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23/01/2024
Non-compete clauses are agreements in employment contracts that an employee won’t compete with the employer once they leave the business.
Non-compete clauses are used to prevent employees from working for customers or competitors, or even setting up in competition. However, they are notoriously difficult to enforce.
Clients often ask how they can protect themselves against an employee leaving and using their knowledge to entice away their best clients. Unfortunately, there is no quick and simple solution.
Litigation to enforce non-compete clauses is costly and often comes too late to make a difference. The wording of the clause has to be very clear and not ‘too restrictive’. If it is too restrictive, the courts are likely to strike it out as unenforceable.
In response to consultation on measures to reform non-compete clauses in employment contracts, the Government has confirmed a statutory cap of three months will be introduced to limit the length of non-compete clauses. The aim is to ‘boost flexibility and dynamism in the labour market, and to unleash greater competition and innovation’.
The changes are scheduled to take place ‘when parliamentary time allows’. It will be interesting to see how this plays out and whether it makes non-compete clauses easier to enforce. Often the complaint about these provisions is that they are too onerous and go further than necessary.
We have, for example, seen cases where employers expect to have two-year restrictions to prevent competition ‘wherever they do business’ when the employer in questions is an international company!
There is a need for protection where companies have something to protect, and we believe the new statutory cap should assist in enforcing these provisions.
Need advice on non-compete clauses?
For advice on this or any other employment issue, please email enquiry@beswicks.com or phone our Stoke-on-Trent solicitors on 01782 205000 or our Altrincham solicitors on 0161 929 8494. If you are an employer, you can benefit from unlimited employment law and HR advice via phone or email through our low-cost Beswicks HR service. Email laura.franklin@beswicks.com to find out more. Alternatively, you can fill out our online contact form or read more about employment law.
