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Government confirms plans to limit the length of non-compete clauses in employment contracts

Makbool Javaid, Partner - Simons Muirhead Burton

The Government has published its response to the previous consultation on measures to reform post-termination non-compete clauses in contracts of employment.

There weren’t a huge number of responses to the previous consultation – just over 100 – but the majority (60%) supported the inclusion of a maximum limit on non-compete clauses. Of the limits proposed, 3-months was the least favoured approach but despite this, this is the period that the Government is proceeding with.

The limit will be applied to non-compete clauses contained in both employment and limb worker contracts but will not be extended out to other forms of contract nor other types of restriction such as non-dealing.

The response is clear that where non-compete clauses are less than three months, they will still be subject to the current common law principles on enforceability – there will be no presumption that a non-compete clause for less than three months will be enforceable. The response does not, however, confirm whether a non-compete clause which is longer than three months will be automatically void or simply capped at three months (assuming it is otherwise enforceable).

No specific timescales have been provided for the change – legislation will be introduced “when parliamentary time allows” for England, Scotland and Wales.

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