In brief
In detail
The Government's working paper marks the latest chapter in a reform saga that began with a 2016 Call for Evidence. That exercise concluded with a finding that non-competes were "a valuable and necessary tool", requiring no intervention. The COVID-19 pandemic prompted a fresh consultation in December 2020, which eventually led to the May 2023 announcement by the previous government that a three-month statutory cap would be introduced "when Parliamentary time allows" - a commitment that was never implemented.
The new working paper frames reform around the current government's growth mission, citing research suggesting that around five million UK employees are subject to non-competes, with typical durations of six months. It highlights concerns that even unenforceable clauses have a chilling effect on worker mobility, noting that many employees may not challenge restrictions for fear of legal costs. The paper draws on Competition and Markets Authority research showing that non-competes are found across all income levels, with 20 to 30 percent of lower-paid workers believing they are covered by such clauses.
It is notable that worker mobility, and more specifically concerns about employers being reluctant to hire new staff, was also a key driver behind the Government's decision last week to drop its manifesto commitment to day-one unfair dismissal rights.
Five headline options are presented in the paper:
Options for reform
- A statutory limit on the length of non-competes, potentially at three months as previously proposed, though the paper invites views on other durations;
- A statutory limit on the length of non-compete clauses according to company size. The paper suggests that, for example, employers with more than 250 employees could have a three-month limit while the limit for employers with fewer than 250 employees could be six months;
- A complete ban, following the approach taken in California and some other US jurisdictions;
- A ban below a specified salary threshold, mirroring the position in Austria and proposals announced in Australia; or
- A hybrid model combining a salary threshold ban with a three-month statutory time limit for higher earners.
The government is also seeking evidence on whether litigation costs deter workers from challenging restrictions.
Any reforms are presumably intended to also capture atypical non-compete restraints - that is, those contractual provisions which do not expressly impose a restriction not to compete but which have the effect of doing so.
Notably, mandatory compensation for the duration of a non-compete - the "continental model" used in France, Germany and Italy - is not among the headline options. This approach was considered and set aside in the previous government's 2023 response. And while the working paper focuses on non-competes in employment contracts, the government does expressly ask for views on whether any reform should also apply to wider workplace contracts, which presumably could cover arrangements such as partnerships and LLP agreements. The deadline for responses is 18 February 2026.
Practical implications for employers
Given the stop-start history of non-compete reform, a measured response by employers at this stage is sensible. In particular, employers may wish to conduct a review of their existing restrictive covenant arrangements now. Those who routinely include lengthy non-competes - especially those exceeding six months - may wish to check again that these comply with existing legal requirements that non-competes must be no wider than reasonably necessary.
Employers should also ensure their protective framework does not rely solely on non-compete clauses. Non-solicitation, non-dealing and non-poaching provisions are not the main focus of any current reform proposals, although the government does specifically ask for views on whether any restrictions should extend to these other provisions. Robust confidentiality clauses and intellectual property protections will remain unaffected, as will garden leave clauses.
This is also an opportunity to review notice period clauses in employment contracts. There has been a recent trend for some employers to impose longer notice periods for more senior hires which, combined with garden leave, may provide appropriate protection.
Businesses with significant retention concerns may also wish to explore whether equity incentive arrangements or deferred compensation structures could achieve alignment of interests more effectively than restrictive covenants in employment contracts. Such arrangements may also fall outside the scope of any employment contract-specific reforms in this area.
Employers who would like to feed in their views on the government's proposals are welcome to respond to our survey that we will shortly be publishing and which we will take into account in our response to the consultation.
If you would like more information or support on non-competes or restrictive covenants generally, please get in touch with your usual Mishcon contact or with a member of the Employment team.