FTA: What would be the effect of widening them out to other types of restrictive covenants such as non-solicitation of or non-dealing with clients, or non-poaching of employees?
SJ: Non-compete obligations are often regarded as the most onerous kind and tend to be more of a concern for departing employees than limits on dealing with clients/contacts or poaching colleagues, for example.
If the same reforms were applied to other forms of restrictive covenants, that would potentially represent a significant reduction in the tools available to employers to protect legitimate business interests such as their confidential information and the stability of their workforce.
It is difficult to predict what the specific effects would be, but one would expect detailed consultation over such a sweeping change.
FTA: What impact might the proposed changes have on the wider UK economy?
SJ: The government projects that this new legislation will allow employers to expand their businesses by broadening the selection and quality of candidates they can hire, to the benefit of the economy generally.
It is anticipated that 5mn UK workers will have greater freedom to switch jobs, apply their skills elsewhere and even earn a pay rise.
How broad the impact is on the wider economy remains to be seen.
Many employees have non-compete obligations without realising. They tend only to come to the fore when an individual leaves their job and, for most employees, should not impact their day-to-day work.
Equally, much of the workforce is not subject to obligations of this kind.
FTA: What about the American model, where measures will be more drastic, to what extent could that work in the UK?
SJ: In theory, if the UK were to adopt a more American model (banning employers entirely from using non-compete clauses), it may offer yet more competition, with employees facing fewer, if any, barriers to switching roles more freely.
However, there could again be lower protection for employers to shield their legitimate business interests and there may be a noticeable shift in power dynamic between employers and employees on departure.
FTA: What are the as yet unanswered questions around the government’s proposals?
SJ: There are a number of unanswered questions, including most pressingly whether the new proposals will apply to existing contracts of employment, or only new agreements.
If the former, employers might find themselves needing to renegotiate existing arrangements to maintain appropriate levels of protection.
It is also unclear how the time limit will interact with garden leave. At the moment, time spent on garden leave often reduces the length of a non-compete obligation. It will be interesting to see how the proposed law addresses that.
