Employee non-competes – change is coming, but we don’t yet know what form it will take!

In November 2025, the Department for Business and Trade (as it was then known) published a working paper on options for reform of non-compete clauses in employment contracts.  This was followed by a period of consultation but, until now, there had been no governmental response since the consultation closed in February. However, in a speech at the Innovation Nation Summit on 9 October, the Prime Minister confirmed that the current position on non-competes is set to change. Mr Burnham announced that the Labour government will legislate to ensure that non-compete clauses “will no longer be a barrier to hiring for our most promising start-ups and scaling firms”. Unfortunately, the Prime Minister’s speech contained little detail, and no formal policy proposal has yet been put forward.  This blog considers what options are available to the government – but we will need to wait for further detail before we can be certain.

A reminder of how non-competes work

A non-compete is a contractual restriction that seeks to prevent a worker from moving to work for a competitor.  The rationale for such a restriction is generally to protect an existing employer’s confidential information and, in some cases, its customer connections.  A non-compete is not automatically enforceable against a worker.  Indeed, a court’s starting point is always that a non-compete restriction is contrary to public policy and therefore void. However, a court will enforce a non-compete if the employer can show that the restriction goes no further than necessary to protect its legitimate interests.  This generally requires a non-compete to be geographically restricted and time-limited (the shorter the better – 12 months is generally considered the absolute maximum, but in many cases this will be too long).  A court will also not enforce a non-compete provision if an employer can obtain sufficient protection from a lesser restriction (such as a non-solicitation or non-dealing provision).         

In practice, therefore, non-competes can often be difficult to enforce.  However, they may also have a significant deterrent effect in dissuading employees from seeking work with competitors.  Employees in the UK are also not typically paid during any period of non-compete (although an alternative technique frequently used by employers is to exclude employees from the workplace for their notice period – so-called ‘garden leave’ – for which they would be paid). There is also evidence that non-competes are not just restricted to senior employees: research by the Competition and Markets Authority suggested that 20-30% of lower-paid workers report being subject to such clauses. 

The government working paper

The working paper in 2025 restated some of the core concerns with non-competes – including that although they can protect legitimate business interests, they also risk restricting job mobility and stifling competition and innovation.

The working paper itself outlined five broad options for reform:

• introducing a statutory limit on the length of a non-compete;
• introducing limits on length based on company size;
• an outright ban on non-competes;
• a ban on non-competes below a salary threshold;
• a ban combining both a salary threshold and a statutory limit on the length of a non-compete.   

The working paper suggested that, even though views were being sought on the subject as part of the consultation, no consideration was then being given to changing the rules relating to other forms of post-termination restriction, such as non-solicitation and non-dealing provisions or confidentiality clauses.  There was nothing in Mr Burnham’s speech to suggest that this position has changed.   

Competing views of the need for non-competes

The suggestion that non-competes can inhibit competition has gained increasing traction.  It was reported in the press that a recent letter to the government co-authored by various founders of UK technology start-ups argued that non-competes, garden leave periods and long notice periods undermine innovation.  Further, the Financial Times has cited a recent survey by Enterprise Britain that 87% of ‘scale-up leaders’ regard non-compete clauses as a hurdle when hiring.     

Although there have been a number of vocal proponents of the need for non-compete reform, this view is far from universally held.  The CBI, for example, is known to take the view that the concerns cited above have been overstated and that there is no clear evidence that non-compete clauses are a drag on innovation.  The CityUK argues that the existing law strikes a careful balance between protecting employers’ interests in their trade secrets and other confidential information and employees’ freedom to work and to move freely between jobs; that non-compete clauses are often the only way to preemptively protect confidential information and intellectual property when employees move to competitors; and that the UK’s current approach to non-compete clauses is aligned with other major financial centres, including New York, Delaware, Singapore, Hong Kong and Dubai (DIFC), where reasonable non-compete clauses remain enforceable.      

However, it appears from Mr Burnham’s speech that those in the first camp may have won out.         

What the Prime Minister said

Mr Burnham only dealt with non-competes very briefly.  He is clearly concerned that non-competes can interfere with a worker’s ability to move freely within the economy without constraint.  He suggested that some companies had gone ‘too far’ in their use of restrictive practices through non-compete clauses, leaving workers ‘caught in a trap’ and described non-compete clauses as a ‘drag on innovation’.  His speech likened his proposed reforms to a ‘Bosman ruling for the innovation sector’, referring to the well-known European Court of Justice decision, relating to the movement of footballers between clubs.  The Prime Minister also noted that workers are ‘often unpaid while they sit on the sidelines’.

Change is therefore afoot.  Given the setting for his speech, Mr Burnham’s focus was understandably on companies in the ‘innovation’ sector.  But it is evident that any changes will have a wider effect, as he also said that the government would make sure workers in the ‘foundational’ or ‘everyday’ economy ‘would not be prevented from moving jobs too’.   But this was pretty much all he said on non-competes in his speech.

So what will change?

The simple answer is that we do not know.  Nor do we know when the changes will be implemented. There was no policy substance in the speech, and nothing has yet been published.

What is clear, though, is that the government will introduce legislation that will have the effect of qualifying, or possibly overturning, the existing common law rules applicable to non-competes. 

It would be dangerous to read too much into the language of what was a political speech rather than a detailed discussion of policy. It should not be assumed, for example, that the government has in mind an outright ban on non-competes. Ensuring that something is ‘not a barrier’ does not mean it will be outlawed.  However, it is evident that, at the very least, additional obstacles will be put in the way of employers who seek to rely on non-competes.  Mr Burnham’s references to the ‘everyday’ economy also suggests (quite rightly) that the government will not seek to distinguish materially between different sectors of the economy when the new rules are put forward. 

Mr Burnham’s reference to employees ‘often being unpaid’ during their non-compete period may also suggest that pay could become a factor in the enforceability of non-competes (although introducing a payment obligation does not in any way address the argument that non-competes stifle innovation).         

There are many other unanswered questions including the impact on non-competes in existing employment contracts or whether the new rules will be restricted to the employment context or could extend further e.g. to LLP members. Nor was any reference made in the speech to the length of contractual notice periods or garden leave. 

In summary, then, we have been given notice of potentially significant changes without yet being given detail of what those changes are. We will of course let you know as soon as greater clarity emerges, and what impact it may have for your business. If, in the meantime, you would like to discuss how you may be affected, please do not hesitate to contact the authors of this blog or your usual Freshfields contact(s).