The government intends to introduce a statutory three-month limit on the length of non-compete clauses. When this cap takes effect, what are your options for restricting what an employee can do once they’ve resigned or been dismissed?
Although it’s not yet clear how the forthcoming reforms to non-compete clauses will apply to existing employment contracts, the most likely scenario is that current longer non-compete clauses will automatically be deemed limited to three months (but then will still be subject to existing case law on whether the clause goes no further than is reasonably necessary to protect the employer’s legitimate business interests).
However, the government has said that its proposal to limit non-compete clauses will not interfere with an employer’s ability to use any of the following:
- paid notice periods
- garden leave
- non-solicitation clauses
- non-dealing clauses
- confidentiality clauses.
Thus, you can continue to restrict competition and protect your business using one or more of the above, e.g. by increasing the length of an employee’s notice period (subject to costs considerations) and invoking a contractual right to put them on garden leave during that notice period. Although it’s straightforward to change your template employment contract for new employees, such as by inserting an extended notice period and a garden leave provision, do bear in mind that you’ll need an existing employee’s express consent to make any changes to their employment contract (but you could tie this in with annual pay rises to make consent more likely). Start now by analysing who your key employees are and what their current contracts say in relation to notice periods, garden leave, confidentiality and restrictive covenants, so that you know who to target when the cap on non-compete clauses does take effect.