In April 2016 the Government announced a call for evidence asking for views on non-compete clauses in employment contracts. The wording used implies that they feel clauses of this nature hold back on innovation in business.
Non-compete clauses in employment contracts are used to protect employers by preventing employees from competing with their old employers once employment has ceased. They will generally prohibit working:
- for competitor entities
- within a certain geographical area
- for an agreed period of time
There is a great deal of case law on whether they are enforceable, but as a rule of thumb courts will not enforce them unless:
- they protect a legitimate business interest, and
- they are reasonable both in the geographical area and length of time
What is reasonable will depend on the seniority of the employee. For example, restrictions on a mail clerk are highly unlikely to be enforceable, while those prohibiting a Sales Director from competing within 10 miles for 6 months would probably work. Courts will either accept or reject a whole clause and won’t substitute a revised version that might be reasonable, so it’s important to get them right first time.
For the time being, non-compete clauses remain an effective and valuable way of protecting your business. If you would like advice on putting them in place or reviewing your existing clauses, please contact Backhouse Solicitors.