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Non-compete clause consultation splits opinions

11/05/2016 by Sarah Powers, Marketing

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Not surprisingly, the Government's announcement that they will be investigating the non-compete clause has caused quite a stir amongst UK businesses and entrepreneurs, generating a host of different opinions.

The Government announcement

"Business Secretary Sajid Javid has announced plans to look into employment rules that could be stifling British entrepreneurship by preventing employees from starting up their own business after leaving a job."

  • New plans to investigate employment rules that could be stifling small businesses and entrepreneurship.

  • Businesses across the UK asked for their views to feed into new government Innovation Plan – focused on promoting high-tech business and advanced manufacturing to revolutionise how we work and live.

  • Plans are part of a government pledge to make Britain the best place in Europe to innovate and start a business.

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legislation to help us understand what this would mean for your business.
We'll announce the results in our next business update email.

The legal view

CIPD's article recently stated that: "Legal experts fear employers will suffer from removal of constraints on where and how departing employees can work."

Dan Begbie-Clench, a partner at Doyle Clayton, said: "My understanding is that this would remove non-compete clauses entirely, or at least limit their application. There are some issues with non-competes, but if these changes were put in place and non-competes were prohibited, it wouldn't necessarily generate innovation but is probably going to be harmful for many employers."

Announcing the consultation, business secretary Sajid Javid said: "I am clear that I want to see more enterprising start-ups and greater productivity in a free and fair marketplace, by making sure we take action to break down any barriers that are curbing innovation and entrepreneurship."

The HR view

Personnel Today's article said: “The call for evidence may find that this is an area where the law diverges from practice,” said Qian Mou, employment law editor at XpertHR. “The law is fairly strict about the use of restrictive covenants and it can be quite expensive to enforce a restrictive covenant at court.

“But, in practice, employers often insert unenforceable restrictive covenants or ones that they do not intend to enforce into employment contracts to deter their employees from moving to a competitor.”

David Gibbens, Director, Poole Waterfield Accountants commented: "As an accountant who helps entrepreneurs on a regular basis, I know that changes to the non-compete clause will be welcome, to say the least. However, the impact this will have on those businesses who have invested in an employee prior to their new venture must also be considered."

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