Regulating Restrictive Covenants in English Employment Law: Time for a Rethink?

Abstract

The potentially chilling effects of non-compete covenants on the ambitions and capacities of former employees to forge careers as commercial entrepreneurs have been propelled to the forefront of public debate in recent years. For example, in the US, reports in the press of rank and file employees working in sandwich bars being restrained by post-employment restrictions have sparked outrage. Nor has public debate in the UK been immune to such concerns. For example, the British Government has issued a call for evidence and a separate consultation paper on the future of non-compete covenants. The emphasis in these papers has been on versing the possible adverse consequences of non-compete covenants for the public good, the wider economy and social policy. Taking these ideas in the Government’s work as its point of departure, the concepts of the public interest and economic power are evoked in this article. Ultimately, the claim is made that in deciding whether to enforce non-compete covenants, the courts should afford greater significance to the public interest in the current incarnation of the common law restraint of trade doctrine. And this calls for a much livelier sense of the economic power that such covenants enable employers to exploit in the labour market, as well as the resultant social costs imposed on the public, consumers and society.