Introduction
On 10 May, the Department for Business and Trade (the “DBT”) released the regulatory reform update “Smarter Regulation to Grow the Economy” – the first in a series of updates on how the government intends to reform regulations to support economic growth. This first package of updates addresses employment regulations, which the DBT have identified as a key area to reduce the administrative burden on UK businesses following the UK’s departure from the European Union. The aim of these reforms is to boost the UK economy by cutting red tape for UK businesses, whilst maintaining UK labour standards. The government’s updates suggest there will be deregulation in the following three areas of employment law:
- The Working Time Regulations 1998 (the “WTR”);
- The Transfer of Undertakings (Protection of Employment) (“TUPE”) Regulations 2006; and
- Non-compete clauses.
Reducing WTR reporting burdens
The WTR contains a range of obligations relating to working time and calculation of annual leave entitlement and pay. The DBT “will be consulting” on a range of reforms to the WTR, though it is unclear when this will take place.
| Current Law | DBT Consultation | |
| Working time records (Reg. 9) | Employers must maintain adequate working time records for their employees to show that their workers have not worked beyond the 48 hours per seven days of work limit (unless the employee has opted out of this limit). | Remove retained EU case law which places additional requirements on businesses regarding their working hour records. The DBT suggest this will save UK businesses around £1 billion a year. |
| Calculation of statutory annual leave (Reg. 13 and 13A) | There are two separate leave entitlements for UK employees, 20 days of leave derived from EU law and 8 days of leave derived from UK domestic law, giving employees a total of 28 days of statutory annual leave. | Merge the two separate leave entitlements into “one pot” of statutory annual leave. Maintain the same amount of total statutory leave entitlement. |
| Rolled up holiday (whereby an employer pays employees at a slightly increased hourly rate to account for pay when the employee is on holiday, rather than paying them when they take their holiday, eliminating the need to calculate an employee’s holiday entitlement and reducing administrative burdens) | Technically unlawful in the UK based on European Court of Justice judgment (Robinson-Steele v RD Retail Services, Clarke v Frank Staddon Ltd, Caulfield & others v Hanson Clay Products Ltd (formerly Marshalls Clay Products Ltd) (joined cases C-131/04 and C-257/04). | Propose to introduce rolled-up holiday pay. |
Simplifying information and consultation obligations in a TUPE context
The TUPE Regulations provide protections for employees when the business/organisation for which they work transfers to new ownership. The DBT is consulting on simplification of information and consultation requirements in a TUPE context.
Currently, businesses (of any size) cannot consult directly with affected employees when there are no employee representatives. Instead, they must go through a process of electing new employee representatives and then consult with the appointed representatives. The DBT proposes to remove the requirement to appoint employee representatives: (i) when a business has fewer than 50 employees; and (ii) where a transfer will affect less than 10 employees. In either of these circumstances, employers will be allowed to consult directly with the affected employees.
The DBT have suggested this will improve engagement with workers and simplify the transfer process, reducing administrative burdens for businesses.
Limiting the length of non-compete clauses
UK employment contracts often contain non-compete clauses which restrict employees from working for competing businesses after they leave their job.
The DBT proposes introduction of legislation to limit the length of non-compete clauses to three months. The aim of this proposed legislation is to provide employees with greater flexibility to look for better paying roles or to set up a rival business, thus increasing the capacity for innovation in UK businesses by making it easier to acquire new talent. The DBT suggest these reforms will give up to five million UK workers greater freedom to switch jobs.
However, employers will still be able to use other available options including (paid) notice periods, garden leave, and non-solicitation clauses to protect their businesses and investment in staff. Additionally, these reforms will not undermine the use of confidentiality clauses.
It is unclear when the legislative process on non-compete clauses will begin, but the DBT have stated the government intends to legislate on the issue when Parliamentary time allows.