In December of 2020, the Department for Business, Energy and Industrial Strategy (BEIS) proposed to modify post-termination non-compete clauses in employment contracts ...
Following this initiative, the Department for Business and Trade (DBT), which replaced BEIS, has published its response to the 104 responses received during the consultation. The key points of the consultation were as follows:
- Enforceability of non-compete clauses only when employers provide compensation during the term of the clause.
- Additional measures such as enhancing transparency where non-compete clauses are used and introducing a statutory limit on the duration of non-compete clauses.
- An alternative proposal to render post-termination non-compete clauses in employment contracts unenforceable.
After considering the responses and conducting further research, the Government has decided to introduce a statutory limit on the duration of non-compete clauses, limiting them to three months.
By limiting the length of non-compete clauses to three months, the Government is taking decisive action to promote flexibility and dynamism in the labour market, and to stimulate greater competition and innovation.
This will facilitate mobility for workers, including highly skilled individuals, to transition to a competitor or launch a competing business. It will also simplify the process for businesses to fill vacancies and attract better candidates".
It is important to note that this statutory limit will only apply to non-compete clauses and not other types of restrictive covenants such as non-dealing clauses, non-solicitation clauses, and non-poaching of employees clauses.
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