Reform of restrictive covenants: our clients' views
SECTION 1
We asked our clients for their views on the Government's proposal to either (i) ban non-competes or (ii) require employers to pay employees for non-competes.
Polling questions:
- To what extent are you risk averse or risk tolerant with regards to running your business? (Very risk averse / Somewhat risk averse / Neither risk averse nor risk tolerant / Risk tolerant / Very risk tolerant)
- To what extent do you agree or disagree with the following statements? (Strongly disagree / Disagree / Neither agree nor disagree / Agree / Strongly agree)
- 2.1. After launching my business, I became more open to taking risks.
- 2.2. Risk-taking is important to my business’ growth.
- What, if any, potential risks are affecting your business right now? Tick all that apply. (Difficult economic climate / Supply chain disruption / Unfavourable tax regime / Cybersecurity attacks / Regulatory environment / Difficulty in attracting talent / Geopolitical conflict / N/A There are no potential risks affecting my business right now / Other, please specify)
- How would you describe the level of risk in the business environment today compared to one year ago? (Much less risk / Somewhat less risk / About the same level of risk / Somewhat more risk / Much more risk / Not applicable – my business is less than one year old)
- Which potential risks, if any, are you most concerned about the impact of in the coming year? Tick up to three. (Difficult economic climate / Supply chain disruption / Unfavourable tax regime / Cybersecurity attacks / Regulatory environment / Difficulty in attracting talent / Geopolitical conflict / N/A There are no potential risks affecting my business right now / Other, please specify)
- What do you anticipate the overall level of risk in the business environment will be like in 12 months’ time? (Much less risk / Somewhat less risk / About the same level of risk / Somewhat more risk / Much more risk / Unsure)
- How often, if at all, do you/would you rely on external, professional support when? (Always / Often / Sometimes / Rarely / Never)
- 7.1. Raising finance
- 7.2. Ensuring effective corporate governance
- 7.3. Managing data privacy risks and ensuring regulatory compliance
- 7.4. Reviewing and negotiating contracts for your business
- 7.5. Protecting intellectual property (e.g., trademarks, patents, copyrights)
- 7.6. Handling disputes or conflicts that may arise
- To what extent do you agree or disagree that the following people understand what your business needs to succeed? (Strongly disagree / Disagree / Neither agree nor disagree / Agree / Strongly agree / Unsure)
- 8.1. Conservative politicians
- 8.2. Labour politicians
- 8.3. SNP politicians
- 8.4. Liberal Democrat politicians
- 8.5. Green Party politicians
- 8.6. The regulators relevant to my industry
- 8.7. Universities
- 8.8. Potential investors
- To what extent is AI a threat to your current business model? (A significant threat / Somewhat a threat / Neither a threat nor not a threat / Not much of a threat / Not a threat at all)
- To what extent is AI an opportunity for your current business model? (A significant opportunity / Somewhat an opportunity / Neither an opportunity nor not an opportunity / Not much of an opportunity / Not an opportunity at all)
- How easy or difficult do you think it will be / would be either to attract the funding your business needs, or to achieve an appropriate market valuation for it from the following sources over the next twelve months? (Very easy / Quite easy / Neither easy nor difficult / Quite difficult / Very difficult / Unsure)
- 11.1 The UK
- 11.2 Europe (excluding the UK)
- 11.3 The US
Introduction
Our survey results suggest that the Government's proposals are not well targeted in achieving their underlying objectives – namely boosting innovation and promoting flexibility within the labour market to support the UK's economic recovery from the impact of COVID-19. This consultation is highly relevant to our employer clients: 90% of the respondents to our survey use, or have used, non-competes in their contracts of employment.
As practitioners, we consider that the Government's premise for this consultation only addresses one perspective: that of the entrepreneur setting up a new business.
Encouraging innovation is important, but without restrictive covenants, how can those entrepreneurs protect what they have created when they themselves become employers? In many industries, restrictive covenants are an essential tool for the preservation of a business' commercial viability. Less than five years ago, the Government had concluded no action was necessary on restrictive covenants following a 2016 Call for Evidence. At the time the Government concluded that restrictive covenants were a "valuable and necessary tool" and "do not unfairly impact on an individual’s ability to find other work.” We have seen no evidence that the pandemic has changed this, and our clients agree.
Contact us for more information.
1A NOT Bespoke | NOT Flush | NO Surface
At the end of last year, the Government launched a consultation on reforms to non-compete clauses in contracts of employment. We surveyed our employer clients across a wide range of sectors for their views on the 37 consultation questions, and were overwhelmed with the volume of considered responses we received.
Mishcon de Reya sat on the Employment Lawyers' Association's (ELA) working party responding to the consultation earlier this year, and our clients' responses formed part of ELA's comprehensive response (here). The Government has not said when it will publish its report on the consultation. In the meantime, we summarise the results of our survey.
To coincide with the launch of the survey, we have also produced a podcast discussing recent developments on restrictive covenants as part of our Mishcon Academy: Digital Sessions series.
1B NOT Bespoke | IS Flush | NO Surface
At the end of last year, the Government launched a consultation on reforms to non-compete clauses in contracts of employment. We surveyed our employer clients across a wide range of sectors for their views on the 37 consultation questions, and were overwhelmed with the volume of considered responses we received.
Mishcon de Reya sat on the Employment Lawyers' Association's (ELA) working party responding to the consultation earlier this year, and our clients' responses formed part of ELA's comprehensive response (here). The Government has not said when it will publish its report on the consultation. In the meantime, we summarise the results of our survey.
To coincide with the launch of the survey, we have also produced a podcast discussing recent developments on restrictive covenants as part of our Mishcon Academy: Digital Sessions series.
1C NOT Bespoke | NOT Flush | HAS Surface
At the end of last year, the Government launched a consultation on reforms to non-compete clauses in contracts of employment. We surveyed our employer clients across a wide range of sectors for their views on the 37 consultation questions, and were overwhelmed with the volume of considered responses we received.
Mishcon de Reya sat on the Employment Lawyers' Association's (ELA) working party responding to the consultation earlier this year, and our clients' responses formed part of ELA's comprehensive response (here). The Government has not said when it will publish its report on the consultation. In the meantime, we summarise the results of our survey.
To coincide with the launch of the survey, we have also produced a podcast discussing recent developments on restrictive covenants as part of our Mishcon Academy: Digital Sessions series.
1D NOT Bespoke | IS Flush | NO Surface
At the end of last year, the Government launched a consultation on reforms to non-compete clauses in contracts of employment. We surveyed our employer clients across a wide range of sectors for their views on the 37 consultation questions, and were overwhelmed with the volume of considered responses we received.
Mishcon de Reya sat on the Employment Lawyers' Association's (ELA) working party responding to the consultation earlier this year, and our clients' responses formed part of ELA's comprehensive response (here). The Government has not said when it will publish its report on the consultation. In the meantime, we summarise the results of our survey.
To coincide with the launch of the survey, we have also produced a podcast discussing recent developments on restrictive covenants as part of our Mishcon Academy: Digital Sessions series.
Our clients consider that:
- The Government's proposals will not achieve their desired objective of promoting innovation.
- Banning non-competes would make hiring new talent easier. However, concern about the inability to protect business interests from unfair competition far outweighed any such advantages.
- There is no appetite for significant reform.
Non-competes remain a valuable and necessary tool, which in general do not unfairly impact on an individual’s ability to find other work.
We believe that such restrictions are better placed in a shareholders' agreement to give them added weight. We would consider - possibly – setting them to one side and not including them in an employment contract, but appreciate this is abold step.
Feugiat nullam in facilisis eu lorem ipsum
Eu urna sit in sit tempus, montes, sed consectetur cursus. Feugiat nullam in facilisis lorem ipsum dolor sit eu.
Amet fringilla tempus tortor sollic itudin non purus
Sit amet
Consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat
Feugiat nullam in facilisis eu lorem ipsum
Eu urna sit in sit tempus, montes, sed consectetur cursus. Feugiat nullam in facilisis lorem ipsum dolor sit eu.
A reminder of the law today
NEXT SECTION
In the employment context, restrictive covenants are contractual provisions designed to prevent employees from competing with their former employer for a limited period after they leave.