Potential reform of non-compete clauses in employment contracts

The UK government is considering whether to reform non-compete clauses in employment contracts. The options being considered in the policy paper include:

Introducing statutory limits on the length of non-compete clauses;
Banning non-compete clauses completely, or below a salary threshold;
Combining a ban below a salary threshold with a statutory limit.

What is a non-compete clause, and when is it enforceable?

A non-compete clause seeks to prevent an employee from working for, or establishing, a competing business for a specified period after the termination of employment.

A restrictive covenant is only enforceable if it is designed to protect a legitimate business interest (e.g. protection of confidential information) and goes no further than is reasonably necessary to protect that interest.

Non-compete clauses are often harder to enforce than other types of covenants. It will depend, for example, on whether the restriction can be justified in terms of its length, geographical scope, and how competitive activities have been defined.

The case for reform

Non-compete clauses are used more widely in the UK than in other jurisdictions, with around 5 million employees working under a contract that contains one. They typically last around six months. According to the 2023 YouGov CMA-LSE Capstone UK survey, although they are slightly more common in higher-paid jobs, 20-30% of lower-paid workers are covered by a non-compete.

The government believes that reforming non-compete clauses represents an opportunity to boost economic growth by improving competition and supporting businesses, particularly start-ups, to access talent.

International approaches

Other jurisdictions have already taken action to limit the impact of non-compete clauses:

They are banned in several US states, including California, North Dakota and Oklahoma;
France, Germany and Italy require mandatory compensation to be paid to workers for the period of the non-compete clause (this is not one of the options being considered in the UK government’s paper);
Luxembourg and Austria have introduced a ban on non-compete clauses below a salary threshold. A similar approach is being proposed in Australia.

Options for reform

Statutory limit on the length of non-compete clauses	It seems that if a statutory limit was to be imposed, it is most likely to be 3 months although other options are being considered. The previous government had planned to introduce a statutory limit of 3 months (read our earlier blog). The government has concerns that a statutory limit would be treated as an ‘industry standard’ and so assumed to be reasonable and enforceable.
Statutory limit on the length of non-compete clauses according to company size	There could potentially be different statutory limits according to company size. Views are sought on what any threshold should be set at. The examples provided in the report are: A statutory limit of 3 months for companies with 250+ employees and a limit of 6 months for companies with fewer than 250 employees; or A statutory limit of 3 months for companies with 50+ employees and a limit of 6 months for companies with fewer than 50 employees.
Ban non-compete clauses	The government believes that making non-compete clauses in employment contracts unenforceable would support worker mobility and strengthen protections for workers. However, there are also concerns that a ban would lead to an increased use of other types of covenants, while employers might be less likely to invest in training / upskilling and remove deferred benefits if employees join a competitor.
Ban non-compete clauses below a salary threshold	The rationale for making non-compete clauses enforceable only if the worker earns over a particular salary is that high earners are most likely to have non-compete clauses in their contracts. It would provide greater protection to lower-paid workers who would not have to risk a period out of work in order to change jobs. The potential negatives include the difficulties in calculating pay and potential for litigation around that, and the risk of creating certain behaviours and incentives around pay levels.
Combining a ban below a salary threshold and a statutory limit of 3 months	The government is also considering a combination of a ban below a salary threshold and a statutory limit of 3 months for those who earn above the threshold.

The government is also seeking views on:

Whether restrictions should be limited to non-compete clauses only or should also apply to other restrictive covenants;
How they can ensure that other restrictive covenants, for example non-dealing clauses, are not used in a way that would have a similar effect as a non-compete clause, if restrictions were limited to non-compete clauses only;
Whether restrictions on non-compete clauses should be limited to employment contracts or whether they should also apply to wider workplace contracts;
Whether the threat of high legal costs presents an obstacle to the enforcement of covenants.

Next steps

Responses to the paper must be submitted by 18 February 2026, after which we'll need to wait for details of the government’s response and timetable for any reform.

In the meantime, employers should review their contracts to ensure that the interests restrictive covenants seek to protect remain legitimate and enforceable. Also consider whether other clauses could provide additional protection on termination e.g. garden leave.

If you would like help with a contract review, please get in touch with a member of Brodies’ Employment and Immigration team. Workbox by Brodies users can access template clauses and guidance on all types of restrictive covenants.