Earlier this month, the Department of Business and Trade published a policy paper called Smarter regulation to grow the economy. This paper contains a number of proposed changes to employment law covering possible amendments to the Working Time Regulations; the Transfer of Undertakings (Protection of Employment) Regulations (more commonly known as the TUPE Regulations); and proposals to limit the use of non-compete restrictions.
Background
Some of these latest announcements form part of the government’s ongoing review into which EU-derived laws will remain part of UK law and which laws will either be revoked or amended. While the government had initially intended to revoke all EU-derived law (other than those specifically identified to be retained), the plan is now for all laws currently in place to remain part of UK law unless the government specifically states otherwise.
Working Time Regulations (WTR)
The government has identified a couple of ways in which the WTR could be tidied up to ease the administrative burden on businesses when it comes to record keeping and the calculation of annual leave entitlement and holiday pay.
The policy paper proposes:
- To remove the record keeping requirements under the WTR;
- To simplify the rules relating to annual leave and holiday pay; and
- To allow employers to use rolled-up holiday pay in certain circumstances.
The rules regarding holiday entitlement and pay in particular have been confusing for employers given that currently, the statutory minimum holiday entitlement in the UK of 5.6 weeks is made up of 4 weeks’ leave under the European Working Time Directive (which has been affected by a number of decisions of the European Court of Justice) and 1.6 weeks’ leave under UK law which is not subject to those European case law decisions.
The consultation proposes to create a single annual leave entitlement of 5.6 weeks and to clarify what employers are required to pay an employee while on holiday. It also proposes to allow the use of rolled-up holiday pay as a means of providing holiday pay to those who work on a casual or irregular hours basis. Presently, while it remains widely used, rolled-up holiday pay is considered unlawful.
TUPE Regulations
The TUPE Regulations operate to protect the employment rights of employees whose employer changes due to a business transfer or a service provision change. Employers faced with a TUPE transfer are required to inform and consult with employee representatives regarding the impact of the transfer on their employment.
The government is proposing to remove the requirement to elect and consult with employee representatives where: (1) the business has fewer than 50 employees; or (2) where a business of any size is involved in a transfer of fewer than 10 employees.
Employers that fall into either of those categories will be able to consult directly with the affected employees (assuming that no existing employee reps are in place eg. via a formally recognised Trade Union).
Non-compete restrictions
Within the same policy paper, the government has announced its intention to legislate to limit the duration of non-compete clauses to a maximum of 3 months. This proposal follows a government consultation that was launched back in 2020.
A number of employers rely on non-compete restrictions in order to protect their business interests by preventing key employees from working for a competitor for a set period of time. It’s common for such restrictions to last for at least 6 months so this particular proposal is likely to prompt a number of employers to review their contractual arrangements with staff.
The proposals don’t affect other typical restrictions that employers put in place such as non-solicitation clauses or restrictions preventing the use of any confidential information acquired during the course of employment.
Timescales for implementation?
The government will consult on the proposed changes to the WTR and the TUPE Regulations until 7th July 2023 so we will await further detail in respect of these proposals later in the summer.
The proposal to limit the use of non-compete clauses will be brought into effect “when Parliamentary time allows” so it remains uncertain as to when or if this proposal will become law. It is also unclear how it would be enforced. Would an existing 6 month contractual restriction only be capable of being enforced for 3 months? Would it only apply to non-compete clauses entered into after the legislation is in force? Further detail is required to allow employers to plan ahead for these changes.
Comment
Daniel Gorry, Director in our Employment Team comments:
“This latest policy paper adds to the growing list of potential changes to employment law that could be impacting employers over the course of the next year.
“When considered on top of the proposed changes to flexible working; additional protection against redundancy for employees who are pregnant or on maternity leave; and the government’s other consultation regarding holiday pay for part-year or irregular hours workers, there is a lot for employers to keep track of over the coming months and potentially a number of updates that may need to be made to employment contracts and staff handbooks or policies.
“We would encourage employers to get in touch so we can help you to plan ahead for these and other forthcoming changes to employment law as well as providing advice on how to deal with these issues in practice”.
