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Non-compete clauses, currently under review.

Reasons to choose Wilson Browne

COVID19 and the global pandemic has been a game-changer. The rules, whatever they may be, have largely been re-written. Whether it was a sea change (or step change if you prefer) on homeworking, supporting businesses and employees with furlough payments, or other changes to the way business operates…things are not the same.

With jobs being lost and more redundancies expected despite the best efforts to ride out the storm, non- compete clauses are being reviewed by the government in response to the current pandemic.

Most have heard of restrictive covenants, the general heading under which “non-compete’ clauses fall. There is no specific statutory definition of what a non-compete clause is and the law surrounding these has derived from case law on a case by case basis.

It is a common perception that most non-compete clauses that are found in contracts of employment are unenforceable unless they are reasonable and there to protect legitimate business interests. But things change and the Government is currently considering options in relation to this area:

1. Mandatory compensation- this option would mean that any employer who wished to include non-compete clauses in their employees contract of employment, would have to provide compensation during the period of restriction to the employee.

This would be a benefit to both employer and employee. The employer would avoid the unnecessary costs of attempting to enforce the restrictions and the employee is more than likely not breach the non-compete clause if they are receiving payment not to. Germany, France and Italy all use this current principle.

2. The second option is to ban non-compete clauses in their entirety. Some Countries have this ban currently and have seen an increase in innovation.

This review is due to take place in February 2021, which will be upon us very soon.

The consultation paper can be found HERE

For advice on employment policies, procedures and contracts, call us for a free, no-obligation discussion.