Non-Compete Clauses: A Comparative Analysis of UK and US Reforms
UK and US reform non-compete clauses, enhancing labour mobility and business competition, set to redefine global employment law landscape.
In a world still reeling from the effects of the global pandemic and Brexit, the UK Government and the US Federal Trade Commission (FTC) have proposed significant changes to non-compete clauses in employment contracts. These changes, aimed at enhancing labour mobility, fostering healthy business competition, and boosting the economy, are set to redefine the employment landscape in both countries.
Understanding Non-Compete Clauses
Non-compete clauses are contractual agreements that prevent employees from working for a competitor or starting a competing business for a specified period after their employment ends. These clauses are particularly relevant for senior employees who, during their tenure, gain access to confidential information about their employer’s business.
While these clauses serve to protect the employer’s legitimate business interests, they must be reasonable and not overly restrictive,” explains Suliat Jimoh, a Paralegal at Winckworth Sherwood. In the UK and the US, these clauses are typically enforced through interim injunctions.
Proposed Changes in the UK
The UK Government announced its proposed measures on 10 May 2023 in their policy paper “Smarter Regulation to Grow the Economy”. The proposed changes limit non-compete clauses to just three months and apply only to employment and worker contracts.
According to the impact assessment published alongside the response, these changes will affect approximately 7 out of 10 non-compete clauses. The new legislation is expected to grant “5 million UK workers greater freedom to switch jobs, apply their skills elsewhere and even earn a pay rise.”
However, there are still unanswered questions, such as whether the time limit will also apply to garden leave periods, settlement agreements between employers and departing employees, or whether they will apply retrospectively to current non-complete clauses already in place. The Government has stated that the legislation will be introduced ‘when parliamentary time allows’.
Proposed Changes in the US
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