Burnham to clamp down on ‘unfair’ non-compete clauses
Andy Burnham is expected to launch a crackdown on lengthy notice periods and non-compete clauses in employment contracts in a bid to free up the jobs market for highly skilled workers.
In a speech later today, the Prime Minister will announce plans to tackle a proliferation of strict employment conditions, which force staff to give as much as 18 months notice before leaving and prevent them from joining or setting up a competitor.
Non-compete clauses have become particularly common in the highly competitive tech and finance sectors, where employers are fearful of former staff using intellectual property to their advantage at an industry rival.
But the strict legal hurdles have also been a blight for fast-growing tech companies, which have sounded the alarm over their inability to take on talent at the pace and rate they need to grow.
Often finance and ‘big tech’ companies will make employees agree to notice periods as long as 18 months, meaning they are economically inactive for several months while on gardening leave.
Last month, dozens of Britain’s fastest-growing start-ups called on the government to weigh into the “unfair” employment hurdles, which are especially widespread in the UK. In a letter to Burnham and business secretary Jonathan Reynolds, bosses from the likes of Synthesia, Fuse Energy and Elevenlabs branded labour immobility “a classic collective action problem”.
“These terms lower wages, reduce competition and undermine the innovation that drives economic growth,” they added.
Backlash from business?
Enterprise Britain, a pro-innovation lobby group set up by Ovo Energy founder Stephen Fitzpatrick and lastminute.com co-founder Brent Hoberman, found in a recent study that hiring costs and recruitment challenges were making it harder for them to grow. Some 87 per cent of scale-up bosses listed non-compete clauses as a barrier to hiring plans and three quarters said they could create at least 10 per cent more jobs if the barriers to expansion were removed.
Researchers said more relaxed labour conditions were a core driver behind Silicon Valley’s rapid growth. UK founders have in some cases been forced to recruit talent from the US because it is quicker and easier than hiring from domestic rivals.
Burnham is expected to announce the clampdown in a speech in Manchester alongside Reynolds and former Prime Minister Gordon Brown, according to the Financial Times, which first reported the news.
But the move may provoke a backlash from representatives of more established businesses. The CBI has previously argued that there is little evidence to suggest the conditions weigh on innovation.