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Outcome on proposed reforms to non-compete clauses still awaited

On the 4 December 2020, the government launched a consultation on the reform of non-compete clauses in employment contracts. The consultation closed on the 26 February 2021. This month the government said it’s response would be published in due course but no time scale has been provided.

The consultation stated that, following the economic impact of the COVID-19 pandemic, the government was exploring the option of restricting the use of non-compete clauses again in order to maximise opportunities for individuals to start new businesses and find new work. It applied to England, Scotland and Wales only.

The government sought views on the following proposals:

Option 1: Making non-compete clauses in contracts of employment enforceable only where the employer provides compensation for the period that the clause prohibits the individual from working for a competitor or starting their own business. Such a step could be accompanied by the following complementary measures:

  • An obligation for employers to disclose the exact terms of a non-compete clause in writing prior to the start of the employment relationship.

  • A statutory limit on the duration of a non-compete clause.

Option 2: Banning non-compete clauses altogether.

The consultation related specifically to non-compete clauses, unlike the consultation in 2016 which applied more widely. However, it seeks views as to whether either of the above options should apply to other types of restrictive covenants as well.

If you wish to discuss this further, please contact us.



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