During my work as an HR consultant, I’ve recently noticed a trend among some clients to implement an overly restrictive non-compete clause in employment contracts.
These clauses sometimes propose durations as long as 12 months and geographical restrictions covering absurd distances of up to 300 miles! This not only raises legal and ethical questions, but also negatively impacts employee morale, staff retention and possibly recruitment.
Examples of sharp practice by employers have not gone unnoticed. The UK Government has recently announced a significant update: a statutory limit of three months on the length of a post-termination non-compete clause in employment and limb (b) worker contracts.
This change could have far-reaching implications for businesses, read on to learn more…
What is a non-compete clause?
A non-compete clause is a type of restrictive covenant included in employment contracts designed to prevent individuals from working for a competitor or establishing a competing business for a defined period after leaving a company. While they can be essential for protecting business interests, overly restrictive terms can be contentious and potentially unenforceable.
Who are limb (b) workers?
These occupy a unique space in the employment landscape. While not classified as employees, they are in dependent working relationships, typically required to perform work personally with limited rights to delegate. They enjoy core statutory employment rights but often engage in casual and flexible working arrangements, frequently involving multiple or rival employers.
How will the new rules affect employers?
The new statutory limit of three months for non-compete clauses applies to employment and limb (b) worker contracts in England, Wales, and Scotland. It does not extend to Northern Ireland due to the devolution of employment law.
I recommend that employers take the following steps to ensure that they remain legally compliant:
Review contracts: review and, where necessary, revise existing contracts and policies to ensure compliance with the new time limit. Any non-compete clause exceeding three months will need to be amended.
Balanced restrictions: consider whether a non-compete clause is necessary at all. Alternative restrictive covenants, such as non-solicitation or confidentiality agreements, might offer sufficient protection.
Employee relations: restrictions can harm employee relations and morale. Demonstrating a fair and reasonable approach to post-employment restrictions can enhance trust and loyalty within your workforce.
Legal compliance: ensure all HR policies and employment contracts are up-to-date and legally compliant. Non-compliance could result in disputes, legal challenges and reputational damage.
Adopt a strategic approach to HR
Employers who take a strategic approach to employee relations can avoid the risk of financial penalties and low morale among staff. As an experienced HR consultant, I can provide valuable insights and help tailor your employment contracts to align with the new statutory requirements.
Training can raise awareness and educate your managers about the changes and their implications to ensure consistent application across your organisation. I also advise employers to focus on core protections for your business’s essential interests, without overstepping legal bounds. For example, confidentiality and non-solicitation agreements are often sufficient to safeguard proprietary information and client relationships.
Need advice on non-compete clauses?
The introduction of a three-month statutory limit on non-compete clauses marks a significant shift in employment law. By understanding and adapting to these changes, employers can not only ensure legal compliance but also foster a more fair and supportive working environment.
At JT HRConsultancy, we’re dedicated to supporting small businesses in navigating complex HR challenges. We are an established HR services company based in Bedfordshire with clients across the UK. If you need help of advice on an employment issue, call me on 07715 026128 or email jo@jt-hrconsultancy.com
