Potential reforms to non-compete clauses in employment contracts
The government has published a working paper inviting views on potential reforms to non-compete clauses in employment contracts.
Non-compete clauses are provisions that restrict an individual from working for or establishing a competing business after leaving their current role. The paper seeks input on alternative policy options which are designed to promote job mobility, enhance competition, and encourage knowledge sharing. These measures are intended to support employment opportunities and drive economic growth. The aim is to ease restrictions on employee movement and reduce downward pressure on wages, aligning with the government’s broader ‘growth mission’.
The paper invites views on a range of policy options, including:
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Introducing statutory limits on the length of non-compete clauses
One approach is to impose a short blanket limit (e.g. 1 – 3 months). This may reduce disputes due to the shorter duration, as workers might feel it is easier to comply because the restriction is brief.
Alternatively, statutory limits could vary according to company size, making it easier for employees of larger firms to move to competitors. This could benefit start-ups, which would retain the ability to use longer non-compete clauses to help secure and retain talent.
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Banning non-compete clauses
Making non-compete clauses unenforceable could encourage employers to adopt positive incentives to retain staff. However, a potential downside is that employers may respond by strengthening other restrictive covenants, such as non-solicitation or confidentiality clauses, to achieve similar effects.
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Banning non-compete clauses below a salary threshold
This option would make non-compete clauses unenforceable for lower paid workers, who are often not in a financial position to challenge the enforceability of the clauses. However, implementing a threshold could raise uncertainty around calculating pay and determining an appropriate level for the threshold itself.
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Combining a ban below a salary threshold with a statutory limit
A combined approach could involve banning non-compete clauses for workers below a salary threshold, while imposing a statutory limit of three months for those earning above the threshold.
Enforcement
Restrictive covenants, including non-compete clauses, are currently enforced through the courts, with the losing party normally liable for legal costs. This potential financial exposure may deter individuals from contesting clauses, even where they are likely unenforceable.
The government is seeking evidence on whether the prospect of high legal costs acts as a barrier to challenging non-compete clauses and invites views on appropriate measures to prevent this.
The closing date for responses to the working paper is 18 February 2026.
The working paper can be viewed here.
Subcribe to news and viewsDespite the UK having one of the most flexible labour markets among advanced economies, persistent low job mobility, weak competition in certain sectors, and low innovation are constraining productivity and economic growth. Non-compete clauses play a part in restricting employee movement, limiting knowledge spillovers, and can undermine incentives for innovation.
https://www.gov.uk/government/publications/reform-of-non-compete-clauses-in-employment-contracts-working-paper/working-paper-on-options-for-reform-of-non-compete-clauses-in-employment-contracts
