Government reforms (1): Restrictive covenants – call for evidence

What do we already know?

We updated you in our Blog by Anne-Marie Boyle Restrictive Covenants – take a fresh look that the Government has announced that it is launching a ‘call for evidence’ on restrictive covenants.

What’s the detail?

On 24 April 2016, BIS announced plans to investigate employment rules that could be stifling small businesses and entrepreneurship.  This is part of the Government’s ‘National Innovation Plan’ drive to make Britain the best place in Europe to innovate and start up new business which will be published later this year.

BIS plans include a call for evidence seeking views on non-compete clauses, see here, and a survey on how the UK can improve its innovation framework, see here.

The survey closed on 30 May 2016 and the call for evidence is due to be launched shortly.

The call for evidence on non-compete clauses will “look for views from individuals and employers on whether this type of restrictive practice is acting as a barrier to innovation and employment and preventing British start-ups from prospering”.

Non-compete clauses are a type of restrictive covenant which prevents individuals from competing against their former employer or working for a competitor for a set period of time.   However, as explained in our Anne-Marie’s Blog, Restrictive Covenants – take a fresh look, it is not just the non-compete restriction on which the Government is seeking views, it will also include ‘non-solicitation’ and ‘non-poaching of colleagues’ covenants too.

It will be interesting to see how many employers agree that restrictive covenants stifle innovation as the damaging effect on employers is more immediately obvious. An employer that has invested time and money in an employee who is then allowed to go off and immediately compete has lost any chance to protect its business and client relationships from that competition.

However, as Anne-Marie comments in her Blog, maybe it’s time to come up with other creative ways to ensure that your employees are kept incentivised to stay with you and not steal your clients?

Given the potential importance of this call for evidence we’ll be sure to update you on its progress, so watch this space…

In the meantime please do not hesitate to contact Anne-Marie Boyle, at anne-marie@menzieslaw.co.uk or any other member of the team for advice and practical guidance on your restrictive covenants or other ways to keep your clients safe.