Government To Consider Banning Non-Compete Clauses In Employment Contracts
The government has launched a “call for evidence” on the use and impact of non-compete clauses in employment contracts.
According to the document issued by the Department of Business Innovation and Skills (BIS), the government wants to look at “employment rules and whether they could be stifling British entrepreneurship by preventing workers from starting up their own business after leaving a job.” The BIS document defines non-compete clauses widely, to include traditional non-compete clauses, non-dealing with customers clauses and non-solicitation of employees clauses.
The government wants to explore whether non-compete clauses can unfairly hinder workers from moving freely between employers, and from developing innovative ideas, translating those ideas into a start-up, and growing their business.
The government notes that there are clearly arguments for and against the use of non-compete clauses. The focus of this call for evidence is to identify whether there are reasons for believing that non-compete clauses written into employment contracts are stifling innovation, particularly for start-up businesses.
Arguably the onerous effect of non-compete clauses is already addressed by common law. The key theme throughout the case law that has developed in this area is to ensure that non-compete clauses (and restrictive covenants generally) go no further than is reasonably necessary to protect an employer's legitimate business interests. Courts do not uphold non-compete clauses lightly and will not uphold clauses which have the sole purpose of restricting competition.
The BIS document can be found on the following link:
The call for evidence closes on 19 July 2016. Responses can be emailed to firstname.lastname@example.org
This bulletin is for general guidance purposes only and should not be used for any other purpose.
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