Reform of non-compete clauses in UK employment contracts revisited

The government has recently published a policy paper seeking views on options for reforming non-compete clauses in employment contracts.  Responses must be submitted by 18 February 2026.

Many international jurisdictions have already taken action to limit the impact of non-compete clauses.  France, Germany, Poland and Italy have a requirement to compensate workers for the period of the non-compete clause. Austria and Spain have imposed a ban on non-compete clauses below a certain salary threshold and Australia is proposing to take a similar approach. In the US, some states have banned the use of non-compete clauses and the Federal Trade Commission has recently launched a public inquiry into the use of non-compete clauses in employment contracts. 

Analysis from 2023 indicated that around 5 million employees in Great Britain work under a contract that contains a non-compete clause with a typical duration of around 6 months. The previous government had announced that it would bring in legislation to limit the length of non-compete clauses to 3 months, but no action was taken to implement it.  This government is revisiting the issue in a bid to reduce barriers for businesses, to improve job mobility and promote competition for talent.

It is seeking input on alternative policy options, including:

1. A statutory limit on length of non-compete clauses according to company size, for example for companies with more than 250 employees, the statutory limit for non-compete clauses could be 3 months while for companies with fewer than 250 employees, the statutory limit could be 6 months with common law principles continuing to apply to non-compete clauses shorter than 3 or 6 months.  The government believes that this could promote competition but also protect the legitimate business interests of smaller employers and it could explore alternative company size thresholds as well.

2. A ban on non-compete clauses in employment contracts, making them unenforceable. The government acknowledges that employers may respond to a ban by strengthening their use of other restrictive covenants.  It would therefore need to ensure that other restrictive covenants, for example non-dealing clauses, are not used in a way that would have a similar effect as a non-compete clause.

3. A ban on non-compete clauses below a salary threshold, given that the highest earners most often have non-compete clauses in their contracts.  This would protect lower-paid workers who do not have to risk a period out of work because of a non-compete restriction or the cost of challenging one.  The government acknowledges that it could lead to difficulties in calculating pay or in creating incentives/cliff edges around pay levels.

4. Combining a ban below a salary threshold and a statutory limit of 3 months, which would still protect the lower-paid workers but mitigate the cliff edge effects.

The government is also seeking views on enforcement of restrictive covenants. Currently, non-compete clauses are enforced through the High Court, leaving the losing party generally bearing the winner’s legal costs. The government wants to explore whether the threat of high legal costs deters workers and is an obstacle to bringing claims on restrictive covenants, including non-compete clauses.