Government signposts post-Brexit changes to Working Time Regulations, non-compete clauses and TUPE

In arguably more of a trim than a cut to red tape post-Brexit, on 10 May 2023 the Government published a policy paper indicating how it plans to make changes to employment law.

The policy paper is described as "the first in a series of regulatory reform announcements" concentrating on ways to improve regulation in the economy to drive growth. 

On the same day, the Government also announced that it intends to reverse the 'sunset clause' in the Retained EU Law Bill so that, instead of all EU-derived laws automatically no longer having effect in the UK at the end of this year unless specifically retained or replaced first (as initially proposed), all EU Law will continue to have effect save for those regulations which they include on an list attached to the bill. The Government has released a list, which does not contain any key employment laws (but they can still revoke other EU-derived laws via regulations).

Non-compete clauses to be limited to 3 months

Restrictive covenants are contractual clauses that employers use in order to control the activities of employees post-termination with a view to protecting confidential information, business connections and the stability of their workforce. You will have seen restrictive covenants in contracts talk about an employee not being able, for a specified period of time after termination, to do things like deal with clients or suppliers they dealt with when employed by you or poach an employee that they line manged in your business to go and work for them in a competing business.

Because restrictive covenants can impose restraints on trade and competition, they are not enforceable unless they go no wider than is reasonably necessary to protect a legitimate business interest.

Non-compete clauses are the most draconian form of restrictive covenant (and the hardest to enforce as a result). They seek to prevent an employee working in competition with the business for a period of time after they have left.

The Government has previously consulted about reforming the law around restrictive covenants with the aim of avoiding over-stifling employee activity post-termination and boosting the economy.

How could this impact your business?

The policy paper explains that the Government plans to legislate to limit the length of non-compete clauses to 3 months for employees. This will not impact though on your ability to keep other longer restrictive covenants in place (e.g. for non-solicitation, non-dealing, non-interfering and/or non-poaching). Nor will it prevent you from utilising notice periods and garden leave to keep an employee out of the market.

It is unclear when this intended legislation will be drafted or come into effect as it requires primary legislation to be enacted and this is only indicated to take place 'when parliamentary time allows'. The fact it is intended to come into effect however, and the reference to this in the press, will mean it is sensible to look now at your current restrictive covenants and notice/garden leave clauses so that you are ready for when this change does come into effect and/or get less pushback from employees on agreeing your covenant clauses.

There is no detail yet on what the impact would be on existing longer non-compete clauses in contracts, but it would be sensible to ensure (particularly in new contracts for new staff or promotions) that your non-solicit and non-dealing clauses may provide sufficient cover should any non-compete over 3 months later become unenforceable.

Changes to holiday

The policy paper described the proposals in relation to this aspect of the Working Time Regulations to be made with a view to "reducing the administrative burden and complexity of calculating holiday pay". Hurrah – we can all rejoice at this being the aim! The detail of the proposals shared so far don't explicitly suggest how they will achieve this fully – or even how it will work.

The brief description provided explains that the Government intend to:

There is no clarity on an implementation date for these proposed changes, but they will not require changes to primary legislation so it can be implemented more quickly that the change to the law around non-competes.

Small reform to TUPE

Under the current law, employers are obliged to inform and consult affected employees where there is a TUPE transfer which will affect them – but they have to first elect a representative of the affected workers to inform and consult about the relevant matters (unless they already have reps in place for this which is unusual).

The Government policy paper indicates that they are "consulting on removing this requirement for businesses with fewer than 50 people and transfers affecting less than 10 employees, allowing businesses to consult directly with the affected employees".

Exactly how that will work in practice remains to be seen. It will be interesting to see if the Government plans/announces any more interesting or practical amends to TUPE legislation. There is no clarity on an implementation date for these proposed changes but they will not require changes to primary legislation so it can be implemented more quickly that the change to the law around non-competes.

Removing the requirement to keep working hour records

The policy paper indicted that the Government has proposed to "remove retained EU case law that impose time-consuming and disproportionate requirements on business for working hours records to be kept for almost all members of the workforce".

The Working Time Regulations require an employer to keep adequate records to show whether the maximum weekly working time limit of 48 hours are being complied with (and to keep these for 2 years) unless the workers have opted-out of the 48-hour working week limit. EU case law had indicated that employers should record the actual daily working hours of their workers on the basis this was the only way an employer could actually ensure the maximum weekly working time limit of 48 hours was being respected.

It is not clear how helpful such a change will be in practical terms (save in relation to salaried employees) since most employers keep records in relation to hours worked by, and payments made to, workers in order to demonstrate to HMRC compliance with the National Minimum Wage regulations. Many employers also have other practical reasons (usually relating to automatic payroll systems and/or monitoring attendance/lateness) which mean they will in any event be collating records around working hours.

There is no clarity on an implementation date for these proposed changes but they will not require changes to primary legislation so it can be implemented more quickly that the change to the law around non-competes.

This article was last updated on 11 May 2023.

If you have any questions about the changes, our employment experts are here to help.