The Government has recently published a policy paper entitled ‘Smarter Regulation to Grow the Economy', the first in a series of regulatory reform announcements. This will detail the Government’s vision for reforming employment law post-Brexit to support economic growth. It intends that the proposed changes to employment law will cut red tape for businesses and save £1 billion per year while still protecting workers’ rights.
The main proposals are set out below.
Non-Compete Clauses to be Limited to Three Months
Non-compete clauses, also known as restrictive covenants, may be included in a contract of employment. They prevent an employee from working for or setting up a competing business in a particular geographical area, for some time (usually six or twelve months) after the employment period is over. Such clauses are only binding if they are no wider than reasonably necessary to safeguard the employer’s ‘legitimate business interests’ such as confidential information or customer connections.
The policy paper sets out the Government’s intention to restrict the duration of non-compete clauses to three months. This is intended to offer more flexibility for employees to join competitors or commence a rival business, therefore allowing the economy to profit from the widened talent pool.
It is unclear at this stage whether the proposals will only be limited to non-compete clauses in employment contracts or will also apply to other types of contracts such as partnership and sale and purchase agreements.
In any event, the change will require legislative change so is some way off being implemented. While employers can continue to use non-compete clauses in employment contracts for now, it might be worth thinking about alternatives for the future.
Changes to the Working Time Regulations
The following changes are anticipated to the Working Time Regulations 1998:
- Rolled-up holiday pay, which is unlawful under EC law, is to be introduced so that workers can be paid an amount for holiday pay at their normal hourly rate. Since this is the most practical way of dealing with holiday pay and entitlement for zero hours and other atypical workers, this is likely to be a welcomed change for employers.
- The requirement to keep adequate records in respect of every worker will be removed
- The four weeks’ EU-derived holiday entitlement will be merged with the additional 1.6 weeks’ provided under domestic law to provide one pot of statutory annual leave. As a result, all workers will be entitled to statutory annual leave of 5.6 weeks, thus providing consistency of treatment for all statutory holiday entitlement.
The Government will consult on these proposals but does still intend them to come into effect ‘this year’.
TUPE Consultation
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) currently provides that only employers with fewer than ten employees can inform and consult affected employees directly on a business transfer or service provision change. Employers must inform and consult with appropriate employee representatives in all other circumstances. In the absence of a recognised trade union in the workplace, this usually involves time-consuming elections being held to appoint employee representatives.
The Government will now consult on permitting employers to inform and consult directly with employees in circumstances where businesses have fewer than fifty employees and the transfer affects less than ten people.
At the moment, a timeframe for when this change might come into effect has not been given.
Plans to Revoke all EU Regulations Watered Down
The Government has also ditched the contentious sunset clause in the Retained EU Law Bill, which could have resulted in thousands of EU-based laws disappearing at the end of 2023 – see our article on ‘Employment law changes and trends coming up in 2023' here for more details.
Employers are advised for now to continue with their current practices until legislation is introduced to pass these reforms. We will provide further employment law updates on the Government’s proposals as and when more detail becomes available.
To keep in touch with more law reforms and updates, visit our blog.
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