Proposals for reform of non-compete clauses in employment contracts
On 26 November 2025, the Government published a working paper inviting views on options to reform the use of non-compete clauses in employment contracts.
The working paper focuses on four main options:
- introducing statutory limits on the length of non-compete clauses;
- banning non-compete clauses in employment contracts;
- banning non-compete clauses below a salary threshold; and
- combining a ban below a salary threshold with a statutory limit.
Purpose
The Government intends to advance the following objectives through the reform of non-compete clauses:
- boosting labour market dynamism by making it easier for workers to move jobs or build their own start-up business, with the potential to earn a pay rise, putting more money in people’s pockets and supporting with the cost of living;
- reducing barriers to recruitment so that high productivity, innovative businesses, particularly scale-ups at critical stages of growth, can access the talent they need;
- promoting competition and innovation by maximising opportunities for the most talented innovators, experts and entrepreneurs in the UK; and
- protecting workers so that they do not have to face extended periods of time out of the labour market in their area of expertise, often as long as six to twelve months, unable to afford the financial burden of challenging a non-compete clause in the courts – or so that they can afford to move job in the first place.
1. Statutory limit
The first option the Government is considering is putting a statutory limit on the length of non-compete clauses that employers can impose.
2. Banning non-compete clauses
The next option that the Government is considering is banning non-compete clauses, making them unenforceable in employment contracts.
3. Banning non-compete clauses below a salary threshold
Under this approach, non-compete clauses would be only enforceable if the worker earned over a particular salary. Non-compete clauses under the threshold would be unenforceable.
4. Combining a ban below a salary threshold and a statutory limit of three months
The Government could also consider a combination of a ban below a salary threshold and a statutory limit of three months for those who earn above the threshold. Click here
Closing date
The closing date for responses and views on the issues raised in the Government’s working paper is 18 February 2026.
Comment
Reforming the law on non-competes has been discussed for several years now and the responses to the working paper will be interesting. The Government will be looking for a solution that strikes the right balance. On the one hand, there is the need for a dynamic job market that promotes competition and stimulates pay growth for employees. On the other hand, employers will want to know their company confidential information and trade secrets are protected, and that it is worth investing time and effort in developing highly skilled, specialised employees who will not just move to a competitor.
Even if a strict approach to non-competes is taken by the Government (or if non-competes are banned altogether), there are still other ways that employers can ensure their interests are protected. So far the focus for reform has been specifically on non-competes. That leaves a range of other post-termination restrictions that employers can ensure are robust such as non-solicitation or non-deal restrictions with clients. Alternatively, the most obvious approach will also be for an employer to review their use of notice periods which, when combined with garden leave, can be an effective way of distancing an employee from the business without yet letting them move to a competitor.
The use of restrictive covenants in employment contracts remains under close scrutiny. The previous government proposed plans to cap non-compete clauses to three months. However, this received mixed consultation feedback and ultimately parliamentary time constraints meant that it never became law before the 2024 election. With next year being a significant one for the employment law landscape due to the huge changes brought by the Employment Rights Bill, the review of non-competes may once again take a back-seat and it could be a while before we truly see a change implemented.