17 December 2020

Cas's Blog - If I can’t have you….then a non-compete may not necessarily be the answer!

It strikes me that the relationship between employer and employee is in some way comparable to a romantic relationship.  We start off wildly in love with each other, but as the months and years go by we may make the mistake of taking each other’s good qualities for granted, and if we’re not very careful that can lead to discontent and a parting of the ways.  And in most break ups, I think it’s fair to say that one side wants to break away more than the other.

Couples may have legal obligations to satisfy before they can extricate themselves from their relationship, and that’s also often the case with an employment relationship.

Employers often include non-compete clauses in employment contracts to protect their legitimate business interests should an employee decide to move to a competitor or set up in direct competition with them.

Of course, restricting and restraining an employee in this way might be legitimate, fair, and enforceable, but that will only be where the clause is reasonable and merely seeks to adequately and not overly protect the employer’s legitimate business interests. The prevention of competition is not in itself a legitimate business reason.

Non-compete clauses are notoriously troublesome because any clause that seeks to restrict an employee’s ability to work for another employer or to set up business on their own account will be tested for fairness and may be found to be unenforceable.  So a judgment has to be made between an individual’s right to earn an honest living, and an employer’s right to protect the business they have built up, possibly over many years, which is a difficult balancing act to pull off.  It’s not surprising then that at a time when the economy has taken a massive hit due to the Covid-19 lockdowns, the Government has revisited the subject of non-compete clauses, with a view to restricting their use and thereby encouraging innovation and entrepreneurialism.

On 4 December the Government launched a consultation on non-compete clauses.  On the table are the options to legislate for clauses only to be enforceable when the employer has provided compensation during the term of the clause, and/or to limit their length. Alternatively a complete ban on any restrictions has been suggested, but this option is less likely.

Although the main focus of the consultation is on non-compete clauses, views are also being gathered on other restrictive clauses such as non-solicitation, non-poaching, non-dealing etc.

So in future, employers may have to think more carefully before including such restrictions in contracts, and in the often quoted, and more often misquoted, words of Kahlil Gibran, take the view of ‘If you love somebody, let them go…’

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