If it ain't broke, don't fix it: The government confirms that it will not legislate on restrictive covenants

Posted on 28 March 2018

If it ain't broke, don't fix it: The government confirms that it will not legislate on restrictive covenants

We are pleased to report that the government has confirmed its conclusions on the proposal it announced nearly two years ago to legislate on restrictive covenants. While the announcement is somewhat buried, it will nevertheless come as welcome news to our employer clients who shared our view that a change to the law is unnecessary, and could even be counterproductive.

In the summer of 2016, we sought our clients' views on the government's proposals in respect of restrictive covenants, the contractual measures employers use to prevent employees from competing with their former employer for a limited period after they leave. Our employer clients strongly agreed that limiting the use of restrictive covenants would put businesses at risk. (To see our report on our clients' responses, please click here). The proposal was one of a raft of measures which, the government said, would promote innovation and flexibility within the labour market through The National Innovation Plan.

Jennifer Millins, a Partner at Mishcon de Reya, was a member of the Employment Lawyers' Association's (ELA) working party which in July 2016 produced a comprehensive response to the government's call for evidence from employment law practitioners.

Nothing further had been heard about the proposal until Wednesday 7 February 2018, when the government published its response to the Taylor Review: "Good Work: a response to the Taylor Review of modern working practices". Eagle eyed readers of that paper will have found that the announcement unexpectedly appears on page 58. 

Business owners and those advising them will welcome the government's sensible conclusions, which echo our clients' sentiments and ELA's response to the government's call for evidence. The government agrees that "restrictive covenants are a valuable and necessary tool for employers to use to protect their business interests and do not unfairly impact on an individual’s ability to find other work. Common law has developed in this area for over a century and is generally acknowledged to work well." The government concludes that "Having built up a picture of the UK experience via this call for evidence, we have decided it is not necessary to take any further action in this area at this stage". The full statement can be found here.

If you would like to understand more about the use of restrictive covenants and their importance for the protection of your business, please contact Jennifer Millins.

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