The current reality is that many employers seek to restrict what their ex-employees can do in the workplace following the termination of their employment. This is typically done by making departing staff sign non-compete agreements. These clauses are designed to prevent ex-employees from joining a competitor or setting up a competing business. This practice has been criticized in some quarters as being overly draconian and potentially disadvantaging employees.
On 10th May 2023, the Government published a policy paper entitled “Smarter Regulation to Grow the Economy.” This document proposes a raft of measures, including ones designed to restrict the efficacy of non-compete clauses. It sets out plans for a new legislative framework which will limit the efficacy of non-compete clauses in certain circumstances. This move is designed to foster a more competitive climate in which employees can rely on the protection of the law rather than relying on non-compete clauses negotiated in employment contracts.
Under the proposed framework, post-termination restrictive covenants would be determined on a case-by-case basis and considered for enforceability. Factors which would be taken into account include the fairness of the application of the clause to the employee, the detriment suffered by the employee as a result of the covenant and the ‘burden of the proof’.
The proposed changes are aimed at striking a balance between protecting employers’ confidential information and intellectual property, and providing employees with the freedom to move between job roles. This should give employers increased confidence that their key personnel won’t be able to easily jump ship to their competitors. It should also mean that employees are not tied to a role simply because of a non-compete clause that has been imposed upon them.
The Government’s proposed changes appear sensible on the surface and intent on striking the right balance between employer and employee interests. It will be interesting to monitor developments on this issue and see how the balance of power shifts between employer and employee when the updated regulations come into force.
It looks as though a shift is in the works for post-termination restrictive covenants. The Government’s recent policy paper introduces a revised legislative framework, designed to foster a more competitive climate where employees are protected by the law rather than by restrictive clauses connected to their employment contract. This new framework seeks to strike a balance between protecting the confidential information and proprietary rights of employers, while giving employees the freedom to pursue new job roles. The effect of the new restrictions on employers and employees will be closely monitored in the coming months. How the balance of power between the two sides will be adjusted will be an interesting point to observe. For now though, it appears that the Government has made an effort to create a more equitable environment for workers.