The government has issued a call for evidence on non-compete clauses, as part of a drive to boost innovation. The Department for Business Innovation & Skills (BIS) has now published the details.
The call for evidence asks about non-dealing, non-solicitation and non-poaching clauses as well as traditional non-compete clauses and the gardening leave provisions that sometimes accompany them. Confidentiality clauses are outside the scope of the review.
Despite the established case law, under which a restrictive covenant is void unless it is designed to protect legitimate business interests and no wider than is reasonably necessary, BIS says it is concerned that the use of restrictive covenants may hamper the movement of talented staff, stifle innovation and hinder business start-ups. It refers to research in the US suggesting that limiting the use of these clauses has had a positive impact.
The government will use the results of the call for evidence to assess whether restrictive covenants are a barrier to high levels of flexibility in the labour market and "inform" the next steps. The Social Market Foundation think tank has already called for the government to consider banning non-compete clauses in employment contracts.
The call for evidence asks questions of both employers and employees. The ones of particular relevance to employers are:
- Are non-compete clauses used mainly in higher skilled roles? BIS appears to assume that they are and that is why they may stifle start-ups.
- Have you as an employer used a non-compete clause? If so, what was the justification?
- Could there be any repercussions or unintended consequences if government restricted some forms of non-compete clauses?
- In your experience are non-compete clauses transparent? There seems to be an impression that employers may be using them without appreciating that some interests are protected by confidentiality clauses and intellectual property law.
