The Government has announced plans to reform non-compete clauses in employment contracts. Whilst there are no details, the direction is evident. Ministers believe that non-compete clauses can restrict labour mobility, make recruitment more difficult and inhibit innovation particularly for start-ups and high-growth businesses.
For employers, non-compete clauses have long been used as a key tool for protecting confidential information, customer relationships and strategic business interests. Therefore, businesses may need to rethink how they protect themselves when employees leave.
What Are Non-Compete Clauses?
Non-compete clauses are a form of post-termination restriction that seeks to prevent an employee from working for a competitor, setting up a competing business or engaging in competitive activities for a specified period after their employment ends.
There is currently no statutory limit on the duration of non-compete clauses. Instead, their enforceability is determined by the courts, which will only uphold them where they go no further than is reasonably necessary to protect a legitimate business interest.
Non-competes are most commonly used for senior employees, individuals with access to commercially sensitive information and those with responsibility for key client relationships.
What Has the Government Announced?
On 9 October 2026, the Prime Minister confirmed that the Government intends to introduce legislation to end the use of non-compete clauses. Andy Burnham suggested that some employers have “gone too far” in their use of non-competes and indicated that reform is needed to remove barriers to recruitment and economic growth.
To be clear, the Government has not explained precisely what reform will look like.
What Might Change?
A number of options have been considered by successive governments over recent years.
The most radical option would be an outright ban on employee non-compete clauses. This would render such provisions unenforceable and significantly limit the employers ability to prevent departing employees from joining competitors.
Other possible reforms include:
- a statutory cap on the length of non-compete clauses;
- restrictions based on salary levels;
- mandatory compensation payments during any period of restriction; and
- different rules depending on the sector the employer operates in.
A similar proposal emerged in 2023, when the previous Conservative Government announced plans to introduce a three-month cap on non-compete clauses. Those proposals were never implemented before the 2024 General Election.
Why Are Employers Concerned?
Non-compete clauses are not just about preventing competition. They are often used to protect legitimate business interests, including confidential information, intellectual property and customer connections.
Businesses operating in sectors such as technology, financial services and professional services frequently rely on these provisions to reduce the risk of employees leaving with valuable know-how and immediately joining a competitor.
Many employers will question whether existing legal safeguards already strike the appropriate balance. At present the courts will only enforce restrictions that are reasonable and proportionate.
Will Reform Really Change Employee Mobility?
Even if non-compete clauses are restricted, the practical impact may be less significant than expected. Employers are likely to place greater reliance on alternative protections.
One alternative protection may be Garden leave. This allows an employee to remain employed and paid during their notice period whilst being kept away from the business and prevented from undertaking work elsewhere.
Businesses may also seek to strengthen:
- non-solicitation restrictions;
- non-dealing clauses;
- confidentiality provisions; and
- intellectual property protections.
What Should Employers Be Doing Now?
The proposed reforms have not yet been translated into a plan or legislation. Existing non-compete clauses therefore remain enforceable, provided they satisfy the current legal tests of being reasonable and proportionate.
However, employers should review their contractual protections and consider whether they would remain adequately protected if the use of non-compete clauses were significantly restricted.
Employers may wish to:
- review existing restrictive covenant provisions;
- assess the adequacy of garden leave and notice period clauses as alternatives;
- strengthen confidentiality protections;
- review incentive arrangements for employees and retention mechanisms; and
- identify key employees whose departure would create the greatest risk to the business.
In summary
At present, the Government has provided plenty of headlines but relatively few answers. Whether the reforms ultimately result in an outright ban, a statutory cap or a more targeted approach remains to be seen.
What is clear, the employers should keep a close eye on developments. If the proposals become enacted law, businesses may need to rethink how they protect their interests. As with many employment law reforms, those who prepare early are likely to be in the strongest position when the detail finally emerges.
