Non-competes under fire: Government aims to boost labour mobility

The working paper closely aligns with competition policy and complements the ongoing focus by the UK Competition and Markets Authority (“CMA”) to crack down on anti-competitive conduct in labour markets, with recent cases targeting wage-fixing and no-poach agreements.

Non-compete clauses, while traditionally viewed through an employment law lens, are now more squarely part of this broader competition policy debate. Through reform, and this joined up approach, the Government seeks to deliver higher living standards, reduce barriers to job mobility, promote innovation,  drive competitive markets and deliver growth.

Non-compete clauses – what is the case for reform?

Non-compete clauses typically restrict an individual’s ability to work for, or establish, a competing business after leaving their employment. While these clauses have traditionally been considered an employment law issue (and are only enforceable in limited circumstances – more on this below) they are now part of the wider debate on competition policy.

While non-compete clauses can be an important mechanism for employers to protect legitimate business interests (e.g. protecting trade secrets, customer connections, confidential information etc.) and are often used in relation to more senior employees who have access to strategic business information and key client relationships, their enforceability is highly fact-specific.

A non-compete clause is unenforceable for being in restraint of trade, unless an employer can demonstrate that it:

• protects one or more of the employer’s legitimate business interests ;and
• is drafted no wider than is necessary to protect that/those legitimate interest/s. For example, if a less onerous type of covenant (e.g. non-solicitation or non-dealing clauses) would provide adequate protection, the non-compete clause will be unenforceable.

The DBT’s  case for reform is that: “even if these [non-compete] clauses are unlikely to be unenforceable if challenged in the courts, their presence can deter workers from moving jobs to secure better pay or working conditions”. Furthermore, the DBT comments that non-compete clauses limit mobility and exert downward pressure on wages, raise concerns about their cumulative impact on market efficiency and can restrict competition by making it harder for smaller businesses to scale up.

Options for reform?

The DBT’s working paper invites views on whether non-compete clauses in UK employment contracts should be reformed in the following ways:

• a blanket ban on non-compete clauses;
• statutory limits on their length;
• a ban on non-compete clauses for employees below a salary threshold;
• a combined approach of banning non-compete clauses below a salary threshold with a statutory limit applied to those earning above the threshold;
• whether restrictions should apply only to non-competes or extend to other covenants (e.g., non-dealing clauses);
• the potential impact of the above options on inward investment and innovation; and
• barriers to challenging non-compete clauses in court and cost concerns.

The DBT is also considering whether restrictions should vary by company size.

The working paper invites responses by 18 February 2026.

The international dimension

The UK is not alone in taking this initiative. Many other jurisdictions have been taking action to limit the impact of non-compete clauses. For example, in the US several states have taken a strong public policy position against non-compete clauses where they have been banned and in September 2025 the Federal Trade Commission launched a public inquiry into non-compete clauses at the federal level. France, Germany and Italy have in place a requirement for mandatory compensation to be paid to workers for the period of a non-compete clause while Luxembourg and Austria have banned non-competes below a salary threshold.

Reform to non-competes integral to competition policy

The DBT’s initiatives signal a closer alignment between employment law and competition policy with the working paper reflecting a broader trend of treating labour as integral to competitive markets. Restrictions on worker mobility can reduce rivalry between firms, dampen wage growth, and stifle innovation. The CMA’s guidance warns that agreements, even indirect ones, that limit competition for talent can amount to anti-competitive conduct. While non-competes are not per se unlawful, their cumulative effect across an industry can raise concerns similar to those seen in cartel enforcement.

What this means for employers?

For employers, the proposals for reform could reshape their approach to the protection of their business interests and drafting of current restrictive covenants. Employers will need to stay abreast of developments and consider reviewing their employment contracts to assess current practices and risks in anticipation of potential reform in this area, while continuing to ensure compliance with competition rules when it comes to retaining and hiring staff as well as dealing with pay reviews.   

This is a rare opportunity to influence policy at a formative stage. By responding to the discussion questions raised by the DBT, businesses can help to ensure that any reforms strike the right balance between protecting legitimate business interests and promoting a competitive labour market.

Further reading

• Competing for talent
• Crossing the Line: How a Minority Shareholding Enabled Anticompetitive Conduct in Labour Markets
• Competition authority warns employers to avoid anti-competitive HR practices
• Competition authorities crackdown on employment markets: a new era for cartels
• Federal Trade Commission proposes rule to ban noncompete agreements in employment contracts