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Government Consults On Non-Compete Clauses

The Government is seeking views as to the issues mentioned in the article below in relation to non compete clauses. I find this very interesting. A non compete clause, more often referred to as a restrictive covenant is on the face of it, a restraint of trade clause making it unenforceable in court unless certain conditions are met.

The conditions are that the business that has the benefit of the clause is seeking to protect a legitimate business interest. Even then, the business must show that the time period the clause is enforceable for is reasonable and that the geographic location of the restriction is relevant to the fact of the matter.

My opinion is that such clauses play a very important part in business. Allowing a senior employee to go and work immediately for a competitor is potentially damaging to the business the employee is leaving. That employee will have sensitive information in respect of matters such as pricing, strategy, confidential information etc etc.

My opinion is that the Government is wasting time with this initiative. I cannot think of one commercial client of ours that would want to be in a position where a whole management team could leave the office and work for a competitor the very next day. I think if the Government were to consider making non compete clauses unenforceable in law, it would lead to notice periods in contracts being extended and employees being removed from any sensitive information for up to 6 months before they could leave. This I feel stifles business growth and would lead to a ridiculous position.

As part of the Government’s drive to make Britain the best place in Europe to innovate and start a new business, the Department for Business, Innovation and Skills is seeking views on whether non-compete clauses stifle entrepreneurship and innovation by preventing people from:

  • moving between employers
  • developing innovative ideas
  • creating a start-up; and
  • growing a business.

Specifically, the questions being asked are designed to give a full understanding of the current situation, from the point of view of employers and employees, as regards when non-compete clauses are used, their prevalence and the benefits or disadvantages associated with them.

The closing date for responses is 19 July 2016. The consultation document can be found here.

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