Non-compete clauses: Government announces plans to clamp down

On 9 October 2026, the Prime Minister announced Government plans to legislate to restrict the use of non-compete clauses and lengthy notice periods in employment contracts, in an effort to combat what he described as a “drag on innovation”. 

The idea of limiting the use of non-compete clauses has been considered by various governments over the last few years without ever quite getting off the ground.   A 2023 proposal to limit non-compete clauses to a maximum of three months didn't get as far as draft legislation. So it will be interesting to see if this latest proposal gets more traction, particularly given the sheer volume of employment law changes in the pipeline. 

Options for reform

Around this time last year, the Government published a working paper with options for reforming non-competes.  It set out five options: 

• an overall limit on the permitted length of a non-compete
• a limit based on employer size, with smaller businesses able to impose longer non-compete periods
• a complete ban 
• a ban on non-competes for staff below a certain salary threshold
• a ban for those below a salary threshold and a limit on duration for those above the threshold

Interestingly, the Government did not include as an option the approach used in some European jurisdictions where employees need to be paid during the non-compete period.  Given the Government's focus on facilitating innovation, it appears unlikely that it is intending to follow this model.   However, it remains to be seen what approach the Government will now take.  It is also currently unclear whether any restrictions would be limited to employment contracts or would include non-compete terms in share schemes or LLP agreements, which could otherwise offer some employers a potential workaround.  However, it will not affect terms in commercial agreements such as share purchase or investment agreements. 

Employers should also remember that, even if limits on the length or scope of non-compete clauses are introduced, this doesn't guarantee that clauses within those limits will be enforceable - they would still be scrutinised by the courts to assess whether they went no further than reasonably necessary to protect the legitimate business interests of the employer. 

What employers should consider now

Although the details of the proposals are yet to be fleshed out, it appears likely that any ban or restriction would be forward-looking rather than catching existing non-compete clauses.   In the meantime, employers should consider what other measures they can put in place to protect confidential information, client relationships and workforce stability.   They should ensure that their contracts have appropriate notice periods and the ability to place departing employees on garden leave. Typically a non-compete clause will also sit alongside a suite of additional restrictions designed to protect these interests, such as non-solicitation and non-dealing clauses, and it appears that these will continue to be available to employers as a means of protecting their business.  Employers should review their contract terms to ensure that these additional restrictions are comprehensive and well-drafted so as to maximise the prospects of enforceability.    

Intellectual property and confidentiality clauses are also critical (and often overlooked); likewise, employers should ensure that these are robust and well-drafted. 

Practical measures

However, in our experience, operational and practical measures are just as important as contract terms when it comes to protecting the “crown jewels” of a business.  Employers should ensure that they have suitable data security arrangements in place, so that key confidential information can only be accessed by those who require it for their roles and cannot easily be sent outside the organisation's systems. If client relationships are handled by one person or in silos, they are more vulnerable to poaching, so employers should consider how to future-proof their client relationships.   Employers should also ensure that they have robust exit processes to ensure return of company property and data on termination. 

Where it's possible, prevention is undoubtedly better than cure: enforcing post-termination restrictions is expensive and time-intensive, with many employers unable to justify the cost and disruption of litigating in the High Court.  Reviewing business protection arrangements now may well help to take some of the sting out of any restrictions on non-competes in the future.  In the meantime, employers should keep an eye on these proposals as they develop.