Rethinking non-compete clauses: The government’s proposals explained
Earlier this year, the UK Government invited responses to its working paper regarding non-compete clauses in employment contracts. This blog updates on non-compete clauses, their link to competition law, and the changes that the government is considering.
What is a non-compete clause?
A non-compete clause restricts an individual’s ability to work for a competitor, or from starting a rival business for a certain period of time after they leave their employer. A non-compete clause is used to protect a business’ legitimate interests and prevents a former employee from exploiting a business’ trade secrets and / or sensitive commercial information once they have finished their employment. In general, non-compete clauses are unenforceable under the common law principle of “restraint of trade” which ensures employees are free to pursue their employment without hindrance. Therefore, non-compete clauses are only enforceable if they are reasonable, necessary to protect a business’ legitimate interests, and are specific to the role. The courts will not enforce non-compete clauses that are overly broad, restrictive or unfairly limit an employee’s ability to work.
Non-compete clauses and competition law
In 2024, the CMA published research on competition and market power in UK labour markets. Its report found that non-compete clauses are prevalent across industries in the UK economy, impacting around 30% of workers and a higher percentage in ICT and scientific services markets. It further found that they are prevalent in sectors that would not traditionally be considered to have a need to protect intellectual property – such as in retail, education, and food services, where around 20% of workers have non-compete clauses in their contracts.
Sarah Cardell, Chief Executive of the CMA, noted in a speech accompanying the publication of the report that “widespread prevalence of non-compete clauses across the economy could act as a barrier to job switching”. While she explained that non-compete clauses would not generally infringe competition law and would fall outside the scope of the CMA’s competition enforcement powers, she expressed the hope that the report would help inform government legislation and policy.
By way of comparison (and contrast) in the US, the FTC determined in 2024 that non-compete clauses were anti-competitive. At that time, the FTC considered the use of non-compete clauses to be an unfair use of post-employment clauses. In response, several legal challenges were filed challenging the FTC’s rule. In September 2025, the FTC reconsidered and ultimately walked back from its position that non-compete clauses were anti-competitive. However, even though an outright ban is no longer being pursued by the FTC, it has indicated that it will continue to enforce legislation “aggressively against noncompete agreements”.
The government’s proposals
The government is looking to create a more “dynamic” labour market as a means of driving economic growth and has identified non-compete clauses in employment contracts as a potential barrier to that aim. Accordingly, the government has taken inspiration from other jurisdictions in putting together four reform proposals, on which it is now seeking public feedback.
Proposal 1: statutory limits on the length of non-compete clauses
The government’s first proposal would impose a maximum length on non-compete clauses. Research shows that most non-compete clauses are set between 6 – 12 months. The current government is considering whether a cap of more or less than 3 months is a suitable timeframe.
The government is also considering whether statutory limits on the length of non-compete clauses should apply and / or differ depending on the employer’s size. One potential scenario being considered is imposing limits for non-compete clauses at 3 months for companies with more than 250 employees, and 6 months for companies with less than 250 employees.
Proposal 2: banning non-compete clauses in employment contracts
Another proposal would ban non-compete clauses completely. Under this option, non-compete clauses would be unenforceable in all circumstances, and employers would have to look to alternative measures to protect their legitimate business interests. This might include implementing other restrictive covenants, withdrawing deferred compensation and benefits for employees who move to a competitor, or restricting the use of confidential information within the business.
Proposal 3: banning non-compete clauses below a salary threshold
A third approach is a modified version of Proposal 2, which would only impose a ban on non-compete clauses on employees who earn below a certain salary threshold. The objective here is to avoid imposing non-compete clauses for lower-paid workers who are in a less financially secure position to see out the period or challenge the enforceability of a non-compete clause.
Proposal 4: combining a ban below a salary threshold with a statutory limit
The final proposal seeks to combine a ban on non-compete clauses below a salary threshold with a statutory time limit. The government is accepting views on banning non-compete clauses below a, currently unknown, salary threshold with a limit of 3 months.
The government’s consultation
The consultation closed on 18 February 2026. The government sought input on the four alternative policy options set out above by posing a series of questions to stakeholders in order to develop and advance the following objectives:
• improving labour market dynamism;
• reducing barriers to recruitment;
• promoting competition and innovation; and
• protecting workers from burdensome non-compete clauses.
The government has positioned this consultation as part of its broader growth agenda.
CMA’s response
In response to the consultation, the CMA submitted that measures to restrict the use of non-compete clauses should meet three objectives (i) reduce tension on labour mobility across all sectors and income levels; (ii) reflect that options available to employees to mitigate the impact of non-competes may differ, particularly across income levels; and (iii) recognise that there may be contexts where non-compete clauses are appropriate, as pro-innovation arguments for non-competes appear more likely to hold in some circumstances for higher salaried roles. Accordingly, the CMA stopped short of supporting a total ban on non-compete clauses, and considered the government’s ‘combined’ approach via Proposal 4, to best reflect the outlined objectives.
Conclusion
The CMA’s research report into the impact of competition and employer market power aims to inform the government’s policy and is “primarily a contribution to the wider policy debate”.
While policy decisions are outside the CMA’s jurisdiction, its research aims to understand issues within labour markets to advance the CMA’s work alongside competition policy more broadly.
Notably, the CMA, like other regulators, has taken a proactive approach to labour issues and in 2025 issued a fine on broadcasters for fixing rates of pay for freelance workers. This was followed a few months later by the European Commission fining Delivery Hero and Glovo for entering into an agreement not to poach each other's employees. Accordingly, while non-compete clauses themselves are a matter for legislative consideration, labour issues remain firmly in the crosshairs of competition regulators, in particular in light of the government’s agenda for promoting growth.