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Restrictive Covenants

This is the million dollar question.  It depends on whether the restrictions only go so far as is necessary to protect the business’ proprietary interest.  There are many arguments on both sides about protecting the business assets when staff leave and preventing solicitation and poaching when acting for the employer and being able to freely practice a trade and not be in handcuffs when acting for the employee.  Restrictive covenants are a tricky area that involve lots of contractual considerations and it is always wise to seek advice before leaving your employer or at the time of critical staff resigning.

The Government has recognised that restrictive covenants can restrict innovation and hamper competition.  Under the guise of supporting the economic bounce back the Government are exploring reform to “unleash innovation, create the conditions for new jobs and increase competition” and are seeking views on reforms to restrictive covenants.  Consultation is invited by 26th February 2021 when consultation closes.

The last review followed a call to evidence in 2016 to understand how these clauses were used and why as well as look at the benefits and disadvantages associated with them at that time.  The Government are consulting on a few ideas including making non-compete clauses enforceable only when compensation is paid for the duration of the clause alongside other measures to increase transparency and communication on these sorts of clauses with the possibility of a statutory limit on the duration.  Other ideas include making non-compete clauses unenforceable (banned rather like those in zero-hours contracts).

You can read the full consultation document here https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/941110/non-compete-consultation-document.pdf

and you can complete the survey and express your views here. https://beisgovuk.citizenspace.com/lm/non-compete-clause/