Hot on the heels of previous signals of potential change (see here and here), the UK government quietly published a working paper inviting views on options for reform of non-compete clauses in employment contracts. With the consultation period open until 18 February 2026, stakeholders are being asked to consider proposals that may fundamentally reshape the UK’s approach to post-termination restrictions.
Why reform non-competes?
Non-competes have for some time occupied a debated corner of employment law. The government’s paper restates the core concern – while non-competes can protect legitimate business interests, they also risk restricting job mobility, stifling competition and innovation, and placing individuals (including in lower-paid roles) in a position where they comply by default rather than legal necessity, due to fear of litigation costs and uncertainty.
Empirical evidence from the UK and internationally suggests that non-competes are widely used, sometimes regardless of true enforceability. Notably, their use is not limited to high earners – 20-30% of lower-paid workers report being subject to such clauses, according to research cited by the Competition and Markets Authority.
What are the options for reform?
The working paper outlines several broad options for reform, each with different implications for the balance between business protection and labour market dynamism.
- Introducing statutory limits on the length of non-competes. Building on the previous government’s proposal (see more here), non-competes might become subject to a maximum length (for example, three months). The paper notes that most non-competes are currently set at six or 12 months. The government suggests that a limit would offer greater certainty, but may not address the underlying deterrent impact for lower-paid workers. There is a risk of such a limit becoming an ‘industry standard’, rather than a ceiling subject to the usual reasonableness tests.
- Introducing limits on length based on company size. Another suggestion is for the maximum non-compete period to depend on company size (for example, three months for companies with more than 250 employees and six months for smaller companies), potentially supporting start-ups and scale-ups. However, the government accepts that this option raises issues about fairness for employees at smaller businesses and could perpetuate longer restrictions in sectors where mobility is most needed. It is also unclear how in practice this would work as companies grow and pass through the 250-employee mark or whose workforces fluctuate for seasonal workers.
- Banning non-competes altogether. The most radical option is a complete ban, as seen in California (subject to some exceptions). The paper contends that this would maximise job mobility and reduce legal ambiguity but could prompt employers to rely more on other forms of post-termination protection or alter wider remuneration policies (see more on this below). The government does not say whether a ban would impact existing non-compete clauses (if it didn’t then there could be a ‘two-tier’ workforce).
- Banning non-competes below a salary threshold. Under this proposal, taking inspiration from jurisdictions such as Australia, non-competes would only be enforceable for workers above a certain income level. This would apparently protect those with the weakest bargaining power and mitigate the harm to those least able to endure time out of the workforce. However, it might also introduce the potential for disputes around what counts as income for these purposes and risk ‘cliff edge’ effects around pay thresholds. The government does not set a specific threshold in the paper, but does suggest a figure around the £125,140 additional rate tax threshold.
- Combining a ban below a salary threshold with a statutory limit on length. The working paper also canvasses combining the above ideas. This could provide a more graduated balance, and could be of particular relevance for high-growth sectors like technology and AI.
Interestingly, the working paper does not propose a requirement for mandatory compensation to be paid to workers for the period of the non-compete clause, which is already the case in jurisdictions such as France, Germany and Italy and has been proposed as an option for reform in previous UK government consultations.
What are the potential implications for employers?
In our view, a maximum limit on non-competes may lead to a greater rush to enforce restrictions, compressing timeframes for injunctive relief and raising the stakes at an earlier stage of disputes. Any ban on non-competes – even if only below a salary threshold – will put trade secrets and confidential information at risk and may ultimately disincentivise employers to invest in innovation activities. Employers will need more creative ways to protect their confidential information if they cannot rely on non-competes.
It appears that the reform proposals are intended to apply only to non-competes in employment contracts, and not to those found in other types of agreements such as commercial contracts, shareholders’ agreements, partnership agreements, or LLP agreements. The paper does ask stakeholders whether reform should be limited to employment contracts or applied more broadly to ‘wider workplace contracts’. Even if the former position is confirmed in due course, there will always be a risk of overlap in scenarios where, for example, an employee enters into a non-compete within a shareholders’ agreement as part of broader changes to their employment terms. Ambiguity also remains around restrictions embedded in bonus or share plan rules, particularly where they apply exclusively to employees (an employee may well try to argue that putting non-competes into share plan rules is anti-avoidance for example).
Importantly, the paper makes clear that – for the time being – the proposed changes will not extend to other forms of post-termination restrictions, such as non-solicitation or non-dealing covenants, nor confidentiality provisions. The consultation seeks views on this point though, suggesting that these other covenants are not entirely off limits just yet. As a result, employers may be prompted to rethink their approach to business protection, relying more heavily on other tools – such as longer non-solicits, stricter enforcement of confidentiality provisions, lengthier notice periods, increased use of garden leave and tying continued vesting of share plan awards/bonuses to compliance with these other restrictions. Employers will need to consider the impact of any changes to the law on indirect restraints of trade in incentive plans, such as provisions that result in forfeiture or deferral of compensation if an employee joins a competitor.
On the other hand, measures that enhance employee mobility could – in the longer term – drive employers to focus on positive incentives such as improved pay or greater flexibility. This may encourage businesses to invest more in employee wellbeing, career development and organisational culture as key levers for attracting and retaining talent, but this has cost implications for employers.
What’s next?
The government is actively seeking feedback on its reform options and has posed a range of specific questions, including how best to balance employer and employee interests, whether restrictions should be extended to other forms of covenants and whether high legal costs are significant barriers for individuals looking to bring enforceability claims. The outcome of this consultation will be far-reaching, significantly influencing how UK businesses compete for and retain talent in an increasingly global market. In the meantime, employers should keep a close watch on developments, review the robustness and reasonableness of their current business protection mechanisms, and ensure that they are prepared to adapt swiftly to potential change in this area.
For more detail on restrictive covenants in different jurisdictions, download our global guide here.
For more information on how these changes might affect your business, please speak to the authors of this blog post or your usual Freshfields contact.
