Government consultation on non-compete clauses: what could change?

The Department for Business and Trade last week published a working paper on options for reform of non-compete clauses in employment contracts. The consultation, open until 18 February 2026, seeks views on a range of reforms to non-compete clauses, including a cap on duration, salary thresholds or an outright ban. These proposals reflect the Government's intention, like its predecessor, to limit the use of non-competes in employment relationships, in order to reduce barriers to job mobility and foster innovation. 

What is the current legal position on non-competes?

Currently, the use of non-compete clauses in employment situations is governed by common law principles; there is no statutory framework regulating their use. A non-compete will only be enforceable if it is reasonable in scope, duration, and, to a lesser extent, geographical reach. It must also be necessary to protect a legitimate business interest, such as confidential information, client connections or workforce stability. Courts assess reasonableness on a case-by-case basis, and any restriction that goes beyond what is necessary will be struck down.

The Government estimates that around 5 million employees in Great Britain are subject to a non-compete – purportedly more than in the US or Europe. The typical duration is around six months, although 12 months is not uncommon for senior executives.

This is not the first time that UK non-competes have come under scrutiny. In 2023, the then government announced its response to a 2020 consultation and set out its intention to limit non-compete clauses to three months, as we explained at the time: A global shift away from non-competes? Major changes proposed. However, the change was never implemented. Reform of non-compete clauses was notably absent from the Employment Rights Bill – it appears the Government is now looking to rectify that.   

What options are under consideration?

The White Paper is seeking views on several options for reform of non-compete clauses:

• Statutory limit on duration – introduce a maximum limit on the duration of non-competes. This could be three months, as proposed by the previous government, or longer or shorter than that. The paper recognises such a limit could risk creating an assumed 'industry standard' and may not fully protect lower-paid workers.
• Duration based on company size – apply different statutory limits based on company size, eg three months for large companies and six months for smaller companies (thereby protecting start-ups). The paper notes this could leave people in lower-paid sectors subject to longer restrictions.
• Outright ban – all non-compete clauses in employment contracts would be unenforceable, irrespective of length. Safeguards would need to be considered to prevent other covenants being used to achieve the same effect as non-competes.
• Ban below a salary threshold – only allow non-competes for workers who earn over a set salary. This would protect lower-paid workers, but could create a cliff edge around pay levels and challenges in calculating pay.
• Combination approach – apply both a salary threshold and a limit on duration to balance flexibility and protection.

One notable change from the options previously proposed by the Conservative government is the absence of employers remunerating employees for the duration of a non-compete period. 

Why is the Government proposing reform?

The Government argues that non-compete clauses restrict job mobility and wage growth, limit knowledge sharing, undermine innovation and create barriers for start-ups seeking skilled staff. Although the Government acknowledges that non-competes can encourage investment in training and protect confidential information, it questions whether these benefits outweigh the broader economic costs.

The paper sets out four key objectives for reform:

• Boost labour market dynamism by making it easier for workers to move jobs or start businesses.
• Reduce recruitment barriers so high-growth, innovative businesses can access the talent they need.
• Promote competition and innovation by enabling the UK’s most talented innovators and entrepreneurs to maximise opportunities.
• Protect workers from extended periods out of work or costly legal disputes.

A global trend

The UK is not alone in seeking to restrict non-compete clauses. The White Paper highlights similar action being taken in the United States, where several states have banned non-compete clauses entirely, and several EU jurisdictions which either have mandatory compensation for non-competes or salary thresholds. Australia has also recently announced a ban on non-compete clauses for employees earning less than a high income salary threshold.

Implications for employers

While the Government has not indicated a preferred option or potential timeframe for reform, the direction of travel is clear: two successive administrations have supported change, making restrictions on non-competes, or their removal altogether, increasingly likely.

If any of the proposed options are implemented, employers will need to reassess their approach to business protection and consider alternatives, such as other types of restrictive covenants, garden leave, confidentiality clauses, and IP protections. For example:

• Consider longer notice periods and greater use of garden leave to keep employees out of the market.
• Extend non-dealing and non-solicitation clauses to limit who employees interact with even if they join competitors.
• Adjust remuneration structures to build protection elsewhere, such as longer non-competes in bonus or incentive plans, or bonus schemes tied to returning confidential information and transferring key client relationships.

Reviewing these provisions now will help provide safeguards as and when reforms are introduced. As a minimum, audit existing covenants to ensure they are well-drafted and remain valid, as discussed in our blog: Restrictive Covenants: how can employers draft them effectively?.

Businesses should also consider engaging with the consultation before it closes on 18 February 2026, to ensure their views are heard. 

Our Employee Competition team will be monitoring developments and providing guidance on practical steps to protect businesses. If you would like to discuss the implications for your organisation, please get in touch.  

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, November 2025