Last reviewed 8 December 2020

The Department for Business, Energy and Industrial Strategy (BEIS) has launched two consultations seeking views on, firstly, options to reform post-termination non-compete clauses in contracts of employment and, secondly, on extending the ban on exclusivity clauses in contracts of employment.

Post-termination non-compete clauses

Non-compete clauses are used in contracts of employment to restrict an individual’s ability to work for a competing business, or to establish a competing business for a defined period after they leave.

The purpose of the consultation, which is one for comments until 26 February 2021, is to seek views on proposals to make non-compete clauses enforceable only when the employer provides compensation during the term of the clause.

BEIS also asks whether this could be complemented by additional transparency measures and statutory limits on the length of non-compete clauses and puts forward an alternative proposal to make post-termination, non-compete clauses in contracts of employment unenforceable.

The consultation document can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/941110/non-compete-consultation-document.pdf.

Ban on exclusivity clauses

BEIS has also invited comments on a proposal to extend the ban on exclusivity clauses to contracts where the workers’ guaranteed weekly income is less than the Lower Earnings Limit, currently £120 a week.

The intention is to allow low-income workers who are not able to secure the number of hours they would like from their current employer to seek additional work elsewhere.

BEIS notes that, following the impacts of the Covid-19 pandemic, companies are not always in a position to offer enough hours for every worker. If more workers are able to take on additional work, on short hours contracts, this could also increase businesses’ confidence to create jobs with contracts which suit them and their current circumstances.

The responses to this consultation, which is also open for comments until 26 February 2021, will help inform decisions on detailed policy questions such as the appropriate level to set the earnings threshold and the appropriate level of hourly wage cap for which an exemption to the ban may be warranted.

The consultation document can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/941088/exclusivity-clause-consultation-document.pdf.

Comment by Kate Palmer, HR Advice and Consultancy Director at Peninsula

Controversy connected with exclusivity clauses is not new; measures were taken back in 2015 to ban them from use in zero-hour contracts.

This means that some employers will already be familiar with when they can and can’t use them.

However, with the possibility that they will have to be removed from all contracts which meet the Government’s criteria, many more employers will need to prepare for the consequences.

Employment contracts would need to be reviewed and any clauses requiring exclusivity are likely to be replaced with something more flexible while still maintaining some control for the employer over any other work that the employee takes on.