On Friday 9 October, PM Andy Burnham confirmed that the UK Government intend to take steps to restrict the use of non-compete clauses used to restrict workers from “joining rival organisations”.
This follows the exploration in recent years, by both Conservative and Labour led governments, of reform in this area, although on each occasion no change materialised. We unpack the key background to these upcoming reforms and how they will affect businesses and employees when they come into force.
Where do things currently stand?
Under current English law, non-compete clauses are enforceable where an employer can show the restriction is reasonable in scope, duration and geography, and is necessary to protect a legitimate business interest. There is no statutory cap on duration, no salary threshold and no obligation to pay employees during a non-compete period.
However, whilst they are a common feature in many employee contracts, the Court’s starting point will always be the principle that individuals should be free to trade. Accordingly, employers will often seek to rely on less onerous restrictions; such as those limiting the solicitation of, or dealings with, clients and colleagues, in order to protect their business interests.
The Government’s working paper issued in November 2025, closed in February 2026, and the speech on 9 October was the first time the Government has made a commitment towards any particular change. The Chancellor’s Budget announcement on 28 October may also provide further insight but any changes are unlikely to come into effect until 2027 at the earliest.
Why is the Government acting now?
Around 5 million employees in the UK are estimated to be working under a non-compete clause, typically running for periods of three months upwards. It is very unusual for non-compete provisions in excess of one year to be enforced in relation to an employee (rather than, for instance, in a business-to-business context).
The Government explained its concern, in the 2025 working paper, that non-compete clauses are too frequently used as a matter of routine rather than genuine necessity, and in situations where enforcement is not a realistic possibility.
The Government argued that this:
- Restricts workers’ ability to move jobs or start new businesses;
- Suppresses wages, particularly for lower-paid workers who lack the resources to challenge a clause;
- Limits the flow of skills, talent and ideas that drives economic growth and innovation.
At the same time, the working paper recognised that non-competes can serve a legitimate purpose: they give employers confidence to invest in training, share sensitive information, and build long-term competitive advantage, knowing that knowledge cannot simply be “walked out of the door.”
The Prime Minister’s 9 October speech made clear the Government’s intent to limit the use of non-competes.
The global attitude towards non-competes has followed a similar trend towards restricting the use of or outright banning non-competes. In 2024, under Biden’s administration, the Federal Trade Commission attempted to implement a US-wide ban. This was later blocked under Trump in 2025. A few US states, such as California, do prohibit non-competes entirely. The use of these clauses also varies across Europe but with countries such as France, Germany and Italy requiring employers to remunerate employees for any period of restriction. This is in contrast to the UK position where these periods are typically unpaid.
What changes are being considered?
The Government’s working paper (linked above) sets out four main options, any of which could form the basis of legislation:
- A cap on duration. A statutory maximum on how long a non-compete can last. A three-month cap was proposed by the previous government in 2023 but was never enacted. There is also talk of introducing a cap by employer size e.g. a shorter limit for larger businesses and a longer one for smaller firms.
- A salary threshold. Banning non-competes only in respect of employees earning below a set income level. Higher-earning employees may still be subject to non-competes. This approach is already used in parts of the US and Europe.
- An outright ban. Rendering all non-compete clauses in employment contracts unenforceable, as is the position in India.
- Mandatory compensation. Requiring employers to pay employees throughout any non-compete period which may result in a fuller cost-benefit analysis being taken by employers (both when drafting the contract for a new employee, and when considering whether to insist on an exiting employee abiding by a non-compete restriction).
The Government has also signalled that long notice periods and enforced garden leave may come under scrutiny as part of the same reform agenda.
What does this mean in practice?
The substance of any proposed changes remains to be seen. Accordingly, it would be premature for businesses to make significant changes to their approach towards the use of non-compete provisions.
However, given the government has signalled its intention to limit the use of non-competes, it remains prudent to consider what other tools can be used to retain staff and to protect the business. These would include other contractual restrictions (such as non-dealing and non-solicitation provisions), along with incentive based arrangements (potentially with an element of deferral such that payments will only be made following a certain period of loyal (i.e. non-competitive) behaviour – or, more simply, continued employment. It will remain that case that only those employees with significant bargaining power will be in a position to negotiate the non-compete (and other post-termination restriction) clauses proposed by the employer – although the dynamic of those negotiations may alter depending on the eventual shape of the new rules.
Stay ahead of the curve
The timing and scope of this legislation will be critical. Particularly whether it applies to contracts already in existence or only to those entered into after any reform takes effect. These are questions that will significantly affect both employment strategy and individual planning.
We are monitoring developments closely and will provide further updates as the position becomes clearer.
To discuss further, please do not hesitate to get in touch with our employment lawyers.