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Government announces employment law reforms

The Government has unveiled a series of measures aimed at restructuring employment laws after Brexit.

These proposed changes carry significant implications for non-competition clauses, holiday entitlements, and the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), along with the broader employment law framework.

Amendments to non-competition clauses

New legislation will limit the length of non-competition clauses in employment contracts from six months to a maximum of three months.

The Government hopes that this amendment will provide more flexibility for employees to join competitors and that this in turn will benefit the wider economy.

However, this change will no doubt see employers use alternative routes of preventing employees from jumping ship, such as gardening leave and non-solicitation post-termination restrictions, none of which have been amended in the new legislation.

Rolled-up holiday pay

The Government also wants to introduce rolled-up holiday pay which would enable employees to receive their holiday pay in their normal hourly rate.

This practice is currently unlawful as it means employees do not receive any holiday pay at the time the holiday is actually taken and could therefore deter employees from taking holiday.

No requirement to record working hours

As part of these changes, the basic and additional leave allowances under the Working Time Regulations will be merged into one pot of statutory annual leave.

However, the amount of overall statutory holiday entitlement (5.6 weeks for a full-time worker) will not change.

In 2019, the Court of Justice of the European Union (CJEU) ruled that employers must record the daily working hours of employees in compliance with the Working Time Directive.

This ruling imposed a more burdensome obligation compared to the Working Time Regulations, which primarily required employers to maintain records demonstrating adherence to maximum weekly working hours and night work limits.

The Government considers the CJEU’s requirements to be disproportionate and intends to enact legislation clarifying that employers are not obligated to record daily working hours.

TUPE reforms

The Transfer of Undertakings (Protection of Employment) (TUPE) regulation changes are only minor but hold certain advantages for small employers and situations involving a minimal number of employees being transferred.

Currently, unless they are micro-employers, employers are required to choose employee representatives to inform and consult on a TUPE transfer if they don’t already have existing employee representatives, such as a recognised trade union.

Under the Government’s suggested approach, in the future, employers with fewer than 50 employees will be exempt from the requirement to elect representatives.

They will have the option to directly consult with employees regarding a TUPE transfer in the absence of established employee representatives.

This exemption will also apply, regardless of the employer’s size, if the number of employees being transferred is fewer than 10.

However, if employers already have employee representatives in place, they must engage in consultation with those representatives and will not be permitted to consult directly with the staff.

The proposed reforms above have been collated into a consultation paper. The consultation closes on 7 July 2023.

For more information about the proposed reforms and how they will affect your business, please contact us.

Amanda Hyam

Head of Dispute Resolution and Employment

I have specialised in Dispute Resolution, Civil Litigation and Employment law for more than 15 years. I understand how daunting the prospect of litigation can be and because of this I am always available to discuss concerns.