The UK government has launched a new consultation on the future of non-compete clauses in employment contracts, setting out a range of reform options aimed at boosting labour market mobility, innovation and business growth and reducing barriers to recruitment. Responses are open until 18 February 2026.

What’s Being Proposed?

The working paper explores several potential models:

  • An outright ban:  Non-competes would become unenforceable in all employment contracts, similar to the approach in California.
  • A ban below a salary threshold:  Lower-paid workers would be fully protected, while non-competes could still be used for higher earners.  One suggestion would be to set the salary threshold at the additional rate tax threshold of £125,140 frozen until March 2031.  This would mean that those who are in low paid positions and not in a financial position to challenge the enforceability of the clauses would not have such clauses in their contract.
  • Statutory duration limits:  The consultation proposes the introduction of a maximum length for non-compete clauses.  The period could be shorter than the three months previously proposed and ranges from one month to twelve months, although the paper acknowledges that it is unlikely that an employer would seek to enforce a covenant for such a short period.  The statutory limit could be either a blanket rule or varied by company size (for example, three months for companies with more than 250 employees and six months for smaller companies).
  • A hybrid model:  A combined approach, banning non-competes for workers below a salary threshold and imposing a statutory time limit for those earning above the threshold.

Alongside these options, the consultation seeks views on whether reforms should extend to other restrictive covenants (such as non-dealing clauses), whether they should apply only to employment contracts, and whether high legal costs deter employees from challenging unenforceable restrictions.

What’s Missing?

Despite its breadth, the consultation leaves several notable gaps:

  • No discussion of mandatory compensation, which many European countries require when enforcing a non-compete.
  • Little consideration of garden leave, which could become a substitute for restricted non-competes.
  • No clarity on what counts as a “legitimate business interest”, leaving enforceability questions untouched.
  • Limited focus on non-employee arrangements, such as contractors, LLP members and partners.
  • No plan for day-to-day enforcement, despite evidence that many employees comply with unenforceable clauses due to fear of litigation.

What’s Next?

If taken forward, these reforms could represent the most substantial rewrite of UK restrictive covenant law in decades. Employers and employees alike should consider engaging with the consultation, as the final direction could reshape recruitment, retention and mobility across the labour market.

Thank you to Salma Khatab for all her help in preparing this post.