Innovation v. unfair competition – tension in the employment relationship
The UK economy grew at 0.4% government statistics revealed yesterday, slowed growth but still growing. However it's clear that these remain tough times for employers and employees. The evidence for that can be found in Port Talbot (Tata Steel) and on the High Street (BHS and Austin Reed).
The somewhat sluggish growth of UK plc and failure of the UK government's desire to achieve an export led recovery have led to a good deal of comment about the comparative lack of productivity of the UK. The Office for National Statistics has commented that in respect of the last set of figures available, 2014, the UK was 6 out of the G7 leading economies.
As the UK government has placed an improvement in UK productivity at the heart of its economic plans, it is perhaps no surprise that earlier this week the Department for Business, Innovation and Skills issued a consultation document on whether post-termination restrictions in employment contracts act as a barrier to employment, innovation and entrepreneurship.
The restrictions of concern are those that prevent former employees from working for competitors or soliciting clients from their former employer for a specified period, often several months, after their employment terminates. The courts will enforce such clauses if they go no further than is reasonably necessary to protect a legitimate business interest, such as trade connections and a skilled workforce. It has been suggested that they hamper the efforts of start-ups and small businesses to hire the most talented people and the Government is seeking views on whether such restrictions have a stifling effect on innovation.
Since such restrictions can be enforced by employers in the USA and Continental Europe (on the whole) it seems unlikely that they do have a significant stifling effect on productivity and innovation given the UK's relative position in the G7 productivity rankings. The flip side of these restrictions can be that they help innovation by permitting the innovative business to protect its business for a finite period of time to try to recoup the investment it makes to launch an innovative product or service.
You can feed your views into the UK government's request for evidence by clicking on this link and completing their survey: https://bisgovuk.citizenspace.com/innovation/national-innovation-plan.