On 10 May 2023 the Government announced a number of significant employment law measures as part of a package of regulatory reforms to grow the economy. These include:

• Removing reporting requirements from the Working Time Regulations 1998 (WTR);
• Allowing rolled up holiday pay;
• Introducing a new exception from the application of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) to smaller businesses; and
• Limiting non-compete clauses to 3 months.

Working Time Regulations

Proposed measures include:

• Merging ‘normal’ holiday leave with ‘additional’ holiday leave, to create one entitlement. This may result (although not expressly stated by the Government) in the calculation of holiday pay reverting to the old method (i.e. excluding overtime, commission, bonus etc). This is certainly a measure that payroll should be made aware of along with…
• Allowing ‘rolled-up’ holiday pay. Under EU Law this has been technically unlawful for some years, although the remedy for breach is limited if the rolled-up element is shown clearly on payslips. This would therefore allow employers to lawfully pay workers with irregular hours an enhanced hourly rate to compensate for the fact that holiday pay will not be paid when holiday is taken without fear of redress.
• Removing the requirement for record-keeping under the Working Time Regulations for working hours. These requirements were to show whether the average working time limit, the night work limits and the provisions on health and safety assessments for night workers were being complied with in the case of each worker. Some employers have not done this despite of the legislation, it being more relevant to those employing night workers in any event. Those diligent employers with night workers may choose to continue to keep a record to ensure working hour limits are not breached but will not be penalised for failing to do so.

Tupe

• Removing the requirement to consult with appointed representatives when there are fewer than 50 employees in the business and fewer than 10 transferees. There is already an existing micro-business exemption (meaning an employer with fewer than 10 employees can inform and consult directly with employees where there are no appropriate representatives already in place and the employer has not invited any of the affected employees to elect employee representatives).
• The new measure means where a business has between 10 and 49 employees, of whom 9 or fewer are transferring, they will also be exempted from the collective consultation rules. Businesses will therefore be able to consult directly with affected employees. These reforms are described as simplifying the transfer process. In reality though this can only apply where there is transfer of part of a business, not a whole business. Whilst being discharged from the obligation to invite effected employees to elect representatives, the employers should remain wary of not falling foul of the TUPE Regulations by not adequately informing and consulting effected employees directly.

These significant changes are described as part of improvements to regulation since leaving the EU and are set out in the policy paper ‘Smarter Regulation to Grow the Economy’.

No timetable has been announced as yet but as none of these changes require primary legislation, they could take effect fairly soon and businesses should prepare themselves in readiness for implementation.

Non-compete

The government intends to legislate when parliamentary time allows on…

• Restricting the duration of non-compete restrictive covenants to three months. Employers will still be able to restrict activities during (paid) garden leave or notice periods and the three month limit will apply only to post-termination covenants. The new law will not affect non-solicitation clauses (these will continue to be subject to the test of being “no more than is reasonably necessary to protect the employer’s legitimate business interest”, nor will it affect confidentiality clauses . The press release is silent about non- dealing clauses. This significant change may take some time to be introduced , if ever. If it is introduced employers should review post-termination restrictive covenants and notice and garden leave clauses in contracts issued to new recruits to ensure legal compliance whilst best protecting their interests.

This is not legal advice; it is intended to provide information of general interest about current legal issues. You should specific legal advice before acting in reliance on any of the information provided. If you or your business require advice on the impact of these significant changes please contact the Employment Team.