Expected Developments in Employment Law

The Government has recently announced a range of changes that it intends to make to employment law.  We have set out below a summary of the expected changes that are likely to be of interest to employers:

Brexit Changes to Employment Law

The Government has announced plans to:

  1. Abandon the controversial “sunset clause” in its Retained EU Law Bill. This clause would have meant that thousands of EU-derived laws would have been automatically revoked at the end of 2023 unless legislation was passed to retain them.   However, the position has now been reversed and all EU-derived laws will remain in place unless they are expressly repealed.   At present there is no proposal to repeal any significant employment laws but there are proposals to make changes to some legislation as detailed below.
  2. Make changes to the Working Time Regulations 1998 as part of the drive to remove “red tape”. Proposed changes include removing restrictions on the use of rolled up holiday pay which is currently unlawful and removing certain record keeping obligations. There is also a proposal to remove the differentiation between the first 4 weeks of holiday entitlement provided for under EU law and the additional 1.6 weeks.  Many commentators believe that this may mean that the requirement to include regular payments such as overtime in the calculation of holiday pay will cease but this is yet to be clarified.
  3.  Reform requirements in relation to informing and consulting employees under the TUPE Regulations. The Government has announced its intention to remove the requirement to consult with staff on a collective basis for businesses with fewer than 50 people and where the transfer affects less than 10 employees, allowing the employer to inform and consult directly with staff in such circumstances.  In practice this is unlikely to be a significant change for most affected businesses taking into account the existing exemption on collective consultation for businesses with less than 10 employees.  Many employment lawyers had expected more significant changes to the TUPE regulations.

At present there is no clear timetable for introduction of the changes and we will keep you updated as further details become available.

Post-Employment Restrictions – Non-compete clauses

The Government has also recently announced its intention to limit the length of post-employment non-compete clauses.

Non-compete clauses are commonly used in employment contracts to prevent employees from working for competitors for a certain period of time after terminating their employment. Whilst these clauses are only enforceable where they go no further than is reasonably necessary to protect the employer’s legitimate business interests, it is not unusual for an employer to seek to restrict a departing employee from working for a competitor for up to 12 months.

However, the Government has indicated that it will introduce new legislation to restrict the duration of non-compete restrictive covenants to three months.  The purpose of the legislation would be to strike a fairer balance between protecting employers’ interests and allowing employees to move on to new employment and develop their careers.

The new proposal will not have an impact on the law concerning:

  • post-employment confidentiality provisions;
  • the ability of employers to use paid notice periods or “garden leave” periods for exiting employees;
  • the potential use of non-solicitation clauses (i.e. restricting a departing employee from contacting certain business contacts such as customers and staff for a period of time)

Other types of post-termination restrictions, such as non dealing clauses, have not been explicitly mentioned, therefore, the extent of the proposal is yet to be clarified.  Overall, it remains to be seen whether such proposals will become law, no timetable has been set and new legislation will be introduced when “parliamentary time allows”.

Employment (Allocation of Tips) Act 2023

The Employment (Allocation of Tips) Act 2023 received Royal Assent last week. The commencement date has not been announced, but according to the Government release, will be in about one year’s time.

The new legislation will require employers to ensure all tips and service charges are allocated fairly between its workers.  There will be a Code of Practice released in due course to assist employers in determining how to “fairly” allocate tips and service charges.

Employers will also have to introduce a written policy on how it deals with tips and employers must keep records of all tips and service charges received for three years.

It will be important for relevant employers to be aware of their obligations and comply with them.  Workers will have up to 12 months (rather than 3) to bring a claim under the Act and the tribunal will be able to order the employer to pay tips and services charges not just to the Claimant, but to any workers employed by the employer. Additionally, compensation of up to £5,000 per Claimant might be payable to reflect additional financial losses caused by non-payment.

We will keep you up to date with any developments in these areas.   If you have any queries about these expected developments or any other employment law matters, please contact the employment department.

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