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Government Update on Restrictive Covenants

David McGarry, Executive Director

written by David McGarry, Executive Director

​In 2020, the government announced a consultation to start a debate over the application of post-employment restrictive covenants.

It is an area where some individuals are subjected to 6/9/12 months restrictions.

Arguments for reform circled around:

  • The stress inflicted on former employees about what they can and cannot do when starting a new role.

  • The anxiety inflicted on former employees about legal threats of them talking to any former clients.

  • The pressure of former clients wanting to work with former employees, and not appreciating a company telling that said client who they can and cannot work with.

  • Most importantly, the impact of a former employee’s mental wellbeing at not being able to make the same financial living for themselves or their family due to restrictions.

The government initially had two ideas for legislating this area, before landing with a new third idea. They announced this year, they want to cap all restrictive covenants to 3 months. Undoubtedly, it will be quite some time, and most probably some more changes before this becomes legislation. However, it represents a big win for employee rights.

In February 2021, EA First took an industry-pioneering decision to scrap all restrictive covenants in our employment contracts.

 

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