The Government confirmed plans to restrict non-compete clauses in the October 2026 Budget, with a detailed policy position expected in early 2027. The scope and timing of reform remain unconfirmed.
The announcements do not change the law. For employers, the priority is to review existing restrictions and wider contractual protections, not automatically remove non-compete clauses.
Liam Kenealy, Director and Head of Employment and HR Services at Wake Smith Solicitors looks at the subject.
Why are non-compete clauses under review?
Non-compete clauses are designed to restrict the employee in respect of competing business actions for a period after their employment ends.
While they can help businesses protect confidential information, customer connections, goodwill and investment in training, the Government has expressed concern that these clauses can be overly restrictive and may reduce job mobility, limit access to skilled labour and hinder innovation.
The current position remains that a non-compete clause will only be enforceable if the employer can show it protects a legitimate business interest and goes no further than is reasonably necessary. A clause that is too broad, too long or unsupported by a clear business interest will likely be unenforceable, but this assessment will depend on the wording of the clause and the circumstances at the time it was entered into.
What reform options are being considered?
The Government’s paper outlined a range of possible reforms which included:
- a statutory limit on the length of non-compete clauses – either by way of a proposed general limit of 3 months or by applying different limits based on the size of the business (with the time limits for businesses with fewer employees being longer);
- a complete ban;
- a ban below a salary threshold; or
- a combined ban below a salary threshold and a statutory limit of 3 months - under which non-compete clauses would be prohibited for lower-paid workers and capped for higher earners.
What does this mean for employers?
For now, you do not need to remove non-compete clauses from your contracts simply because reform is being considered. However, before any changes come into force, you should check whether your existing restrictions are targeted, proportionate and supported by clear commercial reasons. You should also be cautious about using standard wording across all employees without considering seniority, access to confidential information, customer influence and the actual risk posed by the individual role.
Practical steps employers can take now
You should consider taking the following steps:
- Review existing contracts, particularly for senior employees and those with access to confidential information, strategic plans or key customer relationships.
- Check whether each non-compete clause is reasonable in duration, geographical scope and business scope.
- Identify the legitimate business interest each restriction is intended to protect.
- Consider whether a shorter or narrower restriction would provide sufficient protection.
- Review notice periods and garden leave clauses as part of the overall exit strategy.
- Strengthen alternative protections, including confidentiality, non-solicitation, non-dealing and non-poaching provisions.
- Ensure customer relationships and key knowledge are not concentrated in one individual wherever possible.
- Put processes in place to respond quickly when key employees resign, including mapping customer contacts and reallocating relationships during notice or garden leave.
While reform is likely to take time, you should not wait until legislation is introduced before reviewing your position.
The main takeaway is that non-compete clauses should not be treated as a default protection. They should be used selectively, drafted carefully and supported by a broader strategy for protecting confidential information, customer relationships and workforce stability.
For advice on employment matters contact Wake Smith’s employment law team here or on 0114 266 6660.
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