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Five sponsor licence pitfalls and how to avoid them

Hiring overseas talent can be a game-changer for UK employers. But if your organisation holds a sponsor licence, compliance is a legal obligation. Get it wrong, and the consequences can be severe. These include licence suspension, revocation and fines of up to £60,000 per illegal worker. In the worst cases, there are even criminal sanctions.

The Home Office is stepping up enforcement. In the past year alone, almost 2,000 licences were revoked and more than 500 downgraded. Many breaches are avoidable and often happen because of simple oversights.

Lynsey Blyth's (Head of Immigration) recent article, first published in People Management, outlines the most common pitfalls and how to steer clear of them.

Government consults on the reform of non-compete clauses

The Government is considering reforms to non-compete clauses in employment contracts, in an effort to reduce barriers for businesses, entrepreneurs and investors and increase flexibility within the labour market. The Government argues that non-compete clauses restrict employee movement, preventing companies from accessing available talent and individuals from utilising their skill sets to start up business.

What are non-compete clauses?

Non-compete clauses are a restrictive covenant which can be included in employment contracts to restrict the ways in which employees undertake work, during their employment, and for a period after their employment has terminated.  Usually, they restrict an employee's ability to work for their employer's rival post-termination, or to start up a business which would compete with the employer.

Other forms of restrictive covenants found in employment contracts include:

•   Non-solicitation clauses, which prevent former employees from luring or persuading customers, clients and/or suppliers away from the employer;

•   Non-poaching clauses, which prevent former employees from enticing other employees away from the employer to join them at their new employer;

•   Non-dealing clauses, which prevent a former employee having any contact with customers, clients and/or suppliers of the employer, irrespective of which party approached the other;

•   Non-disclosure clauses, which prevent a former employee from using the employer's confidential information.

To be legally enforceable, a restrictive covenant must be reasonable in duration, the geographical area it covers and the specific activities it prohibits. It must only go so far as is necessary to protect the legitimate interests of the employer. What is deemed reasonable will vary depending on the specific circumstances and will be dependent on factors including the seniority of the employee and the nature and size of the employer's business.

Why are non-compete clauses a problem for the UK economy?

According to the Government working paper, non-compete clauses restrict movement of workers and negatively impact entrepreneurial activity in the UK, as well as preventing fledgling companies from accessing labour markets required to develop. Non-compete clauses also restrict competition by disproportionately impacting new businesses, which typically rely on larger, existing companies as the primary source of recruits and may not have the funds to dispute questionable non-compete clauses.

The Government's key objectives in reforming non-compete clauses are to:

1.   Promote job mobility;

2.   Reduce barriers to recruitment;

3.   Promote competition and innovation; and

4.   Protect workers from significant periods of time outside of the labour market in their sector.

Government's options for reform

While the Government is currently considering how non-compete clauses may best be reformed, it has advanced the following potential options:

1.   Statutory limit on the duration of all non-compete clauses. For example, to a duration of 3 months. There is concern that in setting a limit on the number of months, this duration become a standard which employers routinely impose irrespective of individual circumstances, on the incorrect assumption that such a limit would be deemed reasonable in all circumstances.

2.   Statutory limit on the duration of non-compete clauses based on the size of the organisation. For example, businesses with more than 250 employees may only impose non-compete clauses of up to 3 months in duration, while employers with less than 250 employees may impose longer non-compete restrictions. Such a restriction would benefit start-ups over larger, existing companies and promote innovation and competition.

3.   A complete ban. This would significantly increase protection for employees but may lead employers to include more onerous provisions in employment contracts in respect of other restrictive covenants.

4.   A ban on non-compete clauses for employees earning below a salary threshold. This would protect lower-paid workers who may not be in a position to challenge non-compete clauses or to spend time out of work.

5.   A combination of 1 and 5, giving the advantage of promoting innovation and competition while protecting those lower-paid workers.

Action you should take

The Government is seeking views from employees and employers and has proposed 15 questions for discussion, which can be found here: Working paper on options for reform of non-compete clauses in employment contracts - GOV.UK. If you think you could be impacted you should provide your views on or before 18 February 2026.

As the reforms are currently in the initial consultation stage, it is not yet clear how the use of non-compete clauses may be restricted and when such restrictions may take effect. However employers should ensure they are ready for reforms by reviewing the use of non-compete clauses within their employment contracts and considering how any restrictions may be mitigated using other restrictive covenants / contractual provisions.

If you would like one of the Employment team at Michelmores LLP to assist you in the review of any non-compete clauses within your employment contracts, please contact Heidi Brown.

Case Update: Collective Redundancy Consultation - Micro Focus v Mildenhall

The Employment Appeal Tribunal (EAT) recently handed down judgment in Micro Focus v Mildenhall (Mildenhall), clarifying the circumstances in which employer’s collective redundancy consultation duties arise.

Background

Under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer must ‘collectively consult’ with appropriate representatives of the affected employees.

Section 188 TULRCA transposed the EU Collective Redundancies Directive (No 98/59) (the Directive) into English law. As with many transposed provisions, the interpretation of section 188 TULRCA has been subject to intense judicial scrutiny since its implementation.

Facts

Mr Mildenhall (the Claimant) was made redundant by Micro Focus (the Respondent) in July 2022 as part of a restructure of the Respondent’s wider corporate group. In total, more than 20 employees were dismissed as redundant within a 90-day period. Significantly, the redundancies were made in several tranches and affected employees employed by several distinct legal entities.

The Claimant argued that the restructure triggered the Respondent’s duty to collectively consult and, therefore, brought a claim against the Respondent for its failure to comply with section 188 TULRCA, seeking a protective award.

First instance

At first instance, the Tribunal held that the Respondent had breached its duty to collectively consult.

In the light of the decision of the European Court of Justice in UQ v Marclean Technologies (Marclean) (a persuasive, albeit non-binding, judgment for the purpose of English law), the Tribunal directed itself that an employer who proposed fewer than the threshold number of dismissals within 90 days was subject to the obligation to consult if it subsequently proposed additional dismissals within a period of 90 days (so making the total employees to be dismissed 20 or more).

The Tribunal also concluded that employees employed across a corporate group should be regarded as working at ‘one establishment’ for the purpose of s.188 TULRCA.

Appeal

On Appeal, the EAT remitted the case to the first instance Tribunal for reconsideration.

The EAT held that the first instance Tribunal had misapplied Marclean. Properly analysed, the EAT clarified that there is no requirement in English law to look backwards and forwards across the relevant period to artificially construct a threshold. Instead, the focus should be on what the employer was ‘proposing’ for the future at the ‘material time’.

The EAT also disagreed with the first instance Tribunal’s interpretation of ‘one establishment’. According to the EAT, only redundancies proposed by the same employer should be counted. Employees of other group companies, even if closely connected, are not relevant.

Implications for employers

The decision in Mildenhall provides important guidance on the meaning of the terms ‘proposed redundancies‘ and ‘one establishment’ under section 188 TULRCA. Employers will be relieved by the EAT’s strict interpretation of both terms, limiting the circumstances in which collective consultation duties may arise.

However, such relief may be short-lived in the light of the reforms proposed by the Employment Rights Act 2025 (the Act). Section 29 of the Act introduces a new collective consultation trigger, mirroring the wording of section 188 TULRCA, which omits the phrase ‘one establishment’. Subject to consultation, it appears that this new trigger will require employers to aggregate total dismissals across a corporate group. Section 29 of the Act is expected to take effect from 2027.

To discuss any of the issues raised in this article, please contact Michelmores Employment team.

Q: I'm about to set up a new business and will be looking to employ one or two members of staff to support me. Where do I start?

A: There is a lot to consider! Our article – available here – looks at some of the key employment law implications of starting a new business and should give you an idea of how to go about recruiting and onboarding staff.