LEGAL UPDATE: 5 proposed Employment law changes you should know about…
From tweaks to TUPE, to ‘so-long’ to the proposed sunset for all EU-derived laws, it’s been a busy few weeks for Employment law.
Here’s a brief rundown of what you need to know:
1. So long to the sunset…
Under the Retained EU Law (Revocation and Reform) Bill, come the stroke of midnight on 31 December 2023, all EU-derived laws were to be automatically expunged from the statute books, unless expressly saved or replaced beforehand.
In practice, that would have meant much of the UK’s Employment law being revoked. So New Year’s Day 2024, would, by default, have heralded a brave new – fairly lawless - industrial relations landscape in the UK.
A change of approach was widely expected (and perhaps inevitable), but Employment lawyers the land over still breathed a huge sigh of relief when the Government recently confirmed its decision to remove the so called “sunset clause” from the Bill.
The Bill will still bring an end to the days of EU law trumping domestic law, but any reforms to UK Employment law will, thankfully, be done on a more reasoned and specific basis, rather than by default.
2. Changes to the Working Time Regulations 1998
And wasting no time, on 12 May 2023, the Government published its “Retained EU Employment law reforms” consultation. A paper containing its proposals on a few particularly thorny areas; the first one being the Working Time Regulations 1998.
The law governing holiday pay has been hideously complicated for a while. Mainly because our statutory minimum period of 5.6 weeks’ holiday actually derives from two different sources: 4 weeks’ derive from EU law, and the other 1.6 weeks’ derive from UK law.
So different rules govern the different types, which is not ideal. Plus, the supremacy of EU case law has often led to jarring results that make things difficult to manage in practice, particularly with the rise of irregular working patterns in the UK.
So it’s fruit that’s both low hanging and extremely ripe for reform – and the proposed changes are:
combining the two separate types of annual leave into a single tranche of 5.6 weeks, so that the same rules will apply to it all. A welcome change that would make calculating holiday pay and carry over rights a bit more straightforward;
expressly allowing “rolled-up” holiday – that is the practice of simply adding 12.07% to a worker’s basic salary to account for their holiday entitlement. Many employers find this approach the easiest way to address annual leave, but it was deemed unlawful under EU law; and
to further ease the administrative burden, a simplification of the record-keeping requirements under the Regs.
All positive stuff, and certainly a step in the right direction.
But there are still tricky areas left untouched, such as the difficulties arising from British Airways plc v Williams and Lock v British Gas Trading Ltd. A case which held that commission, regular overtime and other allowances ought to be included in holiday pay calculations – and which left employers with a real headache as to how to actually run the relevant calculations. The consultation offers no way forward in that regard, but it does canvass views.
3. A tweak to TUPE
The second area tackled by the consultation paper is TUPE. In attempting to simplify the TUPE process, the Government proposes to:
allow businesses with fewer than 50 employees to consult directly with employees, rather than with employee representatives (but only if there are no existing employee representatives in place). This is essentially an extension of the present carve out for micro-businesses (with fewer than 10 employees); and
allow businesses of any size to consult directly with employees, rather than with employee representatives (if there are no existing employee representatives in place), but only where fewer than 10 employees are actually being transferred under TUPE.
Again, good common-sense stuff.
But considering TUPE is derived solely from EU law (and the UK actually gold-plates the relevant EU Directive compared to many countries), it is a fairly modest tweak. It’s also a missed opportunity to provide some much-needed clarity on post-transfer harmonisation of terms and conditions – an area that often vexes employers.
4. Restricting non-compete restrictions
On 12 May 2023, the Government also announced proposals in relation to non-compete restrictions. This follows up on a 2020 consultation on potential reform to this area.
And the big news? Non-compete restrictions in Employment Contracts are to be limited in duration to 3 months post-employment.
The change is proposed to take place “when parliamentary time allows”, and so there is no set timetable. And it is limited to blanket non-compete restrictions (i.e. “though shall not work for a competitor for [X] months post-employment”).
These types of restrictions are always tricky to enforce anyway. Common law principles provide that any post-employment restriction is only enforceable to the extent it represents a reasonable and proportionate means of protecting a legitimate business interest. In practice, blanket non-competes are often too broad to meet that test.
So they are often accompanied by more specific and focussed covenants, such as non-solicitation, non-poach and/or non-deal restrictions relating specifically to clients and/or employees. The increased specificity of those restrictions, and the fact that the “legitimate business interest” is readily identifiable (i.e. the employer’s client base and/or workforce) makes them easier to enforce.
These more specific (and enforceable) restrictions will not be affected by the change. Also, it appears that non-compete restrictions contained in other documents such as Shareholders’ Agreements, Partnership Agreements, and the like won’t be affected. The change only applies to employment or worker contracts.
So whilst seemingly dramatic on the face of it, the change in practice may have fairly limited impact. That said, it is worth reviewing Employment Contracts and Service Agreements ahead of time to ensure that appropriate protections are in place.
5. A boost to family-friendly protections
In addition to the above, on 24 May 2023, Royal Assent was granted in relation to the Neonatal Care (Leave and Pay) Bill, the Carer’s Leave Bill, and the Protection from Redundancy (Pregnancy and Family Leave) Bill.
Together these provide a number of increased family-friendly protections, including:
the introduction of neonatal leave and pay – parents of babies admitted to neonatal care for at least 1 week (within the first 28 days following birth) will be entitled to a further 12 weeks’ leave. That’s in addition to other leave entitlements, such as maternity and paternity leave. It is a “day 1” right, so applies from the first day of employment. Plus, those parents with 26 weeks’ continuous service shall also be entitled to statutory neonatal care pay (likely to be the same rate as other statutory parental pay);
statutory unpaid leave for carers - a new and flexible entitlement of one week’s unpaid leave per year for employees who are providing or arranging care for a spouse, partner, civil partner, child, parent, a person who lives in the same household, or a person who reasonably relies on them for care (and who has a long-term care need); and
increased redundancy protection - the existing right for a woman be offered a suitable alternative vacancy (where there is one) if her role is redundant, is to be extended to cover the period from the date she notifies the employer in writing of her pregnancy up until to six months after her return from maternity leave.
The timetable for the introduction of neonatal leave and pay is likely to be April 2025, with the unpaid leave for carers being “in due course”, but unlikely to be before April 2024. The tweaks to redundancy protections, again, will be made “in due course”, but could be within the next few months.
For more information, do contact: john.skelly@bakerskelly.com
The above is intended as general commentary only and is not a substitute for specific legal advice. It relates to the law of England and Wales only and to no other jurisdictions.
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