for example, monitoring their technology to prevent misuse and transparency through policies. This is especially relevant to social media use.
Members emphasise that the more practical the guidance, paired with real-world examples, the more likely it is going to help drive behaviour and increase knowledge levels.
Furthermore, employment contracts typically include a provision requiring employees to inform their new employer of any restrictive covenants or non-compete agreements. APSCo believes this level of transparency is crucial for all parties involved.”