Government flags employment law change to cheerlead ‘wave of startups’

Business department consults on the reform of non-compete clauses so ex-employees can go out and start rival businesses

The government is pushing to change employment law to encourage a “wave of startups” across Britain.

The business department today launched two consultations: one looking to reform the use of non-compete clauses, which prevent individuals from starting up a competing business after they leave a position; the other enabling low-paid workers to work elsewhere rather than being tied to just one employer.

The Department for Business, Energy and Industrial Strategy (Beis) said the reform of the use of non-compete clauses would ensure talented individuals would unleash “a wave of new start-ups across the country”.

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If an employer does want to tie an individual into a non-compete clause, restricting them from starting a business within their expert field, then they would have to compensate them financially.

The government is also seeking views on whether it is necessary to go further and ban non-compete clauses altogether.

The move to liberate staff from non-compete clauses in employment law is squarely aimed at workers in technology and legal sectors who want to launch their own startups.

Other countries have also restricted exclusivity clauses in order to stimulate innovation, including Germany and France. In California, where non-compete clauses are not enforceable, the free movement of workers has been given as one reason behind the rapid growth of the tech sector.

>See also: 2020 set to be record year for new companies created

“A more flexible approach to non-compete clauses would be great for the start-up ecosystem,” Dominic Hallas, executive director for start-up business group Coalition for a Digital Economy, told the Financial Times. “You might have some moaning from incumbents, but it will be great for British tech and the British economy in the long run.”

Business secretary Alok Sharma said: “We want to ensure every worker has the freedom and flexibility to work in the way they want, where they want – whether that’s topping up their pay packet by taking on additional work, or being able to start their own business with the skills they’ve gained throughout their career.”

Further reading

Checklist for going self-employed – a Small Business guide