On 10 May 2023, Department for Business and Trade policy paper outlines a number of employment-related reforms, including proposed changes affecting non-compete agreements, Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) requirements, the Working Time Regulations 1998, and retained EU law.
The Government is proposing to:
- limit non-compete agreements to three months.
- remove certain TUPE requirements so that small employers can consult directly with employees.
- The Government will be consulting on several revisions under the Working Time Regulations 1998.
Non-compete Restrictions
Non-competes (a type of restrictive covenant) restrict employees from entering into competition with their employers for a specified length of time after their termination dates. Currently, these are not governed by legislation and are instead deemed enforceable by the court. The plan is for more flexibility to join competitors earlier or establish competing businesses, to benefit the wider economy. The reform is subject to when “parliamentary time allows.” There is no intention to limit the duration of other types of restrictive covenants, such as non-solicitation or non-poaching covenants.
Consultation Requirements Under TUPE
The plan is to remove the requirement under TUPE that employers consult with employee representatives (or hold elections if there are no representatives in place) for employers employing fewer than fifty employees and transfers affecting fewer than ten employees and instead allow them to consult with employees directly.
While this is a minor change, it would benefit smaller employers and bring the law in line with employer practices, as it can be inefficient to consult with employee and some employers will choose to consult directly instead.
Working Time Regulations 1998
The consultation relates to three changes:
- merging the EU-derived annual leave entitlement of four weeks with the additional 1.6 weeks “statutory annual leave” (which is available in the UK) into a single entitlement. This would mean the full 5.6 weeks of annual leave would be treated the same when carrying it over into the next holiday year and for the purposes of calculating payment in lieu of notice;
- reducing record-keeping requirements for employers; and
- allowing employers to “roll up” holiday pay so that an employee’s hourly rate is inclusive of holiday pay (“so that workers can receive their holiday pay with every payslip”). Due to EU regulations, this is currently unlawful in the UK. This change could benefit flexible workers who would prefer their entitlement to be paid as they work.
Retained EU Law (Revocation and Reform) Bill 2022
The Bill set out a “sunset clause” for 31 December 2023. This meant that by 31 December 2023, all EU law would be automatically revoked on that date unless a statutory instrument was passed to protect it. However, the Government has since changed its position so that EU law will remain binding in the UK unless it is expressly revoked on the sunset date. At first glance, this seems like an easier approach, given the number of EU laws the Government must review, as it allows resources to be spent on identifying which laws the Government intends on revoking or reforming.
The Government has now published a list of EU laws that it plans to revoke on the sunset date. At this stage, there are no key employment laws on the list; however, this could change later in the year as the Government works through the laws.
Next Steps: Consultation will need to take place on the proposed changes relating to the Working Time Regulations 1998 and TUPE and will be open until 7 July 2023. Primary legislation will also be required to implement the restrictions on non-competes. As the paper states, this will happen when “parliamentary time allows.”
