Employment Law Update: What Employers Need to Know About Restrictive Covenants in 2025
In the evolving landscape of UK employment law, employers must stay ahead of proposed legislative changes, particularly those affecting how businesses protect their interests after an employee leaves. One area currently in the spotlight is the use of restrictive covenants, especially non-compete clauses.
This employment law update explains the current position, outlines the UK Government’s proposed reforms, and highlights what steps employers should take now.
What Are Restrictive Covenants in UK Employment Contracts?
Restrictive covenants are clauses in employment contracts that restrict what an employee can do after leaving a role. Common types include:
Non-compete clauses: Prevent employees from joining a competitor or launching a similar business.
Non-solicitation clauses: Prevent former employees from approaching or poaching previous clients or colleagues.
Non-dealing clauses: Prohibit dealings with former clients, even if the client initiates contact.
Confidentiality clauses: Protect sensitive or proprietary business information.
Garden leave: Keeps an employee out of the market during their notice period while they remain on payroll.
Such clauses are enforceable only if they protect a legitimate business interest, are reasonable in scope, and do not extend further than necessary.
Current Legal Position on Non-Compete Clauses
Currently, there is no statutory cap on the duration of non-compete clauses. UK courts will generally enforce them where reasonable, often for up to 12 months, particularly for senior or founder-level employees.
Key facts:
Around 5 million UK workers are estimated to be subject to non-compete clauses.
Typical durations average around six months.
No legal reforms have yet taken effect, but many employers are proactively reviewing employment contracts.
Proposed Government Reforms
In May 2023, the UK Government proposed introducing a statutory cap of three months for post-termination non-compete clauses in employment contracts.
The proposed reform does not affect:
Non-solicitation or non-dealing clauses
Confidentiality clauses
Garden leave or paid notice periods
Shareholder, partnership or LTIP agreements that fall outside standard employment contracts
The three-month cap is intended to balance economic flexibility with the need for employers to protect genuine investments in staff and intellectual property.
When Will the Changes Take Effect?
As of summer 2025, no legislation has been passed. The proposal remains under parliamentary review and is likely to form part of a wider Employment Rights Bill. Questions remain about how the cap will apply to existing contracts or whether longer restrictions can still be enforced via settlement agreements.
NDA and Whistleblowing Reforms
The Employment Rights Bill also proposes changes to non-disclosure agreements (NDAs), particularly those used to silence victims of harassment or discrimination. Under the new proposals, NDAs would not prevent employees or witnesses from speaking out about workplace misconduct, although confidentiality clauses for commercial or intellectual property purposes would still be permitted.
Key Actions for Employers
Contract drafting
Review contracts to ensure any non-compete clauses are futureproofed for a possible three-month statutory limit. Strengthen other restrictions like non-solicitation or confidentiality where appropriate.
Notice periods and garden leave
Employers may choose to extend notice periods or use garden leave to maintain a longer post-employment restriction lawfully.
Equity and incentive arrangements
Examine whether restrictions in share option agreements or long-term incentive plans (LTIPs) could fall outside the scope of employment law and the proposed cap.
Settlement agreements
Monitor how the law develops regarding whether post-termination restrictions agreed within settlements can exceed the proposed cap.
NDAs and transparency
Avoid overly broad NDAs and ensure employees can speak up about misconduct without being unlawfully restricted.
There is currently no statutory limit on non-compete clauses in UK employment contracts, but change is likely. The Government has proposed a three-month cap for post-termination non-competes, although the reform has not yet passed into law. Other clauses, such as non-solicitation or confidentiality provisions, remain unaffected.
With wider changes expected under the Employment Rights Bill, employers should review restrictive covenants and NDAs now to ensure compliance in the near future.
How Fairmont Crest Can Help
Fairmont Crest can support your organisation in reviewing and updating your employment documentation to ensure all restrictive covenants remain enforceable, compliant, and future-ready.
Get in touch today to speak with our experts!