What Employers Should Be Doing Now
For many businesses, their most valuable assets leave the building every evening.
Customer relationships, pricing strategies, supplier networks, confidential information and key personnel are often concentrated in a small number of employees. Employers have therefore long relied on restrictive covenants when those employees leave. However, proposed reforms announced by Prime Minister Andy Burnham suggest that non-compete clauses may face significant change. The Government intends to legislate so that they do not impede recruitment and business growth, although the form of reform remains unclear.
Employers should not view this solely as a threat. It is also a reminder that many businesses rely too heavily on non-competes rather than protecting their wider commercial interests.
The Problem with Non-Compete Clauses
A non-compete does not automatically prevent a departing employee from joining a competitor. A clause is enforceable only where it protects a legitimate business interest and goes no further than reasonably necessary; the employer must justify the restriction.
Yet many clauses are copied from precedents and applied across an organisation without regard to an employee’s role or influence. Weaknesses often emerge only when a key employee resigns.
Why Employers Should Look Beyond Non-Competes
Non-competes are not always the strongest protection. Employers may obtain greater security from a carefully drafted package including:
robust confidentiality obligations;
non-solicitation clauses preventing former employees approaching customers;
non-dealing clauses preventing business with key clients;
employee non-poaching provisions; and
well-drafted garden leave clauses.
These protections are likely to remain available even if non-competes are limited or abolished, and many employers already rely on them more heavily when managing departures.
Non-Competes and Confidential Information
Confidentiality obligations can prevent a former employee from using or disclosing protected information, but not from joining a competitor. A narrowly drafted non-compete may add protection where a new role creates a genuine risk that highly sensitive material—such as pricing models, strategic plans or product-development information—could be used, even inadvertently, and lesser restrictions would not adequately address that risk.
Simply labelling information “confidential” does not make it so, and confidentiality clauses cannot restrain an employee from using their general skill and experience. Employers should identify genuinely sensitive material, restrict access, maintain appropriate security controls and make post-termination obligations clear and proportionate. If non-competes are curtailed, evidence of these practical safeguards will become still more important.
Burnham's Proposals: What Could Change?
Possible models include a complete ban, statutory limits on duration and restrictions linked to salary. For now, the law has not changed: existing covenants remain enforceable where they satisfy the established reasonableness test.
Our view is that businesses should use this period to assess whether their contractual protections could withstand challenge.
Three Questions Every Employer Should Ask
Employers should ask:
Do our contracts reflect the employee’s actual role?
Could we justify the restriction in court?
What happens if non-competes disappear altogether?
Businesses that rely entirely on a non-compete clause are particularly vulnerable. Confidentiality provisions, customer protections and garden leave arrangements should be reviewed now rather than after reforms are introduced.
A Useful Opportunity for Employers
The reality is that a well-drafted suite of restrictive covenants will often provide far greater protection than a lengthy non-compete clause alone.
With further Government announcements expected in the coming months, now is an ideal time for employers to review their contracts and ensure they remain equipped to protect customer relationships, confidential information and workforce stability in an increasingly competitive market.
