UK: consultation documents provide more detail on non-compete, working time and TUPE reform proposals

The Government has now published further details of the proposed reforms to employment law announced in its policy paper on 10 May (see our post here).

Non-competes

The response to the 2020 consultation here confirms the following:

• the proposed statutory limit of 3 months will be applied to non-compete clauses only, and not other types of restrictive covenant such as non-solicitation or non-dealing clauses;
• common law principles will continue to apply to non-competes of 3 months or less (so they will remain enforceable only if they go no further than is reasonably necessary to protect legitimate trade interests);
• the limit will be applied to contracts of employment and 'limb (b)' worker contracts only, and not other contractual agreements such as partnership agreements, LLP agreements, and shareholder agreements;
• the Government acknowledges that employers could respond to the proposed restriction on the use of non-competes by using other types of restrictive covenants, garden leave clauses, confidentiality clauses and intellectual property protections but considers that this response would be more significant if non-competes were banned completely.  There is no mention of any intention to reduce the 3 month limit by setting off any period of garden leave;
• there is no information as to whether and how the limit would apply retrospectively to existing contracts;
• the other approaches considered in the earlier consultation, including mandatory compensation and limits on an employer's ability to unilaterally waive a covenant, will not be taken forward. The Government will enhance transparency by producing guidance on non-compete clauses;
• as previously stated, legislation will be brought forward "when parliamentary time allows".

Given uncertainty as to the likely timescale and retrospectivity of these changes, it is probably premature for employers to change their use of non-compete clauses for the time being.  It would be prudent to review the drafting of other types of covenants, confidentiality/IP clauses, notice provisions and garden leave clauses, to ensure appropriate alternative protections are in place.

New consultation on working time and TUPE reform proposals

The Government is consulting until 7 July 2023 on its recently announced plans for reform to the Working Time Regulations and TUPE, as set out below.  The document also confirms that the Government intends to preserve without change the EU-derived regulations concerning maternity, parental, paternity and adoption leave; protections for part-time workers and fixed-term employees; agency workers; European and domestic works councils and those parts of TUPE and the Working Time Regulations which are not being consulted on.

• Proposal to remove the requirement for employers to keep records of all workers' actual daily worked hours (derived from EU case law):  the Government is seeking evidence as to what record-keeping employers do and asks whether other record-keeping requirements in the regulations could be improved.  As currently drafted, the regulations currently require employers to keep and maintain "adequate records" to show whether the limits on average working time, night work and provision of health and safety assessments are being complied with in the case of each worker.
• Annual leave and holiday pay calculations: the proposal is to combine the EU-derived 4 weeks and the additional 1.6 weeks of leave into a single leave entitlement governed by one set of rules.  There would be no practical change to the carry-over provisions, in that only 1.6 weeks could be carried over the leave year end (if this is provided for in a written agreement between employer and worker) and the remaining 4 weeks could only be carried over where a worker has been unable to take it due to being on long-term sick or family leave.  The consultation seeks views on whether the method of calculating minimum holiday pay for the new combined entitlement should be 'normal remuneration' (as currently applies to the EU-derived 4 weeks' leave) or basic pay (excluding overtime, bonuses, and commission).  The Government also proposes clarifying that workers accrue their annual leave entitlement at the end of each pay period until the end of their first year of employment.
• Rolled-up holiday pay: the Government proposes allowing rolled-up pay at 12.07% of a worker’s pay on each payslip (provided it is clearly shown on the payslip), for both irregular and regular hours workers.
• TUPE transfers: the consultation document makes clear that the proposal is to allow employers with no appropriate employee representatives in place to inform and consult employees directly where either they employ fewer than 50 employees in total, or the transfer affects fewer than 10 employees (whatever size the employer is).  The consultation also asks for views as to other ways TUPE could be improved.

Update: see our blog post here for details of the Government's response and draft regulations published on 8 November 2023.

To discuss the implications of these proposals further please do get in touch with your usual HSF contact.