Non-Compete Clauses: What Could the Government’s Proposed Reforms Mean for Businesses?

Posted on 21 September, 2026

By Jeremy Parkinson, Partner and Head of Employment Team

The future of non-compete clauses remains under consideration following a government working paper published in November 2025. The paper explored a number of options for reforming non-compete clauses in employment contracts, from introducing statutory limits to banning them altogether.

The working paper closed for responses on 18 February 2026 and the government is now considering the views received. While no final decision or implementation date has yet been confirmed, the potential reforms could significantly change how businesses protect confidential information, client relationships and competitive advantages when employees move on.

For businesses that currently rely on non-compete clauses, now is a good time to understand the proposals, review existing protections and consider whether alternative measures could provide appropriate protection if the law changes.

The Current Legal Landscape

Approximately five million employees in Great Britain currently work under contracts containing non-compete clauses, with typical durations of around six months. While UK courts have historically enforced non-competes lasting up to 12 months for senior management and founders in certain sectors, any restriction must satisfy the established common law test: it must be no wider than reasonably necessary to protect a legitimate business interest and must not be contrary to the public interest.

However, the government has highlighted a critical issue with the current system. Even when clauses are broadly drafted and unlikely to be enforceable, many employees perceive them as binding and comply out of fear of legal repercussions. This "chilling effect" can restrict labour market mobility, limit knowledge transfer and potentially undermine innovation and competition.

The previous Conservative government proposed a three-month statutory cap on non-competes in 2023, but this never became law. The current Labour government has since reopened consideration of the issue through its November 2025 working paper, which set out a broader range of potential reform options.

The Proposed Reform Options

The government’s working paper presented five distinct approaches to reforming non-compete clauses. No option has yet been confirmed, and the government is considering the responses received:

• Complete ban on non-compete clauses: Under this approach, non-compete clauses in employment contracts would be entirely unenforceable. The government would need to ensure that other restrictive covenants, such as non-dealing clauses, are not used to achieve a similar effect.

• Statutory duration limit: A maximum length for non-competes could be introduced, potentially ranging from one to twelve months, though the government acknowledges that very short periods (such as one month) would be unlikely to be enforced in practice. This could be shorter or longer than the previously proposed three-month cap.

• Company-size-dependent limits: Different statutory limits may apply based on company size. For example, companies with more than 250 employees might be limited to three-month non-competes, while smaller companies could impose six-month restrictions.

• Salary-threshold ban: Non-competes would only be enforceable against employees earning above a specified salary threshold. One scenario suggests using the additional rate tax threshold of £125,140 (frozen until March 2031), protecting lower-paid workers who lack the financial means to challenge potentially unenforceable clauses.

• Hybrid model: A combined approach that bans non-competes for workers below a salary threshold while imposing a statutory time limit (such as three months) for those earning above it.

The working paper also explored whether these limitations should extend to wider workplace contracts, including shareholder agreements, equity incentive documents and LLP agreements.

What This Could Mean For Your Business

Impact on Workforce Strategy

For many businesses, non-compete clauses have been a cornerstone of talent retention and competitive protection. The potential loss or significant curtailment of these provisions could require businesses to rethink how they safeguard their interests when key employees leave.

What this means: Businesses should begin considering alternative protection strategies. This includes strengthening other restrictive covenants, such as non-solicitation, non-dealing and confidentiality clauses, implementing robust garden leave provisions and considering longer notice periods for sensitive roles. The emphasis may shift from preventing competition to protecting specific business interests through carefully drafted and enforceable alternatives.

Companies should also review their approach to confidential information. If employees have greater freedom to move to competitors, businesses may need to be more selective about who has access to highly sensitive data, proprietary technology or strategic plans.

Increased Litigation Risk

Analysis by law firm Nockolds revealed that legal disputes involving non-competes had surged, with High Court claims up more than 40 per cent in the first nine months of 2025. This trend occurred even before any reforms take effect, suggesting that employees are increasingly willing to challenge restrictive covenants.

What this means: The uncertainty around non-compete enforceability may encourage employees to test the boundaries of existing restrictions. Businesses should not assume that a contractual non-compete will automatically provide protection and should consider whether existing restrictions remain appropriate and proportionate.

Compliance and Contract Reviews

The government has not yet indicated whether any future reforms would apply retrospectively to existing contracts or only to new agreements. Until further legislation or guidance is published, the position for existing contracts remains subject to the current legal framework.

What this means: Employers should consider conducting comprehensive audits of their current employment contracts now. For key positions with existing non-competes, consider whether garden leave, extended notice periods or enhanced confidentiality provisions provide similar protection. For junior or non-sensitive roles, scaling back or removing non-competes may reduce future compliance risk and ensure contractual restrictions remain proportionate to the interests being protected.

Sector-Specific Implications

The impact of any non-compete reforms will vary significantly by industry. Technology firms, financial services organisations, professional services firms and businesses with high-value intellectual property or client relationships may face particular challenges. Small businesses and start-ups may also be concerned about losing the ability to prevent key employees from immediately joining or establishing competing ventures.

What this means: Sector-specific strategies will be essential. Technology companies should focus on robust IP assignment clauses and trade secret protection. Professional services firms should strengthen client confidentiality and non-solicitation provisions. Financial services organisations may need to consider longer garden leave periods, potentially alongside any remaining non-compete restrictions, to protect legitimate business interests.

Alternative Protection Mechanisms

Whatever form any future legislation takes, businesses should consider how they can protect their interests without relying solely on non-compete clauses. The following measures can play an important role:

• Garden leave: Paid leave during the notice period, during which the employee remains employed but is excluded from work. Garden leave is distinct from a post-termination non-compete and can provide businesses with time to protect relationships and confidential information.

• Extended notice periods: Longer notice requirements give businesses more time to protect relationships and transition responsibilities before an employee joins a competitor.

• Non-solicitation clauses: Preventing former employees from actively approaching clients or customers, even if they cannot be prevented from working for a competitor.

• Non-dealing clauses: Preventing former employees from doing business with clients who approach them, which in some industries can have an effect similar to a non-compete.

• Enhanced confidentiality obligations: Strengthening provisions around the protection of trade secrets, proprietary information and business intelligence.

• Intellectual property assignment: Ensuring all work products, inventions and developments created during employment are properly assigned to the employer.

The key to effective protection will be precision. Generic, broadly drafted clauses are likely to face increased scrutiny. Instead, businesses should tailor restrictions to the specific role, clearly articulate the legitimate business interests being protected and ensure proportionality in scope and duration.

The Broader Economic Context

The government’s stated objectives for reform include liberalising the UK labour market, enabling start-ups to access a broader range of talent and improving competition and innovation. Proponents argue that relaxing restrictions on employee mobility will lead to better skill matching, higher wages and greater knowledge spillovers that benefit the broader economy.

However, business groups have raised concerns that weakening non-compete protections could reduce employers’ willingness to invest in training, limit employees’ access to sensitive information and discourage equity and deferred compensation arrangements. For smaller businesses in particular, the inability to prevent key staff from immediately establishing competing ventures could undermine business viability and deter entrepreneurship.

The government’s working paper also considered the question of compensation for non-compete periods. No final approach has yet been confirmed.

Next Steps and What Businesses Should Do Now

The government’s working paper closed for responses on 18 February 2026. The government is now considering the responses before deciding whether and how to take the proposals forward. No implementation date has currently been confirmed.

This means there is no immediate change to the current law. However, businesses should not necessarily wait for final legislation before reviewing their approach to restrictive covenants.

Key actions to consider include:

• Conducting a comprehensive audit of existing employment contracts, particularly for senior staff and key roles

• Reviewing and strengthening alternative protective provisions, such as confidentiality, non-solicitation and IP assignment clauses

• Reviewing garden leave provisions for sensitive positions

• Re-evaluating access to confidential information and trade secrets

• Developing robust onboarding and offboarding processes to protect business interests during transitions

• Training HR and management teams on the current legal position and best practice for protecting business interests

The future of non-compete clauses remains uncertain, but the government’s consideration of reform means businesses should keep their restrictive covenant arrangements under review. Ensuring existing protections are targeted, proportionate and supported by appropriate alternative measures can help businesses protect their interests while the position develops.

If you would like tailored legal advice on how potential reforms could affect your business, including a review of your current employment contracts and the development of alternative protection strategies, our employment law team can help. Call Owen White Catlin on 0208 890 2836 or contact us via the OWC office closest to you.