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Non-compete clauses: does your business need them?

It goes without saying that employers do not want their staff to leave – particularly if those staff members are taking internal knowledge to competitor firms.

This is where non-compete clauses come in.

When added to an employee’s contract, they can prevent your staff from immediately joining your competition. Instead, staff must wait a set period before they can join a firm that directly competes with yours.

Whilst these are currently legal, the Government has announced plans to restrict the post-term non-competes to only three months, and further restrictions could be on the horizon.

When should you use non-competes?

Non-competes should not be used for every contract in every industry.

They are specifically designed to protect employers whose staff receive high levels of training and have access to company secrets that could be implemented by competitors.

The ICT, scientific, and professional sectors are where non-competes are most common, with around 40 per cent of staff having non-compete clauses written in their contracts.

However, non-compete clauses are found in almost every sector, including retail, education, and food services.

Whilst non-compete clauses can be implemented at each employer’s discretion, you must consider whether the clause is necessary for your business.

Why the Government plans to limit them

Limiting the length of post-term non-compete clauses has been welcomed by the Competition and Markets Authority (CMA).

This follows a survey by the CMA that revealed around a quarter of those with non-compete clauses in their contracts felt restricted and unable to leave their current job.

Whilst this change has no set date, employers must start preparing. This includes evaluating how impactful non-compete clauses are to your business, and if any alternative strategies can be put into place to prevent staff from moving to competitors.

Our thoughts

Non-compete clauses still have a place in many contracts. If your firm has a high focus on training and holds confidential industry secrets, then writing these clauses into your contracts is vital.

However, non-compete clauses should not be used to deter staff from leaving, particularly in lower-paid positions and fields.

If you are unsure of whether you should include the clause in your employment contracts, it is best to talk to an expert.

Our Employment Law team are on hand to help – get in touch today.

Amanda Hyam

Head of Dispute Resolution and Employment

I have specialised in Dispute Resolution, Civil Litigation and Employment law for more than 15 years. I understand how daunting the prospect of litigation can be and because of this I am always available to discuss concerns.