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Restrictive Covenants in Contracts of Employment

BIS call for evidence on restrictive covenants in contracts of employment

A consultation exercise initiated by BIS is currently seeking to identify “whether there are reasons for believing that non-compete clauses… are stifling innovation, particularly for start up businesses” and is seeking the views of employers, employees and advisors. The consultation ends on 19 July 2016.

In 2014, a report commissioned by the Government recommended that it should consider banning non-compete clauses in contracts of employment on the basis that these act as a barrier to workers leaving a business to start up their own businesses in the same field. Many argue that this is surely the point (and a valid one) and necessary if the new business is being set up to directly compete with the old one. 

The Government has acknowledged already that such clauses are considered to be in restraint of trade and are only enforceable to the extent that they seek to protect a “legitimate business interest” and are reasonable in terms of the scope and length of the restriction.

They argue that the Courts are well used to balancing the competing interests involved and the principles underlying the enforceability of such clauses are well established. Undeterred, by what many consider to be the proper functioning of these common law principles, the Government wants to know:

  1. Whether it is common practice to include restrictions (by sector and role);
  2. The reasons why employers’ include restrictions and their experiences of trying to enforce them;
  3. Workers’ experience of restrictions and in particular if these deterred them from changing jobs or setting up by themselves; and
  4. Whether restrictive covenants are “transparent”.

The Government will then, depending on the responses look carefully at these types of clauses if the consultation suggests there is a need for this.

To respond, click here: www.gov.uk/government/consultations/non-compete-clauses-call-for-evidence

Are you worried about protecting your business against unfair competition?

Properly drafted restricted covenants can be vital in protecting a business’ interests. Whether a non-compete clause or by less onerous clauses, protecting your business is a must. Irwin Mitchell has developed a product which provides you with all the tools you need to protect your business and confidential information at fixed rates. We call it “IM Protect”.

It also gives you effective processes and procedures to avoid the pitfalls associated with recruiting individuals/teams and the damage that can occur to your business. For more information, please contact Glenn Hayes. 

Key Contact

Glenn Hayes