It is a topic that many thought had exited stage left with the previous Government, but a House of Lords debate this summer about AI and Tech has reignited discussion over introducing limitations on non-compete clauses.
Is this an area where the Government should intervene, and if they did, what might be the result? The limitations could lead to an agile and dynamic workforce, free to create ever more enterprise. On the other hand, critics have suggested they could result in a stifled economy, with businesses fearful of investing in developing people if they cannot subsequently protect their own interests.
The previous Government had a specific proposal to limit the duration of all non-compete clauses to a maximum of three months. There is not the same level of detail on the table at the moment - the current Government has simply indicated that it will consult on options for reform of non-compete clauses in employment contracts. So with reform in this area on our 'wait and see' list, the question remains: what might a world of limited non-competes look like in practice?
There is no doubt that businesses - particularly those in industries reliant on knowledge and innovation - will continue to seek ways to protect their interests. There are a number of other common protective measures employers can use:
- Longer notice periods, and gardening leave;
- Other types of post termination restrictions (such as non-solicitation, non-dealing and non-poaching clauses); and
- Confidentiality terms.
The key issue with longer notice periods is one of cost; businesses need to weigh the value of having the option to lock a departing employee out of the market for an extended period of time. That may not be a straightforward assessment at the outset of an employment relationship.
Other categories of post termination restrictions have long been deployed but, they cannot always offer the desired protection for a business, particularly against an ex-employee who can comply perfectly well with non-solicitation/dealing clauses and yet still present a significant threat by working for a competitor.
Confidentiality protections will continue to be a key pillar of most contracts but the age-old problem of how to police them remains. Expensive litigation of breaches may simply not be an option for smaller businesses. It also doesn't offer the practical answer to the impact of leaked secrets that are fundamental to giving businesses a competitive edge in fast-moving industries such as AI and Tech that are drawing so much of the Government's attention.
What is clear is that being coupled with debates on AI and Tech means the discussion on non-competes is unlikely to end any time soon.
If you would like to discuss how best to navigate this changing landscape to protect your business, please call your usual Mishcon contact or get in touch with our expert Employment High Court team at MDREmploymentHighCourt@mishcon.com.