Non-Compete Clauses are Stopping UK Employees from Switching Jobs
A non-compete clause is a restrictive covenant that prevents employees from joining or starting competitive businesses during a specific timeframe. Recently, a survey has shed light on the impacts of such covenants on workers in the UK. Below, we explore the survey findings, the pros and cons of these clauses and how employees can navigate them.
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30% of Workers Have a Non-Compete Clause
The Competition and Markets Authority (CMA) are a non-ministerial Government department that ensures competition between businesses is strong. Recently, the CMA conducted a new study and discovered that a non-compete clause generally impacts 30% of workers. This figure exceeds 40% in the IT industry, and surprisingly, 20% of workers in retail and education have this restrictive covenant too.
The CMA stated this restrictive covenant could be justified when enabling employers to implement workplace training and share sensitive information. This is because the employer would gain confidence the worker wouldn’t take their skills and information directly to a competitor.
Yet, the CMA also discussed the growing global concern regarding the career mobility impacts of these covenants on workers. They explained there’s a concern with clauses restricting employees from joining a competitor or creating a rival business. And 24% of the surveyed respondents agreed, feeling their non-compete clause restricted their ability to leave and join a competitor.
Following these concerns, legislation has been proposed by the Department for Business and Trade (DBT) to provide limitations. The Government has said it will create new laws limiting non-compete clauses to three months. If this occurs, employees may be able to join competitors or make a rival company after such time.
Advantages and Disadvantages of a Non-Compete Clause
When an employer implements a non-compete clause in an employee’s contract, there could be several reasons for doing so. This leads to a number of advantages and disadvantages, which mainly fall in favour of the employer.
Concerning the advantages, sensitive information could be protected since these restrictive covenants prevent employees from joining or creating rival companies. This is because employees wouldn’t be immediately able to disclose their previous employer’s trade secrets to competitors.
Furthermore, employers could see better retention rates, as employees may be more likely to stay due to the restrictions. This could help the employer remain competitive because they could utilise their talent rather than lose them to rivals.
However, a non-compete clause could put potential talent off joining a company. Such individuals may feel the clause would restrict their future career prospects. Similarly, the employer may see high staff turnover as employees look to escape the restrictions.
What’s more, imposing this restrictive covenant could increase a company’s legal liability. That’s because clauses that aren’t reasonable and legally compliant could lead to fines and employment tribunal claims. As such, employers could create more work for themselves to avoid such penalties.
Finally, even if a company implements this clause correctly, enforcing it could be difficult and expensive. The employer would need to pursue a breach of the clause through the civil courts. This could take time, become costly and may leave little remedy if the employee cannot afford damages.
Restrictive Clauses Must be Reasonable
A non-compete clause could be enforceable, providing it’s in relevant signed documentation, like an employment contract, and is reasonable. For such a clause to be reasonable, the employer must be able to show they could lose money.
This could be through an employee taking their employer’s clients to a rival business or creating a local competing company. Therefore, restrictions shouldn’t apply to jobs or locations that wouldn’t affect an individual’s previous employer.
Moreover, the restriction period shouldn’t be longer than the standard for an employee’s industry and job title. Should the clause be deemed unreasonable by the courts, it would be unenforceable.
How can Employees Tackle Restrictive Clauses?
Employees who wish to navigate a restrictive clause could negotiate with their employer. It might be that the employer hasn’t fully understood the employee’s new job. Alternatively, the employer may simply be worried about a particular element, such as losing clients. In either instance, the employee could be honest about their intentions and stress they will honour the covenant in their new role.
Should the old employer refuse to negotiate, the employee could look at options with their new one. For example, the employee could suggest postponing their start date until the clause has expired. Another option could be to start work in an alternative location or capacity until the clause becomes unenforceable. If any of these options are available, the employee could change jobs while remaining legally compliant.
If you have a non-compete clause in your contract, want to change jobs and have questions about whether you can, contact us today. Redmans Solicitors are employment law specialists and have years of experience. We could discuss your circumstances and advise on how you could proceed.
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