The career costs of non-competes: ‘Your star striker is sitting on the bench’

Damien Couture remembers going through “seven, eight months of hell” with his family after he was sued by his former hedge fund employer for allegedly breaching a non-compete agreement when he left to join a rival.

Despite his recent legal ordeal, the French quant trader still believes the British government is wrong to plan to end the use of non-competes, a move that is supported by tech companies but has sparked a backlash across the financial sector.

“I’ve been on the bad side of this litigation,” Couture says. “But I one-hundred-per-cent agree that there is a need for non-competes in companies to protect themselves.”

The issue of non-competes has shot to prominence in the United Kingdom after prime minister Andy Burnham this month pledged to introduce legislation to ensure such clauses could “no longer be a barrier to hiring for our most promising start-ups and scaling firms”.

More than five million British workers have non-competes in their employment contracts that prevent them moving to a competitor for a period after leaving their job.

The clauses, widely used among financial and professional services companies such as hedge funds and banks, as well as tech groups, are intended to protect intellectual property and the investment companies make in training and developing staff.

They are a key tool for City firms to stop star traders, money managers and dealmakers from taking their clients and trade secrets to a rival.

“Non-competes can give ... comfort that people are not just going to walk out the door and join or set up a rival using the intellectual property they have gained at the company,” says Amy Bird, a partner in the employment team of law firm Clifford Chance.

But their use has broadened significantly in recent years – spreading to lower-paid roles such as care staff and fast-food workers – while the time periods they cover have extended to sometimes more than a year.

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Portfolio managers at top hedge funds in London often have non-compete clauses requiring them to sit out of the market for as long as 18 months to two years before they can join a rival, while an analyst might have to wait a year.

Citadel, one of the world’s biggest hedge funds, successfully lobbied last year for legislation in its home state of Florida to allow non-compete agreements lasting up to four years.

While highly paid fund managers often appreciate the chance to take time off and travel or spend time with their family, such lengthy non-compete periods can make top performers less attractive to other employers, limiting the opportunities to seek out better and higher-paid roles.

Workers are usually unpaid during the period in the UK at least, and their skills may fall behind those of their peers, particularly in fast-growing sectors.

Burnham said the clauses “stunt innovation and trap workers” because these “prevent the best really being energised and bringing that dynamism to the economy”.

The UK’s tech sector has criticised non-competes for making it harder for them to hire. More than 20 start-up founders recently wrote to Burnham to ask him to “ban lengthy post-termination restrictions”.

Alan Chang, founder of the $5 billion (€4.5 billion) energy start-up Fuse and co-signatory of the letter, says his company’s progress has been slowed because of the delay in hiring caused by non-competes and other employment restrictions.

Chang says his chief technology officer, Greg Wilk, was originally subject to an 18-month non-compete clause. This was reduced to six months of gardening leave – which differs from a non-compete period as the person remains a paid employee – before he joined Fuse because he was changing industry.

But Chang says the wait was still too long. “Let’s say [Wilk joined in] one month rather than six ... I think our share price [would] be worth a lot more ... And rather than us being in two markets, we [would be] in four markets.”

Jacomo Corbo, founder of $2.4 billion start-up PhysicsX, says he is currently negotiating a 15-month non-compete agreement to hire an employee, an experience that has made him consider recruiting more in the US where restrictions are less prevalent.

“In Europe ... on the whole, you find that these long notice periods and gardening leave are very prevalent,” he says. “The lack of liquidity means you end up refocusing a lot of that hiring on US hires.”

Edward Hughes, who had a three-month gardening leave after leaving Google DeepMind to co-found London-based artificial intelligence (AI) start-up Inherent, which co-ordinated the letter to Burnham, says restrictions risk leaving fast-growing companies a “generation” behind their Californian competitors.

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“It’s a little bit like you buy your great striker and the Premier League season starts and all the other teams are playing and ... your striker is sat on the bench instead,” he says.

Burnham did not give full details of the reform he is planning, but said the aim was to free up hiring for innovative companies, including in the AI sector.

The UK is an outlier in having relatively few constraints on employers’ use of non-competes, although they must show a clause is reasonable to enforce it in court. Elsewhere, efforts to curb the use of non-competes have had mixed results: a long-standing ban in California has not stopped some employers writing the clauses into contracts, even though these cannot be upheld by law.

Spain can fine employers that use them wrongly; France requires companies to continue paying staff part of their salary during non-compete periods. Australia plans to limit their use to high earners.

Shivchand Jhinku, an employment partner at law firm Herbert Smith Freehills Kramer in Sydney, says an unintended consequence of restricting non-competes in Australia may be to benefit bigger companies that have more ways to compete for staff, such as the ability to pay more and offer better perks.

“Smaller businesses and start-ups, which often rely on non-competes as the only practical mechanism to protect their investment in key employees, may be less able to compete for talent,” he says.

Lawyers predict the curbing of non-competes in the UK may lead employers to use other tools to protect their intellectual property and delay the departure of employees. In their letter to Burnham, the tech founders also argued for the restriction of “extended notice periods and gardening leave”.

Another downside to non-competes is that disputes over the terms often result in costly and stressful legal contests.

Citadel, for example, this year launched a lawsuit against its former portfolio manager Daniel Shatz, who left to join UK rival Marshall Wace.

London-based quant trader Couture was sued by Jump Trading in 2023 after telling the Chicago-headquartered firm he was joining rival Verition Fund Management. He had already served a 12-month notice period after resigning, but his contract also included an extra non-compete period of up to a year, which Jump insisted he respected.

The 41-year-old reached a confidential settlement with Jump that allowed him to continue working at Verition, but only after he had spent almost £1 million (€1.2 million) on lawyers to defend himself in court. “It was a huge stress,” he says. “Anxiety for the whole family went through the roof.”

Couture still believes non-compete clauses can play a valuable role, but thinks they should have a time limit placed on them by law. “The fact that UK law does not express up to what point they are reasonable makes it a matter to be determined by a judge, where individuals have to face deep-pocketed companies,” he says.

“I think non-competes are perfectly fine, up to a year ... After a certain point, whatever remains in people’s memory is skill and experience and not precise enough to amount to confidential information.” – Copyright The Financial Times Limited 2026