UK Follows US FTC Proposal and Issues its Own Non-compete Proposals

The UK government on May 10, 2023, announced its intention to limit the length of post-employment non-compete clauses (i.e., restrictions prohibiting an employee from going to work for a competitor or to start a rival business after they have left employment) to just three months.

Currently, non-competes in the UK are often drafted in practice to be up to 12 months in duration and are only enforceable if they are “no more restrictive than is reasonably necessary to protect the employer’s legitimate business interests,’’ including in respect of their length.

The government considers that this change will not only benefit UK workers by providing them with more flexibility to join a competitor or start a rival business on leaving an employer, but also that it will boost the wider UK economy by supporting employers through widening the talent pool and candidates available to them when hiring.

The government has already made clear that this proposal will not:

  1. change the law on confidentiality provisions;
  2. affect the ability of employers to use (paid) notice periods or “garden leave” periods for exiting employees; or
  3. restrict the potential use of non-solicitation clauses (being less onerous clauses restricting the taking of clients or customers from an ex-employer for a certain period post-employment). Other types of post-termination restrictions are not explicitly mentioned.

The proposal forms part of the first of a series of announcements of the government’s “package of regulatory reform” to “reduce unnecessary regulation for businesses, cutting costs and allowing them to compete,” taking advantage of post-Brexit regulatory freedoms.

It is currently unknown when such proposals will take effect, only that the requisite legislation to enact this will be passed “when parliamentary time allows.”

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.