In December 2020, the Government launched a consultation on reforms to non-compete clauses in contracts of employment. We surveyed our employer clients across a wide range of sectors for their views on the 37 consultation questions, and were overwhelmed with the volume of considered responses we received.
We asked our clients for their views on the Government's proposal to either (i) ban non-competes or (ii) require employers to pay employees for non-competes. Our survey results suggest that the Government's proposals are not well targeted in achieving their underlying objectives – namely boosting innovation and promoting flexibility within the labour market to support the UK's economic recovery from the impact of COVID-19. This consultation is highly relevant to our employer clients: 90% of the respondents to our survey use, or have used, non-competes in their contracts of employment.
As practitioners, we consider that the Government's premise for this consultation only addresses one perspective: that of the entrepreneur setting up a new business.
Encouraging innovation is important, but without restrictive covenants, how can those entrepreneurs protect what they have created when they themselves become employers? In many industries, restrictive covenants are an essential tool for the preservation of a business' commercial viability. Less than five years ago, the Government had concluded no action was necessary on restrictive covenants following a 2016 Call for Evidence. At the time the Government concluded that restrictive covenants were a "valuable and necessary tool" and "do not unfairly impact on an individual’s ability to find other work.”
Our clients consider that:
- The Government's proposals will not achieve their desired objective of promoting innovation.
- Banning non-competes would make hiring new talent easier. However, concern about the inability to protect business interests from unfair competition far outweighed any such advantages.
- There is no appetite for significant reform.
- Non-competes remain a valuable and necessary tool, which in general do not unfairly impact on an individual’s ability to find other work.
We have seen no evidence that the pandemic has changed this, and our clients agree.
Read our full report here: Reform of restrictive covenants: our clients' views.
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