Government Proposals to Reform UK Employment Law

David Reid
Director
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On 10 May 2023, the Secretary of State announced that the Government is replacing the current ‘sunset clause’ in the Retained EU Law Bill with, instead, a list of the retained EU laws that it intends to revoke under the Retained EU Law Bill at the end of 2023. That list has now been released and has a minimal impact on employment law. So, practically speaking, this means that EU employment laws will now remain binding in the UK unless they are expressly repealed.

The Government has also just announced proposals to reform several key areas of UK employment law:

Restrictions on the duration of non-compete clauses

Non-compete clauses are a type of post-termination restriction, also referred to as a “restrictive covenant,” which are used in employment contracts where the employer has a business interest it needs to protect, and where it wants to be able to restrict the employee’s ability to start up, or go and work for, a competing business after termination of employment.

Until now, the courts have decided whether such clauses are reasonable, and therefore enforceable, and, in making their decisions, have had to weigh up the individual’s freedom to trade and earn their living against the need to protect employers’ business concerns.

The Government intends to introduce a new law which limits the length of non-compete clauses to three months. The Government’s policy paper has stated, however, that the proposed changes will not interfere with an employer’s ability to use (paid) notice periods or garden leave, non-solicitation clauses or confidentiality clauses.

Simplifying TUPE 

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) protect employees when the business or organisation for which they work transfers to a new owner. TUPE may also apply when a service transfers to a new provider or is taken back in-house.

Currently, businesses are obliged to inform and consult with representatives of employees affected by a transfer in advance of the transfer taking place, which includes meeting obligations around election of employee representatives and informing those representatives about key information long enough before the transfer to enable meaningful consultation.

Currently, the only exception to these requirements (with certain relaxation of the TUPE rules already applying) is where the business is a ‘micro-business’, that is, a business that employs fewer than 10 employees.   However, the Government is now proposing to broaden this exception, and simplify certain obligations and processes under TUPE, to cover (i) businesses that employ fewer than 50 people and (ii) transfers affecting less than 10 employees, allowing businesses to consult directly with the affected employees in those situations instead.

Reform of the Working Time Regulations

Finally, the Government intends to reform the Working Time Regulations and will be consulting on proposals to:

• remove the requirement for employers to keep records of all individuals’ working hours;
• permit rolled-up holiday pay; and
• merge the current 4 weeks (EU-derived) annual leave entitlement with the additional 1.6 weeks UK statutory annual leave, with a view to reducing the administrative burden and the complexity of calculating holiday pay.

Conclusion

The proposed changes to the Working Time Regulations will likely be welcomed by employers who have grappled with how best to calculate holiday pay for employees and the proposed restriction of the permitted duration of non-compete clauses is certainly one to watch, not least given the potentially significant impact on employers operating in sectors where 6 or 12 month non-compete restrictions are the norm.

However, no timescales have been given as to when we might expect the Government to introduce the legislation needed to implement these changes, so we will be following the progress of these proposals through the legislative process and we will be providing further updates in due course.

If you have any questions about these proposals, or about any other aspect of employment law, please don’t hesitate to contact a member of our team on 0141 331 5150.

Topics: EU Law, Restrictive Covenants, Retained EU Law Bill, TUPE, Working Time Regulations