Restrictive Covenants – what is set to change?
Monday 22nd December 2025
The Government has recently started a consultation and issued a working paper seeking views on reforming non-compete clauses in employment contracts.
What are non-compete clauses?
Non-compete clauses are a type of restrictive covenant, intended to protect a company’s business interests. They are inserted into employment contracts to restrict an individual’s ability to work for, or establish, a competing business after they have moved on from a job.
The enforceability of non-compete clauses depends on whether the former employer can demonstrate their reasonableness and show that they protect a legitimate business interest, as determined by a court.
Why does the Government want to change them?
The working paper indicates the Government’s main concerns are:
- Restrictive covenants may be considered a restraint on trade.
- The “behavioural effect”: workers may treat clauses as binding, fearing legal consequences even if they are unenforceable.
- They limit mobility and prevent workers from seeking better-paying jobs or improved working conditions.
- Restricting competition – smaller businesses might struggle to grow or expand
Due to these concerns, the Government has started consultation and prepared a working paper aimed at:
- Boosting the labour market, by making it easier for workers to move jobs or start their own business.
- Reducing barriers to recruitment.
- Promoting competition and innovation.
- Protecting workers.
Options for reform
The Government is currently considering several options for reform, including:
- Statutory limits on the duration of non-compete clauses.
- Banning non-compete clauses in employment contracts.
- Prohibiting non-compete clauses for employees earning below a certain salary level.
- Combining a prohibition below a certain salary level with an established statutory limit.
What can employers do?
Employers are invited to submit their feedback by responding to the working paper. The government has identified specific points on which they are seeking input. A link to the working paper can be found here: Working paper on options for reform of non-compete clauses in employment contracts – GOV.UK.
The deadline to respond to the working paper is 18 February 2026. The government will then review the responses and draft any necessary legislation.
If you would like advice on the use of non-compete clauses or any other type of restrictive covenants in the meantime, get in touch with our employment team.
