Government faces scrutiny over non-compete clauses

Today, the Prime Minister confirmed plans to introduce legislation aimed at addressing non-compete clauses that have been described as “trapping” workers and serving as a “drag on innovation”. In the wake of this announcement, Dan Pollard, a partner at employment law firm Fisher Phillips, expressed his concerns regarding the lack of detail in the government’s proposals. He noted that while the Prime Minister characterises the initiative as the “Bosman ruling for the innovation sector”, specifics about the plan remain unclear.

Pollard highlighted that the Labour administration, under Keir Starmer, previously released a comprehensive working paper in November 2025 which explored various options for reform. These included an outright ban on non-compete clauses, a limit on their duration, and the establishment of a salary threshold. Pollard pointed out that it remains uncertain which approach Greater Manchester Mayor Andy Burnham would prefer, adding that Burnham’s focus on start-ups, scaling firms, and the “everyday economy” might indicate an intention to pursue a distinct strategy altogether.

The debate over non-compete clauses is particularly complex, as Pollard commented that “the case for reform rests on promoting innovation, but the position is far more nuanced than the Prime Minister would have us believe.” He elaborated on the divergent views within the business community, questioning whether non-compete clauses ultimately enhance or detract from innovation. He stated that “the opposing view is that, properly used, non-competes protect investment by safeguarding know-how,” especially in early-stage companies where patent protections are not yet viable.

Pollard further expressed his belief that genuine support for innovation in the UK would require reevaluating current reforms concerning unfair dismissal laws, which he believes could hinder the country’s appeal to global employers. He warned that from 1 January 2027, employees will be entitled to uncapped compensation, a move that could deter innovators from hiring in the UK. He concluded that “no reform of non-competes will offset that damage,” indicating a deep concern about the overall impact of government policy on the innovative landscape.