Proposals to ban non-compete clauses in employment contracts would be unnecessary intervention

Comments Patrick Brodie, Head of Employment Law of RPC the city-headquartered law firm:

“A ban or severe curtailment of the rights of businesses in this area would be seen by most employers as anti-business and an unnecessary intervention in the pretty smooth operating of the UK labour market.”

“The courts regularly test whether a non-compete is an unfair restraint on employees and, therefore, unenforceable. Overall, the courts have ensured there is a very fair balance between the rights of employers and employees in this area. Equally, the balance is being continually reviewed because our courts recognise that the ability to restrict a person from working has to adjust with social and economic change.”

"For the better part of 600 years, our courts have grappled with whether it is appropriate to stop a person's freedom to work, even for a short period, and, so, depriving society of her skills, society of wealth generation and families of self-sufficiency.  Originally, our courts said any restriction was unenforceable, because it stopped a person's trade and her earning a living.  A few hundred years later, they changed their minds: they said that paradoxically a freedom to trade and work, without reasonable limitations, was inhibiting trade, being the very thing that the consultation paper now seeks to preserve.  So, the rule was relaxed, allowing for certain restrictions, including non-competition.  However, the courts have been at pains to recognise that the ability to restrict a person from working, even for a good reason, has to adjust with social and economic change.  Our courts are always looking at the right balance (and the sensitivities of that balance) between limitation of work and protection of business, especially for the more economically vulnerable."

“The consultation document says the intervention is to encourage more start-ups but start-ups are employers as well. Start-ups, especially in a knowledge economy, need to protect themselves from employees leaving and setting themselves up in direct opposition.  Originally, restrictive covenants were unenforceable.  However, our courts changed this principle because they recognised that, paradoxically, a freedom to work, without limitation, was inhibiting trade”

“So far the Government has presented very little statistical analysis or other evidence to support this dramatic intervention in the employment market. Employers will feel that they deserve that before all the agreements they have made with employees are overturned.”