Proposals for reform of employment law

The Government has published a policy paper ‘Smarter regulation to grow the economy’, setting out proposals for regulatory reform with the aim of driving economic growth.

The key proposals from an employment law point of view are as follows:

Working Time Regulations (WTR) reform

There is a proposal to reduce WTR reporting burdens, which the Government considers place disproportionate burden on business. The proposals include:

Removing retained EU case law that impose requirements on business for working hour records to be kept for almost all members of the workforce.
The introduction of rolled-up holiday pay, so that workers can receive their holiday pay with every payslip. Rolled-up holiday pay is a system of including holiday pay in an employee’s basic rate of pay. It is not specifically prohibited by the WTR, however it is currently technically unlawful following ECJ case law, although sums paid under a transparent rolled-up holiday arrangement can in some circumstances be set off against any claim for unpaid holiday pay.
Merging the two separate leave entitlements into one pot of statutory annual leave, while maintaining the same amount of statutory leave entitlement overall. Currently, all workers are entitled to 5.6 weeks holiday each year, which is equivalent to 28 days for a full-time worker. This is made up of 4 weeks, derived from the Working Time Directive and 1.6 weeks, which is a domestic right and referred to in WTR as additional leave.

The Government has indicated that it intends to reform the regulations this year and will be consulting on how to improve how the regulations work without affecting the rights that matter to workers.

Transfer of Undertakings (Protection of Employment) Regulations (TUPE) reform

There is a proposal to simplify TUPE, which protect employees in certain circumstances when a business transfers to a new owner or when a service transfers to a new provider. TUPE imposes an obligation to inform and (in certain circumstances) consult with ‘appropriate representatives’ of employees affected by a proposed transfer. Where there is no recognised union or existing employee forum, there is a requirement to arrange the election of new employee representatives.

The proposal is that this requirement will be removed for business with fewer than 50 employees and for transfers affecting less than 10 employees. This will allow businesses to consult directly with the affected employees in those circumstances.

Restrictive Covenants reform

The Government had previously published consultation on whether non-compete covenants should be banned. The current proposal is to legislate to limit the length of non-compete clauses to 3 months. Non-compete clauses are used by some employers to prevent an employee from joining a rival business for a defined period of time after their employment has ended.

The aim of the proposal is to provide employees with more flexibility to join a competitor or start up a rival business after they have left their employment. However, the paper notes that this will not interfere with the employer’s ability to use notice periods, garden leave provisions or non-solicitation clauses; and that it will not cut across arrangements on confidentiality clauses.

Comment

There is no specific timescale for the announced proposals. There is, however, an indication that the Government is ‘not stopping here’ and that future updates with further regulatory reforms are on the way.

12 May 2023

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