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UK government consults on impact of non-compete clauses on entrepreneurship


The UK government will look into the impact of 'non-compete' clauses on British entrepreneurship, business secretary Sajid Javid has said.

These clauses in employment contracts are designed to prevent individuals from competing against their former employer, or working for a competitor, for a set period of time. This can be up to nine months, the government said.

The government has published a call for evidence asking for views on innovation in the UK; including whether these clauses are preventing start ups from hiring the best talent, and acting as a barrier to innovation and employment.

The consultation looks at seven topics: regulation; procurement; access to finance; data challenger businesses; national infrastructure; and intellectual property.

The business secretary will also run a survey of businesses asking for their views on how government can work with them to turn ideas into new opportunities.

The responses received to the call for evidence and the survey will be used to develop a national innovation plan, the government said.

Javid said: "Home to some of the most innovative companies in Europe, Britain is already ahead of the curve in many ways when it comes to driving forward new ideas. But I am clear that I want to see more enterprising start-ups and greater productivity in a free and fair marketplace, by making sure we take action to break down any barriers that are curbing innovation and entrepreneurship."

Employment expert Stuart Neilson of Pinsent Masons, the law firm behind Out-Law.com, said: "There is a certain logic that supports the view that individuals should be free to pursue their career or profession with any employer that they choose. California has a strict ban on non-compete clauses and they seem to do quite well when it comes to innovation and investment."

"However you always have to be careful about unintended consequences. Would a ban make employers less likely to invest in the UK if they believed that there was a lack of protection for their IP or client connections? Would the ban mean that employers would resort to lengthier notice periods to keep employees tied to them and on garden leave for longer? Certainly it's an area that is worthy of some consideration by government, given that the law in this area originally developed in the Victorian era at a time when the world of work was a very different place," Neilson said.

The UK banned non-compete clauses in contracts with consultants last year. The Small Business, Enterprise and Employment Act is intended to protect lower paid employees on 'zero hours contracts' but also covers higher paid workers.

The previous UK government ruled out banning the use of zero hours contracts outright after a consultation exercise in 2013, but instead proposed a ban on exclusivity clauses to prevent abuse of the contracts and prevent vulnerable workers.

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