Non-compete clauses have become a standard term in employment contracts. Non-compete clauses serve the purpose of safeguarding employers' business interests by placing limitations on where and for whom departing employees can work.
These clauses typically restrict an employee's ability to work for or set-up a competing business within a specific geographical area and for a defined duration. Their primary aim is to employees from using their knowledge, relationships, and skills to gain an unfair advantage or cause harm to their former employer's interests. A reasonable non-compete clause typically lasts for a period of three to six months, with exceptional cases of up to twelve months.
The impact of non-compete clauses has raised concerns regarding their potential to hinder employee mobility and limit career prospects. In recent years, these clauses have faced increasing scrutiny due to worries about their effects on innovation and competition.
To address these concerns and streamline regulations, the government has proposed the introduction of a three-month limit on all non-compete clauses in employment contracts. While the government is certain that it will impose this change it is yet to provide a specific implementation date and has delegated the task to Parliament.
Some experts predict that in response to the proposed limitation on non-compete clauses, employers may seek to extend notice periods within their employees' contracts. This would enable employers to maintain a greater level of control over departing employees.
Others argue that extending notice periods may have unintended consequences, potentially individuals from joining companies that enforce longer notice periods.
In light of the proposed changes and in the absence of a definitive implementation date, it is crucial for employers and employees to carefully consider the potential outcome of this change. Employers will need to assess how the new three-month limit may impact their ability to protect their business interests, while employees should evaluate how the change could enhance their mobility and career prospects.
It is important to note that there is currently no obligation for employers to modify their employees' contracts, and further information from the government is expected within the upcoming weeks. While the government aims to limit non-compete clauses, there are currently no proposed plans to restrict or cap other clauses such as non-solicitation or "garden leave" clauses.
Although the specific implementation date remains uncertain, it is essential for employers and employees to remain vigilant and stay informed about the proposed changes.
If you require advice on any area of employment law please do not hesitate to get in contact with us to discuss how we can assist you. To arrange an appointment or for more information, please contact our dedicated Client Relations Team on 01603 693510 or email us using the 'Make an Enquiry' form on our website.
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*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.
