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Changes to employment law: Non-competes, TUPE and holiday
The Government recently published a paper entitled 'Smarter Regulation to Grow the Economy,' indicating plans to reform employment law post-Brexit. There are several proposed measures including changes to: non-compete clauses, Working Time Regulations 1998 and TUPE. The Government has also scrapped the 'sunset clause' in the Retained EU Law (Revocation and Reform) Bill.
This alert summarises the key changes proposed by the Government.
The Government intends to limit the length of non-compete clauses to three months. Non-compete clauses can be included in employment contracts to restrict an individual’s ability to work for, or establish, a competing business after they have left their current employer (typically for a period of 3-12 months post-termination).
Whilst non-compete clauses can protect the legitimate business interests of companies, the Government has concluded that lengthy non-compete clauses have become far too common in employment contracts, and often disproportionately impact the employee.
There will be no changes to non-solicitation clauses, confidentiality clauses or garden leave clauses under the current proposals and, as such, we may see employers introducing longer notice periods or relying on garden leave clauses to keep the employee from joining competitors. It is unclear how the legislation will impact current non-competes (i.e. will they be void or only enforceable up to a maximum of three months?).
This change requires primary legislation and will be introduced "when parliamentary time allows". Employers should consider how they will protect their businesses including reviewing their employment contracts and their suite of post-termination restrictions.
The Government has proposed the following changes and launched a consultation on these areas.
The Government is proposing to make the following post-Brexit changes.
- Rolled-up holiday pay
The Government proposes to introduce rolled-up holiday pay which was previously banned by EU law. This would allow workers to receive an additional amount or enhancement with every payslip to cover their holiday pay, rather than receiving holiday pay only when they take annual leave. This flexibility is likely to be a welcome change for employers of casual workers or those on short term contracts.
Merging of types of leave entitlements
Annual leave has been a notoriously tricky area with two type of leave entitlements – four weeks' leave under EU law and the additional 1.6 weeks' leave under the Working Time Regulations 1998. The proposal is to merge these types of leave into one combined leave allowance of 5.6 weeks of paid statutory annual leave. The Government is consulting on how to define the rate of holiday pay in legislation.
- Record-keeping requirements
The Government is proposing to remove uncertainty for employers about their record keeping obligations, by legislating to clarify that businesses do not have to keep a record of daily working hours of their workers. The Government has suggested that this could help businesses save £1 billion per year.
The Government is proposing to simplify the TUPE transfer process for small businesses with fewer than 50 employees. For such businesses, they are proposing that the consultation can take place directly with employees if there are no existing employee representatives in place, rather than having to arrange elections for new representatives.
For businesses of any size, where fewer than 10 people are proposing to transfer, direct consultation with employees will be permitted.
This may remove an element of unnecessary bureaucracy for employers; however, this change is relatively minor.
Retained EU Law (Revocation and Reform) Bill
The Government has committed to removing the 'sunset clause' in the proposed Retained EU Law (Revocation and Reform) Bill.
The controversial 'sunset clause' provided that EU-derived law would be automatically revoked at the end of 2023, unless secondary legislation had been passed to specifically retain it. This could have led to the end of countless EU derived employment rights, given the tight deadline by which the Government would have had to introduce secondary legislation.
This has now been replaced with a list of EU laws that it plans to revoke at the end of 2023, which doesn’t include any key employment laws. This is likely to be reassuring news for employers.
The Government has stated that the proposals are the first of many to come. It is likely that there will be new proposals in the next few months, to bring clarity to employment law post-Brexit.
We'll keep you updated with developments and please do get in touch with Paul Reeves or your usual Stephenson Harwood contact if you have any questions.