Non-solicitation clauses could be key in helping advice firms alleviate the impact of the government’s “blindside” move to limit non-compete clauses to just three months, compliance experts have told Health & Protection.
However, the move was also welcomed as a “fantastic” idea as it would also likely reduce the time people spent on gardening leave between jobs.
This week the Department for Business and Trade (DBT) unveiled an initial package of regulatory reforms which it said was aimed at reducing “unnecessary” regulation for businesses, cutting costs and allowing them to compete.
Included in the package is a plan to promote “competition and productivity” in the workplace by limiting the length of non-compete clauses to three months.
Commenting on what this would mean for advisers where one of their employees seeks to strike out on their own, Branko Bjelobaba, principal at consultancy Branko, told Health & Protection the move was a “fantastic” idea and would ensure gardening leave is kept to a minimum.
But Bjelobaba warned: “This will stress employers out massively as unless they can keep their most productive staff from walking, they will be able to do so and compete against them in only three months time.
“A blindside from the government but everything will be in the detail.”
Brian McDonnell, partner at McDonnell Ellis, explained that non-compete clauses may still be valid for the financial advice sector.
However he noted that to be enforceable employers need to be able to show that their legitimate interests, such as safeguarding confidential information, cannot be adequately protected by other, lesser forms of restrictions such as non-solicitation or non-dealing clauses.
“Advice firms may be an area where such non-competes may be more likely to be enforceable given the importance of client contacts,” he said.
“However, although such firms may be concerned by the three-month limitation, employers will still be able to use non-solicitation clauses which prevent employees from contacting previous customers or clients to solicit their business, and clauses protecting confidential information.
“Also, it seems as though non-dealing clauses, which prevent employees from dealing with previous customers, may still be possible – this will become clearer at consultation stage.”
