Government Announces Proposed Reforms To Employment Law

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Government Announces Proposed Reforms To Employment Law

Key Contact: Claire Knowles

Author: Laura Spence

In line with its aim of streamlining regulation, taking a scalpel to those it deems heavy on red tape and light on support for innovation, the UK Government has announced a number of changes that will impact employment law.

With Brexit never far from any conversation on regulation, the Retained EU Law (Revocation and Reform Bill), currently awaiting final consideration, continues to make headlines. The Bill planned to curtail the lingering influence of EU law in the UK by automatically revoking (or “sunsetting”) EU laws by the end of 2023 unless they were specifically listed for preservation.

However, in a change of emphasis, the Government now proposes to instead list those EU laws targeted for revocation, replacing the “sunset” provision with the rule of thumb that each EU law will now stay in force unless the Government has explicitly stated otherwise.

Fortunately, as it currently stands, the list indicates very little impact on employment law.

Other aspects of the Bill are, nevertheless, still in play, including:

  1. Abolition of the principles of EU law, smoothing the way for higher courts to depart from existing EU laws and case law
  2. A broadening of the existing rules of interpretation in applying EU-derived employment rights or case law. Employees and their employers could therefore face uncertainty when interpreting and implementing significant portions of employment law
  3. The retention of Government powers to amend EU laws, which could impact employment legislation and, therefore, protections.

Notably, the Government has earmarked certain pieces of regulation that will definitely affect employment law as it currently stands:

Reducing Working Time Regulations reporting burdens

The Government plans to remove EU case law that requires employers to keep working-hour records for nearly all workers – which it considers onerous and an example of the “red tape” it wishes to cut for businesses. The Government hopes this will save businesses money while protecting employees’ rights.

Introducing “rolled up holiday pay”

The Government intends to ease the admin of holiday pay calculation by including holiday pay with every payslip, or “rolled up holiday pay.” This will merge the two separate leave entitlements into one pot of statutory annual leave, while keeping the same amount of statutory leave entitlement overall.

Simplifying the employment rules governing a business’s transfer to new ownership (TUPE)

Currently, if a business does not have employee representatives in place, it cannot consult employees directly. Instead, it must elect new employee representatives. The Government views this as infuriating “red tape” and plans to allow businesses of fewer than 50 people transferring under ten employees to consult directly with the affected workers. It hopes this will also enhance engagement with workers.

Limiting the length of non-compete clauses

Non-compete clauses are terms of employment contracts that place limitations on the extent an employee can work for a competing business after they have taken up a new role. Undoubtedly these clauses protect businesses, who often invest in their staff, but they also hamper individuals’ ability to seek attractive and potentially better remunerated roles.

The Government therefore proposes to limit non-compete clauses to a period of three months. This will not restrict employers’ right to use paid notice periods, garden leave or non-solicitation clauses, and will also not affect confidentiality clauses. What it will do, the Government says, is allow five million people in the UK more freedom to take up new roles and reap the financial rewards. In turn, the Government contends, by expanding the talent pool and allowing organisations to hire better quality candidates, this will boost both businesses and the economy.

Timeline

The reforms are expected in 2024, giving employers some lead time to make sure that their employment contracts are unassailable, and that any restrictive covenants, confidentiality, garden leave and notice clauses are fit for purpose.

The Government’s rationale for proposing these changes is to cut bureaucracy, while safeguarding workers’ rights – and to save an eye-popping £1 billion a year. It hopes that, as a package of reforms alongside a full costing and the labour market measures announced in the Spring Budget earlier this year, the changes will reshape the economy to be more productive and competitive, as well as aligning the degree of regulation to the outcomes intended.

In short, the Government envisages an economy that is “better able to attract businesses to our shores, better able to innovate, better able to serve households, and delivers prosperity across our nation”. 

For advice on how the reforms could impact your business, contact the Employment team at Acuity Law.

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