Don’t think restrictively: Being open minded about proposed changes to non-compete clauses

I am sure many of you have seen the recent announcement that the Government has launched a call for evidence on non-compete clauses on the basis that such clauses "could be stifling British innovation".

Employers have various tools in their armoury to protect their business, information and clients from potential damage caused by departing employees. These range from the lower end of the "toughness" scale (express restrictions on disclosing business sensitive information) through to the fairly standard (time limited restrictions on contacting certain clients, contacts or colleagues) and on to the "toughest" restriction (preventing people from working at a competitor for a period of time). It is this last form of restriction, a "non-compete", about which the government wants to consult.

I can understand why the Government might be concerned. At its "worst", a non-compete clause prevents an individual from being employed by the exact companies which might find their skills and experience most useful. It is a classic Catch-22 situation – the new employer wants the individual because they have the skills and experience which allow the old employer to stop the individual joining the new employer. Such clauses enforce a period of unemployment as it is unlikely an individual will get a job for the period between roles. When faced with one, two, six or more months without pay, many individuals may choose to remain at the old employer. There is, I suppose, an argument that this is preventing innovation by restricting movement and the spread of ideas, skills and experience around a sector.

What struck me in the ensuring debate was how quick most employment lawyers were to defend the non-compete clause. The main argument seems to be that, far from restricting innovation, the non-compete clause in fact ensures companies fully invest in their employees and are happy to develop their experience, knowledge and contacts without worrying about a competitor benefiting from that investment. The point is also made that the law already strikes a balance between companies' rights and employees' rights as any restriction can only go so far as is necessary to protect legitimate business interests and no further.

Why is this the immediate reaction from practitioners? Maybe they are right and the law on non-competes in the UK is fair and correct. However, maybe it is just what we are used to and a practice with which we employment lawyers (if not always our clients!) are comfortable working. Having recently spent some time with employment lawyers from all over the world at a meeting of the Union Internationale des Avocats (the UIA), it seems to me that people do tend to think the laws from their own part of the world are right. There are such different global practices in all aspects of employment law, not just in relation to non-compete restrictions, and it is fascinating to learn a little about them. Everyone listens politely to the other countries' rules and initially, I suspect, quietly thinks "what an odd system – ours is so much better!". But then, following a little discussion, thought and understanding it is instructive to see that there are other, perfectly workable, ways of doing things.

So, although as a true UK employment lawyer I confess that I am sceptical of the need to change the status quo, in the spirit of the UIA I will listen to the debate with an open mind and try not to reject suggestions simply because they are different.

We will, of course, keep you posted on the developments in this debate in future WorkLife blogs.