Non-compete, non-solicitation and exclusivity clauses

What is a non-compete clause?

A non-compete clause is a promise not to compete with the other party, or work for its competitors, for a set period, usually after the contract ends. In contracts between a large client and a freelancer, consultant or agency, it often comes with related restrictions on approaching the client’s customers or staff, and on working for anyone else while the contract runs.

Lawyers call these promises restrictive covenants (a covenant is a contractual promise). In the UK, they’re tested against the doctrine of restraint of trade: a term that restricts someone’s freedom to carry on their trade or business is generally unenforceable unless it can be justified as reasonable. The US and EU countries have their own rules, and they differ widely. These restrictions also feature in our checklist of contract red flags to check before you sign.

The five common restrictions

Restrictive covenants usually take one of five forms, often combined in a single clause:

An exclusivity clause can also run in your favour, where a client agrees to buy a particular service only from you. It’s exclusivity that binds you alone, with no commitment from the client, that deserves a closer look.

In-term vs post-term restrictions

An in-term restriction applies only while the contract is running; a post-term restriction continues after it ends. Restrictions during the contract are usually easier to justify, because the other side is still paying you and you still have access to its customers and information. Once the relationship is over, a restriction costs you work with nothing coming back, and UK courts tend to look at post-term restrictions more closely.

For any post-term restriction, check two things:

• What triggers it. A restriction that applies after termination “for any reason” can bind you even if the client ends the contract early, or after a dispute about payment.
• Whether it survives. Contracts usually list the clauses that continue after termination. Our guide to termination and auto-renewal clauses explains how that works.

When is a non-compete clause reasonable?

A restriction is more likely to be treated as reasonable when it protects a genuine business interest and goes no wider than needed in time, place and scope. In the UK, simply avoiding competition is generally not enough: the restriction has to protect something specific, such as customer connections, confidential information or a stable workforce. The main factors are:

• Duration: how long it lasts, compared with how long the protected interest stays valuable and how long the relationship itself lasted.
• Geography: whether the area matches where the other side actually does business. “Worldwide” may suit a global business, but it’s harder to justify for a local one.
• Activities covered: whether it covers only the services you provided, or everything the other side and its group do, or might do in future.
• People covered: whether it’s limited to customers and staff you actually dealt with in a recent period, or reaches anyone who was ever a customer.

What you’re paid for accepting a restriction, and each side’s bargaining power, can also play a part.

Is a non-compete enforceable in the UK?

Sometimes, if it’s reasonable. In the UK, restrictive covenants are generally unenforceable as restraints of trade unless they protect a legitimate business interest and go no further than reasonably necessary to protect it. Courts tend to allow more latitude between businesses of similar bargaining power than between an employer and an employee, so wording that might stand in a deal between two established companies could fail in an employment contract.

Narrower restrictions fare better. Non-solicitation and non-poaching clauses are generally more likely to be enforced than broad non-competes, partly because they protect specific relationships rather than stopping you working in your field.

For employees, the UK government has proposed limits on non-compete clauses, so if you’re employing someone or being employed, check the current position. And enforceable or not, a broad restriction can still deter you from work you’re entitled to take, because testing it means a dispute.

Business-to-business vs employment

A restriction agreed between two businesses can be judged differently from the same restriction in an employment contract: courts tend to look more closely at restrictions on employees, and some countries and US states have specific rules for them.

Non-competes for contractors sit in between. You contract as a business, but the other side is often much larger, uses its own standard terms and may not negotiate much, and a court may take that imbalance into account. Two questions help:

• Was the clause written for an employee? Restrictions copied from employment contracts, such as a ban on working for any competitor for a year, can fit badly with a business that sells its services to many clients.
• Is the restriction paid for? Exclusivity, or a non-compete that stops you earning elsewhere, may be easier to justify, and to accept, when the client pays for it through a retainer or guaranteed work.

Non-competes in the US and the EU

In the US

There is no federal ban on non-competes: a 2024 Federal Trade Commission rule that would have banned most of them was blocked by a federal court, so state law decides. California treats most non-competes as void, Minnesota banned most new non-competes from 2023, and other states restrict them in different ways, for example for lower earners. Some state rules also cover independent contractors, not just employees, and some states apply their own rules to people who live or work there, whatever law the contract chooses.

So the answer depends on which state’s law applies. The governing law clause usually says, although even that can be disputed, and an attorney in the relevant state can tell you where a particular clause stands.

In the EU

Rules vary by country. For employees, some countries, such as Germany, require the employer to pay compensation during a post-employment non-compete. Between businesses, national law applies, and EU competition law can also limit some non-compete obligations, for example in distribution agreements. The detail depends on the country and the type of agreement, so for anything significant, a local lawyer’s view is worth having.

Non-compete rules in the UK, EU and US compared

This is the general position: a starting point for a conversation with a lawyer, not a statement of the law that governs your contract.

In the UK, the EU and the US alike, agreements between businesses not to hire each other’s staff can raise competition-law issues (antitrust issues, in US terms) in some circumstances, so a broad no-hire clause is worth raising with a lawyer.

Red flags in restrictive covenants

The restrictions that cause most trouble are the ones wider than the relationship they protect. Look for:

• A vague “competitor” definition, such as any business that competes “or may compete” with the client “or any member of its group”.
• A restriction that outlasts the relationship, such as two years after a three-month project.
• Your whole industry, rather than the services you provided or the clients you worked with.
• Clients you had before, with no carve-out for your existing customers or the clients you introduced.
• “Worldwide”, or no limit on territory, for a business that operates in one region.
• One-way restrictions, such as a ban on you hiring the client’s staff while it stays free to hire yours.
• Exclusivity with nothing in return, where you can’t work for anyone else but the client doesn’t commit to any work.

18.1 The Consultant shall not, for a period of twenty-four (24) months following termination of this Agreement for any reason, be engaged or interested, directly or indirectly, in any business anywhere in the world which competes, or may compete, with any business of the Company or any Group Company.

18.2 For twelve (12) months following termination, the Supplier shall not solicit, accept instructions from or otherwise deal with any person who was a client of the Company at any time during the Term, including any client introduced to the Company by the Supplier.

A narrower version targets the relationships the client actually needs to protect:

18.2 For six (6) months following termination, the Supplier shall not solicit any Restricted Client for services similar to the Services. “Restricted Client” means a client of the Company with whom the Supplier had material dealings in the twelve (12) months before termination, other than any person who was a client of the Supplier before the Start Date.

4.2 During the Term, the Agency shall not provide services of any kind to any other person without the Client’s prior written consent. The Client does not undertake to place any minimum volume of work with the Agency.

What to ask for

You won’t always be able to remove a restriction, but you can often narrow it, and specific proposals tend to get further than general objections. Points worth raising:

• Something narrower than a non-compete, such as confidentiality and a targeted non-solicitation clause, which may protect what the client actually cares about.
• A shorter period, in proportion to the relationship and what needs protecting.
• A named list of competitors, or a definition limited to businesses offering the same services in the same market.
• Limits to the services you provided, and to clients and staff you actually dealt with in a recent period.
• A carve-out for your existing clients and for clients you introduced.
• A carve-out for general advertising, so a public job advert that a client’s employee answers isn’t a breach.
• Mutual non-poaching, especially if you’re an agency whose staff the client could hire.
• Release from post-term restrictions if the client ends the contract early without cause, or doesn’t pay.
• Payment for exclusivity, such as a retainer or a minimum volume of work.

If a restriction could stop you earning a living, it’s worth getting a lawyer’s view, before you sign, on whether it’s likely to be enforceable under the law that governs the contract. Our guide on how to brief a lawyer on a contract shows how to keep that quick.

How LegalSling helps

LegalSling reads the contract you’ve been sent and explains each restriction in plain English, including the definitions it depends on, such as “Competitor” or “Restricted Client”, with a note on what it means for each side and which way it leans. Restrictions like the ones in this guide are flagged in the document with the exact words highlighted, so you can see how long each lasts, where it applies and who it covers.

Because enforceability depends so much on which law applies, LegalSling takes the governing law from the contract’s own wording and shows the quote, or says “not stated” rather than guessing. You can ask questions, such as whether a restriction still applies if the client ends the contract early, and get answers drawn only from the contract, with paragraph references. Then add your own notes and turn everything into a brief for your lawyer. It explains; it doesn’t tell you whether to sign. See how it works, or read about LegalSling for freelancers.