UK Government re-opens the potential for legislating on employee non-compete clauses

The Government has, somewhat unexpectedly, published a working paper on options for the reform of non-compete clauses in employment contracts. The Government seeks views on a number of proposals to curtail the use of non-competes in the UK workforce.

This is not the first time that the Government has considered such legislation.

In 2016, the previous Government issued a call for evidence and concluded that restrictive covenants were “a valuable and necessary tool for employers to use to protect their business interests and do not unfairly impact on an individual’s ability to find other work”.

Then in 2020, the previous Government opened a consultation on measures to reform non-compete clauses in contracts of employment. The consultation proposed two main options for reform: 1) mandatory compensation for non-compete clauses; and 2) an outright ban on non-compete clauses.

In 2023, the previous Government published its response to the consultation. Interestingly, the response confirmed that neither of its proposed options for reform would be pursued and instead a statutory limit of three months on non-compete clauses in employment contracts would be introduced. We covered this development in our Law-Now article: UK government’s response to non-compete consultation. However, nothing came of the proposals and reform to non-compete clauses did not appear in any party’s manifesto during the 2024 General Election.

Tentative references had been made to this topic being on a legislative agenda, but the new Government has been busy dealing with its manifesto commitment to introduce other sweeping employment law changes. For further information on those changes, please visit our Employment Rights Bill Hub.

Latest options for reform

The latest options for reform outlined by the Government are:

• Statutory limit on the length of non-compete clauses. The Government could introduce a general statutory limit that is either shorter or longer than the three months proposed by the previous Government.
• Statutory limit on the length of non-compete clauses according to company size. The Government could look to apply different statutory limits according to company size. The examples given by the Government are statutory limits of three or six months depending on company size – they make no commitments to any specific thresholds but suggest that these could, for example, be 50 or 250 employees. 
• Ban on non-compete clauses. The Government could impose a complete ban on non-compete clauses.
• Banning non-compete clauses below a salary threshold. Under this option, non-compete clauses would only be enforceable if the worker earns over a specific salary threshold and non-compete clauses for those earning below that threshold would be unenforceable. The Government does not suggest any salary thresholds but gives the additional rate tax threshold of £125,140 as an example.
• Combining a ban below a salary threshold and a statutory limit of three months. The final option for reform is a combination of a ban below a specific salary threshold and a statutory limit of three months for those who earn above that threshold.

Enforcement of restrictive covenants, including non-compete clauses, is currently pursued through the county courts or the High Court. As a result, the losing party will generally bear the winner’s legal costs. The Government is also seeking views on whether the threat of typically significant legal costs presents an obstacle to bringing claims to enforce restrictive covenants, including non-compete clauses.

The Government concludes the paper by listing fifteen questions, which cover the above and some additional issues, on which it seeks views together with supporting evidence. 

Next steps

This topic has ebbed and flowed on the domestic policy agenda for many years, with little substantive action so far.  Meantime, several other countries have implemented more restrictions and shored up existing protections for individuals as covered in our Law-Now article: A global move towards banning employment contract non-compete clauses?.  Businesses and investors will no doubt have concern that this development could inhibit investment into UK businesses where protection of legitimate business interests is weakened.  On the other hand, some organisations may find some greater specificity of the law in this area a useful tool in a legal landscape that can be difficult and expensive to navigate.

We will need to wait and see what the Government proposes after the deadline for responses on 18 February 2026. The paper does however indicate that this issue remains on the Government’s policy agenda and so employers may need to review how they protect their business interests when employees leave. This should be added into the mix of wider substantive employment law reforms that are expected to come into effect with the Employment Rights Bill in the coming months and years.

Authors: Hannah Netherton (Partner), Felicity Bramall-Plumb (Senior Associate) & Max Wiktorsson (Associate)