UK Employment Law changes under Retained EU Law Bill

After a relatively stable period in UK Employment Law, the government has announced a raft of proposed changes. The government has long since seen some current employment laws to be prohibitive to business growth, describing some protections and requirements under EU Employment law as “red tape” to the growth of the economy. 

At the same time as these announcements, the government has also stated that all EU law will remain binding unless it is expressly repealed. This is a reversal of the previous headline announcement that unless expressly introduced into UK law, all EU law would automatically be revoked at the end of 2023 under the Retained EU Law (Revocation and Reform) Bill. 

The government has found the task of trying to identify which EU they need to save, amend or leave to disappear too difficult. Much easier is to simply keep everything, and make any desired changes as and when parliamentary time allows. In other words – nothing at all changes or disappears unless the government specifically changes the law. The Bill will however include some specified revocations – still to be confirmed.

Following these proposed changes to EU employment laws, and with the next general election taking place in 2024, employment law is now likely to be at the forefront of policies and manifestos of all parties.  

Working Time Regulations

The Working Time Regulations are a central piece of EU employment law, but the practical implementation and associated holiday pay calculations have been the subject of several long running, complex tribunal cases for the past decade. Reform has long since been viewed as required and the government has announced several different proposed changes to the legalisation to simplify and streamline processes and procedures for employers.

The proposals:

1) Allowing ‘rolled-up’ holiday pay.

Potential impact: this has been unlawful under EU law for many years, creating logistical issues for employers. Currently, the damage arising from a technical breach is limited if the rolled-up element is shown clearly on payslips. If holiday pay continues to be calculated using the current methods however, employers would still need to ensure that holiday pay throughout any period is checked to ensure it includes overtime, commission etc. Although not including in the announcements, there will be pressure on the government in this respect and it is possible that holiday pay calculations will be simplified, and potentially removing the requirement to include overtime and commission etc. as part of the calculations.

2) Annual leave entitlement being simplified to one type of annual leave removing the distinction between “normal” and “additional” holiday leave, to create one pot of “5.6 weeks annual leave”.

Potential impact: All holiday legislation is based on “week’s leave” rather than days or hours. The UK implemented the Working Time Directive via the Working Time Regulations. The Regulations provided extended rights to UK workers and introduced a further 1.6 weeks ‘additional’ annual leave entitlement to the ‘normal’ 4 weeks annual leave entitlement provided under the Directive. The additional 1.6 weeks were designed to cover the 8 typical bank holidays in the UK each year, although this was not expressly stated in the Regulations. The proposals would remove this distinction and would simply provide workers with one pot of 5.6 weeks statutory minimum leave to take in any given year. It is difficult to see any huge benefit to this amendment. In reality most employers make it clear that employees annual leave for a year includes the bank holidays and they will need to continue to do so if they wish for employees to take these days as annual leave moving forwards. It may give employers who do not typically close on a bank holiday further perceived flexibility in designating when annual leave takes place, but the change appears to be mainly cosmetic.

3)Removal of record keeping obligations for working hour records

Potential impact: the keeping and storing of working hours is an onerous task for employers. However, the purpose of the Working Time Regulations are primarily to protect the health and safety of employees and so accurate records can prove extremely helpful in the defence of any employee’s claim that they have not been afforded the correct rest periods and any breach of health and safety obligations as a consequence. Some employers may opt not to keep records once the obligation is removed (and indeed many already operate in breach of this requirement), but there would continue to be large benefits for those employers who employ individuals with shift patterns, night workers, and whose working hours are also linked to limitations on operating machinery (driving large vehicles etc.)

The Transfer of Undertakings (Protection of Employment) TUPE

These regulations have long since been viewed as burdensome by employers and although protect employees rights upon transfer, are often viewed as not being flexible enough to account for operational or size differences between the old and new employers. This has been seen as a potential piece of legislation that may see large reform that therefore, surprisingly, only one proposed change has been announced by the government. In addition, it should be noted that there is currently no proposed change to allow the harmonisation of employment terms upon transfer. 

Proposed Change: Removing the requirement to consult with appointed representatives when there are fewer than 50 employees in the business, and fewer than 10 proposed transferees.

Potential impact: In reality, it is likely this will have very little impact. The current micro-business exemption already provides that businesses with fewer than 10 employees do not need to consult with employee representatives, but can consult directly with their employees. In reality this change will therefore only impact a very specific situation where a business has between 10 and 49 employees, and where 9 or fewer are proposed to transfer i.e. in the transfer of part of that business (most likely a service provision change). In this situation, the need to inform and consult (if applicable) will still apply, but employee representatives will not need to be elected, speeding up and simplifying the process.

Non-compete clauses

The courts and tribunals have for several years ruled that the use of non-compete restrictions (where an employee is restricted from working for a competing organisation after leaving their previous employer) are only enforceable where other types of restrictions are not sufficient to protect their business. However, it is still common practice for these to be included in employment contracts, with some senior members of staff potentially being restricted for periods of up to 12 months.

Proposed change: to limit the duration of non-compete clauses to 3 months. 

Potential impact: this will likely impact employees in senior positions far greater than other employees. This change will provide senior individuals within organisations to move to competing businesses, or even set up their own competing business, very soon after leaving their employment. It will therefore be crucial for employers to ensure that the remaining clauses in the contract (confidentiality, non-solicitation of clients and suppliers, and non-poaching of staff) are well drafted and optimised for enforceability. 

On the plus side, the limit on the duration of non-compete clauses may also make it easier for companies to enforce covenants and recover damages from any breach (which can be notoriously tricky). This is because the competing employment (and corresponding actions) will openly commence sooner (rather than the current situation of working “behind the scenes” during any non-compete period). This will make it easier to argue a breach of the remaining covenants, and methods such as an account of profits to determine damages, will be available from an earlier date. 

It is worth noting that this is the only change that will require primary legislation, and so will likely be implemented from a later date that the other changes in this article.

Timing

No timetable has been set for any of the changes, with some potentially able to be introduced sooner than others due to the requirement (or not) for primary legislation