Government publishes working paper on options to reform non-compete clauses
Non-competition clauses in employment contracts are a contentious issue. They are clauses which survive the end of the employment relationship and restrict the ex-employee, for a period of time, from working for a competitive business or setting up in competition with their ex-employer. These clauses will only be enforced by the Courts if they are narrowly drafted and go no further than is reasonably necessary to protect legitimate business interests. Legitimate business interests include factors such as protecting confidential information and client relationships.
Non-competition clauses are a form of restrictive covenants. Other restrictive covenants, which are less controversial, include clauses which prevent solicitation or dealing with clients, or those which prevent solicitation or dealing with suppliers.
There is a good argument that, if the identified legitimate business interest can be sufficiently protected via these other forms of covenant, then these should be used – there should be no place for a non-competition provision at all.
The Government remains concerned that non-compete clauses may be impacting their ‘growth mission’ by hindering free movement of labour. It has recently published a working paper asking for opinions on options to reform non-compete clauses.
The Government’s working paper outlines possible options including:
- a statutory limit on the length of non-compete provisions – perhaps to three months
- a statutory limit linked to business size
- restricting the use of non-compete provisions to high earners only
- an outright ban on any form of non-compete clause.
The closing date for responses and views is 18th February 2026.
In light of the Government’s clear direction of travel on this: a move towards a more restrictive role for non-competition clauses, employers should take the time now to review their contractual documentation and check that it is fit for purpose. If non-compete clauses are going to become less reliable, then businesses with high risk from departing employees should consider the following:
- Reviewing express confidentiality clauses to make sure that employees are absolutely clear what information is covered and that it remains confidential after the end of employment.
- Reviewing other restrictions to see if they can adequately ‘fill the gap’ if non-competition clauses can no longer be freely used. Look at non-solicitation and non-dealing clauses in particular and check that they are tightly drafted.
- Consider including garden leave provisions alongside lengthy notice periods for key staff members. This combination will give them a period of time away from the business (and away from sensitive business information) before they are able to move to a competitor.
When is a dismissal not an actual dismissal: when it’s a constructive dismissal
Constructive unfair dismissal is a strange beast. It is an unfair dismissal but there is no actual dismissal involved at all. It occurs when an employee resigns in response to their employer's conduct. The employer’s conduct must be such that it amounts to a repudiatory breach – a breach going to the root of the contract. If it does, then the resignation is treated, in law, as a dismissal, and the employee can claim unfair dismissal. One of the key requirements for constructive dismissal is that the employee must not have affirmed the employment contract and accepted the breach before resigning. This is not something which is easy to assess, but tribunals look at factors such as the amount of time which elapses between the breach and the resignation and whether, in the intervening period, the employee conducted themselves in a way which indicated that they had accepted the breach.
The issue of affirmation was front and centre in the recent Employment Appeal Tribunal case of Barry v Upper Thames Medical Group. Dr Barry was told by the Trust that she would not be paid sick pay. This was a breach of her employment contract. Six months later, she resigned. She claimed constructive dismissal, relying on this breach. The Trust argued that by delaying for six months between becoming aware of the breach and resigning, Dr Barry had affirmed the employment contract and accepted the breach. The Employment Appeal Tribunal did not agree. Even though there had been a six-month delay, there had been no affirmation. The EAT pointed to the fact that Dr Barry didn’t work at all following the breach and actively disputed the breach throughout the six-month period. All of this pointed against her affirming her employment contract.
This case is a useful reminder to employers that a delay in resigning, in and of itself, does not mean that a breach of contract has been affirmed. If the employee continues to work ‘under protest’, then the breach may well continue. If an employer is faced with a similar situation, then simply sitting on the issue and hoping it will go away through the passage of time is unlikely to work. Employers should engage with the employee, acknowledge mistakes, and attempt to reach a mediated agreement to move forward. Document all such discussions - especially if you might want to rely upon them as evidence of affirmation by the employee.
Drafting a discretionary Bonus Scheme: key considerations for employers
Discretionary bonus schemes can be a valuable tool for recognising performance and driving engagement, but they also present legal and practical risks if not carefully drafted. Employers need to strike a balance between retaining flexibility and providing enough clarity to avoid disputes over fairness, eligibility or entitlement.
A common question is whether to specify the factors taken into account when exercising discretion. Leaving discretion completely open gives employers maximum control, but it can also leave decisions more vulnerable to allegations of unfairness, discrimination, or bias. A middle ground is often more effective – for example, setting out that company, individual, and potentially team performance may all be considered when assessing bonus awards.
Eligibility for bonuses can also become tricky when employees join or leave part-way through a bonus year. Employers have several options when dealing with new starters: excluding them until the next bonus year, allowing immediate participation with pro-rating, or requiring completion of probation before eligibility. Each approach has advantages, but clarity is essential to avoid disputes and administrative complexity.
Similar considerations apply when employment ends mid-year. Employers may choose to exclude leavers entirely, take a hybrid approach where only “no-fault” leavers, such as redundancy or ill-health cases, receive a pro-rated bonus, or adopt a more generous position and pro-rate for all departures. The importance of clear drafting was highlighted in Clark v Nomura International, where the absence of a clause allowing the employer to withhold or apportion bonus meant the full amount had to be paid.
Beyond joiners and leavers, employers should consider wider circumstances in which they may wish to withhold payment, such as where an employee is subject to disciplinary investigation or suspension. Including provisions to defer payment until outcomes are known can be particularly useful in industries where investigations are lengthy.
Clarity around dates is also crucial. Employers should define the bonus year and specify exactly when entitlement is lost – for example, whether giving notice or the termination date triggers forfeiture.
Finally, clawback provisions can help protect the business where bonuses have been paid but repayment is justified. These clauses must be carefully drafted to be enforceable and ideally included within the employment contract. Alternatives such as deferring payment over time can give employers greater control.
A well-drafted discretionary bonus scheme can provide flexibility while reducing risk. Clear rules, thoughtful design and careful documentation will give employers the best chance of administering bonuses fairly and consistently.
The need to take a sensitive approach to sick leave
In the recent employment tribunal case of Robinson v Middlesex Learning Trust, a teacher received almost £140,000 compensation after her employer failed to take a sensitive approach to her sickness absence.
Ms Robinson was employed on a one year fixed-term contract to teach design and technology at the Trust. After only a few weeks in post, she went off ill with sciatica. She had an operation and was off for several months whilst she recovered. She came back to work for a short period of time before going off sick again, this time with migraines. It was accepted that she was a disabled person under Equality Act 2010. Her contract was not renewed at the end of her one-year fixed term. The reason given was a reduction in funding for design and technology teaching.
The employment tribunal held that the Trust had subjected Ms Robinson to harassment related to her disability in the insensitive way it had handled her illness. In particular:
- Holding a sickness absence meeting where six staff members attended was found to be hostile conduct.
- Telling Ms Robinson that students and staff had suffered as a result of her absence and that she had let them down amounted to disability-related harassment.
- Suggesting that Ms Robinson had tactically returned to work for a short period of time in order to maximise sick pay was also an act of harassment.
- Failing to renew Ms Robinson’s fixed term contract was found to be for a reason related to her disability. The tribunal found that it would have been renewed if she had not had periods of absence.
This is an extreme example of an unwell employee having to deal with an unsupportive workplace. However, this case can give other employers pointers of what not to do when dealing with employees who are off work:
- Think carefully about the conduct of sickness absence meetings. The environment should be a supportive one – focused on enabling the employee to return to work if possible.
- Even if you are thinking it, do not openly allege that the employee might be ‘gaming’ the system to maximise sick pay. If an employee is genuinely unwell, this is highly insensitive. If there are concerns that the absence is not genuine, then investigate this separately. Do not make off-hand comments. Equally, if ‘gaming’ the system to maximise sick pay is an issue for your organisation, consider altering your policy so that employees have to return to work for a minimum continuous period before sick pay entitlement renews.
- Whilst the pressures that an absence are placing on a business can become an important consideration at the point at which a sickness absence issue is being evaluated for the purposes of a capability dismissal, it is not reasonable or fair to criticise a genuinely ill employee for the impact their absence is having on the workplace outside of this context. It could, as in this case, be seen as intimidating and hostile behaviour.
- Having a clear capability policy which sets out the format of sickness absence meetings and other dealings with an absent employee may have avoided many of the issues which arose in this case. It is unlikely that an employer’s written policy would suggest that six employer representatives should attend a sickness absence meeting!
How we can help
Please contact Sally Morris, Head of Employment, at sally.morris@mfgsolicitors.com or call on 01905 610410.