The Prime Minister, Andy Burnham, has announced plans to curb the use of non-compete clauses, likening the change to the 1995 Bosman ruling that transformed football transfers. The government is yet to set out specifics, but more detail is expected when the Budget is announced later this month.
Our partners shared their view on what the proposals could mean for employers, partnerships and senior executives.
Why a ban could backfire
Writing in Supply Chain IT, partner Caroline Field sets out the case against an outright ban. She explains that the courts already strike down restrictions that go further than needed to protect a business’s legitimate interests, striking a balance that would be hard to replicate in legislation.
Caroline warns that a ban could have the opposite effect to the one intended. Businesses may lengthen notice periods, rely more heavily on gardening leave, or hold back deferred pay from those who join competitors. Investment could also suffer where confidential strategy can leave with an employee soon after it is developed.
She acknowledges that some reform has value, particularly to protect lower-paid workers from restrictions used as a deterrent, and points to less drastic options such as fairer rules on urgent injunctions.
Questions over the evidence
The firm’s comments, from partner Catriona Watt, also feature in WealthBriefing’s coverage of the announcement. Catriona notes that this is the fourth time in ten years the government has reviewed non-competes, and that consultations have offered little evidence that they hold back job mobility or innovation. Sectors that rely on them, such as financial services, fintech and insurance, are hardly short of innovation.
What to do now
Change looks likely in some form. Employers, partnerships and senior executives should review their existing restrictions now, so they are ready when the detail is published.
Coverage :
Read Caroline’s full article in Supply Chain IT
Read Catriona’s comments in the WealthBriefing coverage.