Post-termination restrictions – stifling opportunities or protecting businesses?
April 26, 2017
Many employers include clauses in their contracts of employment to prevent the solicitation of customers, clients, suppliers, other employees or general competition for a defined period after the termination of employment.
Usually these clauses are used to protect the employer’s business and information and can restrict employees for 6 to 12 months after the employment relationship has terminated. Provided that the employer can show that it has a legitimate interest that it is appropriate to protect and that it is doing no more than is reasonable, then the parties are generally held to their bargain.
However, the Business Secretary has now announced a ‘call for evidence’ on whether post-termination restrictions, or non-compete clauses, in employment contracts act as a barrier to employment, innovation and entrepreneurship. Businesses are being asked whether restrictions that prevent an individual from competing against their former employer are stifling opportunities to innovate and grow. Although enforcement of these clauses can be expensive, many businesses see them as an essential protection from employees who leave and use their information to the benefit of a competitor or for the employee’s own new rival business.
The government has also launched an ‘Innovation Survey’ asking businesses for their views on issues such as access to data and intellectual property. The results are to be fed into the Innovation Plan that is due to be published later this year with the aim of making Britain the most attractive place in Europe to start up new businesses. More details about the survey can be found here.