The Department for Business and Trade has published a working paper exploring options for reforming non-compete clauses in employment contracts.

Some of the options that are being considered would represent a significant overhaul of the existing system, reflecting the view expressed in the working paper that non-compete clauses “play a part in restricting employee movement, limiting knowledge spillovers, and can undermine incentives for innovation”. The paper also notes that even where such clauses are drafted too broadly to be enforceable (on the grounds that they are unreasonable), workers may nonetheless comply with them for fear of legal repercussions.

In setting out the potential reforms, the Government identifies four objectives: (1) boosting labour market dynamism by making it easier for workers to mover jobs or build start-ups; (2) reducing barriers to recruitment; (3) promoting competition an innovation; and (4) protecting workers so that they do not face extended periods of time out of the labour market.

Four options are proposed in the working paper:

1. A statutory limit on the length of non- compete clauses;
2. A statutory limit on the length of non-compete clauses according to the size of the company, with a longer period for smaller companies;
3. A total ban on non-compete clauses; and
4. A ban on non-compete clauses below a salary threshold.

The working paper invites views on these various proposals, as well as on other matters such as whether restrictions should also be extended to other restrictive covenants such a non-dealing clauses.

Responses are due by 18 February 2026 and more information can be found here.