Key Takeaways
- Restrictive covenants in 2026 settlement agreements, such as non-compete clauses, are being scrutinised more strictly post-pandemic and may limit your future employment options.
- Employers increasingly include wider non-compete clauses in 2026 settlement agreements, but their enforceability depends on reasonableness of duration, geographic scope and justification for protecting business interests.
- You have the right to negotiate restrictive covenants and non-compete clauses in your settlement agreement to secure softer terms or reduce the length and scope of restrictions.
- Our solicitors can advise on whether restrictive covenants are enforceable in your settlement agreement and help you negotiate better post-termination terms or higher compensation.
- Signing a settlement agreement with broad restrictive covenants without independent legal advice may leave you at risk of breaching future restrictions or limiting your career options.
- Employers usually pay our legal fees, so you receive settlement agreement legal advice and negotiation support from our SRA regulated solicitors at no cost to you.
- There may be scope for increased ex gratia payments or amending redundancy terms where restrictive covenants are unreasonable or duplicated from your original contract.
- Settlement Agreement Lawyers are rated Excellent, with over 1,400 five-star reviews on Trustpilot and Google, and our solicitors offer same-day remote appointments anywhere in the UK.
Restrictive covenants in 2026 settlement agreements: Are non-compete clauses being enforced more strictly post-pandemic?
If you have received a settlement agreement in 2026, you may be surprised at the restrictive covenants it contains, especially non-compete clauses that could seriously limit your future career options. Recent changes in post-pandemic employment law mean these restrictions are being scrutinised more closely, but the law still requires independent legal advice before any settlement agreement is binding. The cost of this advice is almost always covered by your employer, so our solicitors can review your agreement and provide guidance at no charge to you.
Settlement agreements often introduce or repeat restrictive covenants like non-compete, non-solicitation, and confidentiality clauses—which may be stricter than ever before. Without the right advice, you risk signing away key rights or taking on restrictions that are broader or longer than employment law actually allows. Our solicitors specialise in helping employees challenge, negotiate, or clarify these clauses and make sure any offer you accept is fair, enforceable, and tax-efficient.
A financial-sector employee in London was offered a settlement agreement with a 12-month non-compete clause, preventing work for any competitor group-wide. Our solicitor reviewed the restriction and negotiated a reduction to 6 months, covering only direct competitors in a five-mile radius, in exchange for a higher ex gratia payment and a more flexible reference. The employer paid all legal costs.
In this article, you’ll learn how restrictive covenants are being handled in 2026 settlement agreements, what makes a non-compete clause reasonable (or not), and how you can negotiate better terms before agreeing to any restrictions. For expert, employer-funded legal advice, call our solicitors on 0800 054 1144 or book your settlement agreement advice online.
Are non-compete clauses in 2026 settlement agreements being enforced more strictly after the pandemic?
Non-compete clauses in 2026 settlement agreements are attracting tougher enforcement and closer scrutiny. The employment law landscape in England & Wales has evolved since the pandemic, with courts focusing on whether non-compete restrictions are tailored to legitimate business interests, of reasonable duration and scope, and justified for protecting confidential information or customer relationships.
While employers now target more bespoke, risk-based restrictions, aggressive or blanket bans are still vulnerable to challenge if not proportionate. In 2026, stricter court enforcement is likely where the non-compete is precise, not excessive, and agreed alongside suitable financial consideration—especially for senior roles or sensitive sectors.
Always check the exact wording and scope of each post-termination restriction in your agreement. Courts are more willing to enforce reasonable, business-critical non-competes, but employers cannot use standard, one-size-fits-all terms to restrict your future career.
For tailored guidance on your restrictive covenants, visit our Settlement Agreement Advice page.
What are restrictive covenants and non-compete clauses in a 2026 settlement agreement?
Restrictive covenants in a settlement agreement limit an employee’s activities after leaving their job. Typical clauses include non-compete (restricts work for rivals), non-solicitation (prevents poaching clients), non-dealing (blocks working with specified parties), and non-poaching (stops soliciting ex-colleagues). Non-compete clauses are the most restrictive, blocking you from certain employment for set periods and within certain areas.
In 2026, these covenants are more prominent as employers respond to remote and hybrid working risks. For a clause to be enforceable, it must be no wider or longer than genuinely necessary to protect a legitimate business interest—such as trade secrets or customer connections. Overly broad or vague restrictions are unlikely to be upheld by a court.
A settlement agreement can introduce new or stricter restrictive covenants—not only repeat those from your contract. Once signed, with a certificate of independent legal advice, these restrictions can be legally binding.
An employee’s draft settlement agreement had a new 12-month non-solicitation clause that went beyond anything in the employment contract. Our solicitor negotiated it down to six months, limited to named key clients, securing a fairer outcome and ensuring enforceability.
Learn about different restrictions and how to address them in our Settlement Agreement Advice resource.
Why is independent legal advice mandatory for signing a settlement agreement with restrictive covenants?
Independent legal advice (ILA) is a legal requirement for a settlement agreement to be binding, especially where restrictive covenants are included or strengthened. Under section 203 of the Employment Rights Act 1996, you must receive advice from an independent solicitor to protect your statutory rights and ensure you fully understand waiver of employment claims and the meaning of any post-termination restrictions.
Employers pay for this advice so you are not out of pocket. Our solicitor will explain whether the restrictive covenants are reasonable, identify risks, and highlight negotiation opportunities. Without valid ILA and its certificate, the settlement agreement is not binding—even if signed.
If your draft agreement contains new or toughened post-termination restrictions, let our solicitors review them first. We frequently negotiate softer terms or secure higher ex gratia payments in return for agreeing to additional covenants.
For an overview of your rights and mandatory ILA, see the official government guidance on settlement agreements.
Are financial offers in 2026 settlement agreements fair when restrictive covenants are included?
Settlement agreements that introduce or toughen restrictive covenants should always offer you fair financial compensation. This should cover not just statutory notice, redundancy, holiday pay, and other contractual entitlements, but also a suitable ex gratia sum to reflect the impact of any new restrictions—especially a non-compete clause that affects your ability to earn.
When analysing offers, consider:
- The length and breadth of the restrictions—longer or wider may justify higher pay.
- Whether the restriction is new or simply repeats your contract.
- Whether the employer is clearly paying you additional consideration for new or tougher restrictions.
- Specific employer contribution for legal advice.
- Your role/sector and how restrictions may limit your job prospects.
Use our Settlement Agreement Calculator to benchmark if your deal reflects the value of what you’re giving up.
If your ex gratia payment is being offered specifically in consideration for restrictive covenants, that part is taxable. Negotiate breakdowns, and never accept a “bundled” payment without clarity, as HMRC can challenge ambiguous drafting.
If you face a settlement agreement with wider non-compete clauses, our solicitors can negotiate better outcomes or higher compensation, funded by your employer. Call 0800 054 1144 or book your settlement agreement advice online.
Tax implications of settlement agreements containing restrictive covenants
Payments in a settlement agreement attract different tax treatments. Ex gratia payments for loss of employment (up to £30,000) are usually tax-free under HMRC guidance. However, any payment in consideration for agreeing to restrictive covenants—including non-compete or non-solicitation clauses—is fully taxable as earnings, with income tax and NICs to pay.
It is essential that payments are properly categorised. Our solicitor will check for any reference to “consideration for restrictive covenants”, as unclear or excessive allocations can give HMRC reason to tax amounts that could have been tax-free.
| Payment Type | Normally Tax-Free? | Taxable? |
|---|---|---|
| Statutory redundancy | Yes (up to £30k) | Over £30k |
| PILON/notice pay | No | Yes |
| Holiday pay | No | Yes |
| Restrictive covenants consideration | No | Yes |
A client’s settlement agreement stated a large payment was “in consideration of post-termination restrictions”. Our solicitor negotiated the majority as tax-free ex gratia, with only a minimal, taxable allocation for restrictive covenants, saving thousands in tax.
If you’re unsure of your tax position, check with our Settlement Agreement Calculator or call our team for bespoke advice.
Which key clauses and risks should I watch for in a 2026 settlement agreement?
Watch for clauses that may introduce risks or affect your next job:
- Restrictive covenants: Are they new, longer, or broader than your current employment contract?
- Confidentiality: Is the wording so wide it stops you using your skills or discussing your work history?
- Reference: Is the employer only offering a basic reference, or can you negotiate better wording?
- Indemnity: Are you being asked to repay the employer if a tax issue arises with HMRC?
- Financial breakdown: Are payments properly labelled to avoid unexpected tax?
Never assume restrictive covenants are standard. Always compare with your contract and flag anything that could impact your future career. Our solicitors routinely negotiate these clauses for our clients’ benefit.
For case studies of successful negotiations on restrictive covenants, see Client success stories. For more on your rights with redundancy or unfair dismissal, visit Redundancy or Unfair Dismissal.
Step-by-step: The process for signing a settlement agreement with restrictive covenants in 2026
The process of signing a settlement agreement with restrictive covenants in 2026 involves:
- Receiving the draft agreement with any proposed restrictions.
- Arranging independent legal advice from a specialist (usually within a same-day slot).
- Our solicitor provides a full review: comparing to your contract, highlighting risks, and explaining each term.
- Negotiation: You or our solicitor may request changes to restrictive covenants, financial terms, references, or tax wording.
- Once agreed, our solicitor signs the ILA certificate so the agreement becomes binding.
- Completed forms are returned to your employer, and funds are paid as agreed.
A client contacted us in the morning with a settlement agreement containing fresh non-compete clauses. With our solicitor’s remote advice and quick negotiations, improved terms were agreed and signed by the end of the day, paving the way to their next role.
If you have an urgent settlement agreement, call our solicitors now on 0800 054 1144 or book your settlement agreement advice online, with employer-funded advice and same-day appointments UK-wide.
Why Choose Settlement Agreement Lawyers?
Free to the employee: employer pays, fee capped at employer contribution
Your employer pays all our legal costs for reviewing your settlement agreement and issuing your ILA certificate, as required by law. Even where negotiation is needed, the fee is capped at the employer’s contribution, so there are no hidden costs for you.
If the employer’s draft agreement offers less than the standard legal fee contribution, our solicitors can negotiate an increase to cover full advice.
Learn more on our Free for employees / funding page.
Same-day, remote service across the UK
We offer fast, confidential advice nationwide via secure phone or video call, perfect for urgent exits, redundancy, or sensitive settlements.
A client facing a tight deadline contacted us and had their agreement reviewed, restrictive covenants negotiated down, and the paperwork finalised—all on the same day and at no cost.
Book instantly on our Book ILA online page for a guaranteed same-day appointment.
SRA regulated specialist settlement agreement solicitors
We are fully SRA regulated and all of our solicitors are employment law experts with specialist experience in restrictive covenants and post-pandemic settlement trends.
Always use a dedicated employment solicitor, not a generalist. SRA-regulated solicitors give you added security and the highest quality independent advice.
See our Client success stories for real-world results.
Experts in negotiation: reducing restrictive covenants and maximising financial terms
Our solicitors don’t just certify agreements—we negotiate to soften or narrow restrictive covenants and maximise your financial outcome if limits remain.
A departing software engineer was presented with a 12-month non-compete. Our solicitor cut this to three months and secured an enhanced ex gratia payment, ensuring freedom to move on and greater financial security.
See more examples in our Client success stories.
Frequently Asked Questions
Are non-compete clauses in settlement agreements harder to challenge in 2026?
Yes, in 2026 non-compete clauses are being enforced more strictly, especially if well-drafted and justified by business need. However, an employee can still challenge or negotiate clauses that go beyond what is reasonably necessary, particularly with advice from our solicitors.
Can an employer add new restrictive covenants to a 2026 settlement agreement?
Yes, employers can propose new or tougher restrictive covenants in your settlement agreement compared to your contract. You are entitled to negotiate terms you believe are too broad or restrict your career prospects.
How can I negotiate the duration or scope of a non-compete clause?
You should compare the proposed clause to industry standards, assess the impact on your career, and request reduction in length or territory. Legal advice and sector benchmarking are invaluable for effective negotiations in 2026 settlement agreements.
What happens if I breach a restrictive covenant after signing a settlement agreement?
If you breach a restrictive covenant, your former employer may seek an injunction to prevent you from working in breach, and claim damages for losses. In technical or senior roles, the risks of serious legal enforcement are higher.
Who pays for my legal advice on restrictive covenants in a settlement agreement?
Employers are legally required to pay reasonable legal fees for your independent advice and certification on the settlement agreement, including all restrictive covenants. This ensures employees do not incur personal costs.
Does the law about restrictive covenants differ by sector or seniority in 2026?
Yes, the courts are more likely to uphold non-compete clauses for senior roles or in highly competitive sectors, such as technology or finance, provided the clause is tailored, reasonable, and justified.
Is a non-compete clause in my settlement agreement enforceable if I go abroad?
Often, yes. Non-compete clauses can have cross-border effect, especially with multinational employers. Enforceability may depend on the jurisdiction, but English courts can uphold global restrictions with the right justification and drafting.
Can restrictive covenants affect my ex gratia or redundancy payment?
Yes. Payments specifically allocated as consideration for restrictive covenants are not tax-free and may erode the net benefit of your settlement. A solicitor should always check how payments are categorised to protect your entitlements.
Non-compete clauses and other restrictive covenants are more complex and strictly enforced than ever post-pandemic. Our solicitors offer clear, same-day advice focused on reducing unfair restrictions and securing fair compensation—always free to employees as your employer covers our fee. To protect your rights and future career, call Settlement Agreement Lawyers on 0800 054 1144 or book your settlement agreement advice online for a specialist remote appointment today.
