Reform of non-compete clauses
The government announced on 10 May 2023 that it will be legislating to limit the length of non-compete clauses to 3 months “when parliamentary time allows". It confirmed the plans to reform the law on 12 May 2023 in a long-awaited response to its 2020 consultation. This announcement follows similar proposals in the US, where the Federal Trade Commission is considering a ban of such restraints in an effort to drive innovation and competition. However, the need for primary legislation to bring this into force means that we shouldn’t expect any changes imminently.
The changes will apply to post-termination non-compete covenants only, and will not affect employers' ability to use non-solicitation clauses, non-dealing clauses and non-poaching clauses (to the extent reasonably necessary to protect legitimate business interests) as well as notice periods, garden leave and confidentiality obligations. However, employers must still exercise caution when using lengthy notice and/or garden leave provisions, as they may be open to challenge by employees.
The three-month limit will only apply to non-competes contained within contracts of employment and worker contracts although it is not yet clear how “contracts of employment” will be defined. It will not apply to wider workplace contracts such as partnership agreements, LLP agreements and shareholder agreements.
In the meantime, non-competes of over three months remain enforceable in the UK provided they are no wider than reasonably necessary to protect legitimate business interests. However, we recommend that employers start to think about contingencies to deal with the impact of any new laws.
For more information, see our publication: Reform of non-compete clauses in employment and worker contracts and Reform of non-compete clauses – the knowns and the unknowns.
You can also find out more on our dedicated webpage here.
Proposed changes to holiday pay, working time rules and TUPE
In a move to “cut red tape for business” following the UK’s departure from the EU, the government will be consulting on changes to the following regulations:
- The Working Time Regulations – including clarifying that employers are not required to operate a system for recording actual daily working time for individual workers. The government proposes to allow rolled-up holiday pay, so that workers can receive their holiday pay with every payslip, and to merge the current two separate leave entitlements (derived from European and domestic rules) into one pot of statutory annual leave to which a single set of rules will apply. The consultation seeks views on the minimum rate for holiday pay for the new merged annual leave entitlement.
- The Transfer of Undertakings (Protection of Employment) Regulations – for businesses with fewer than 50 people and transfers affecting less than 10 employees, the government will be consulting on removing the requirement for businesses to elect new employee representatives so that they can instead consult directly with affected employees.
The proposal to allow rolled-up holiday pay is likely to be welcomed by many, particularly employers of casual workers.
Further changes to holiday are on the horizon following the government’s earlier consultation on calculating holiday entitlement for part-year and irregular hours workers.
For more information on proposed changes to the regulations, see the government’s policy paper: Smarter regulation to grow the economy.
Although the UK’s whistleblowing framework celebrates its 25th
anniversary this year, stories of retaliation and mistreatment of whistleblowers continue to be commonplace.
Following calls for reform and a commitment made in 2021 to review whistleblowing protection under the Public Interest Disclosure Act 1998 (“PIDA
”), the government launched its review
in March 2023. It will look at the effectiveness of the current whistleblowing framework in the workplace, including what protections are available and to who, and examine best practice. The definition of ‘worker’ for the purpose of whistleblowing protection will be under the spotlight as part of this.
With the EU Whistleblower Directive setting EU-wide minimum standards on whistleblowing, the UK now risks falling behind its European counterparts in protecting whistleblowers without further action. Given the increasingly important role that whistleblowers play in society, we could soon see proposals to strengthen the current regime including introducing requirements for employers to establish internal whistleblowing channels and procedures. Even without legislative change, many employers are now focusing on how they can create a positive speak-up culture within their organisations through their policies, procedures and practices.
Find out more about possible areas for reform in our publication: UK whistleblowing laws under review
Financial services reform
A wide package of reforms to the financial sector was announced in December 2022 including a review of the Senior Managers and Certification Regime.
The review was launched in March and closed on 1 June 2023. HM Treasury’s call for evidence focused on the legislative aspects of the regime while the joint discussion paper from the FCA and PRA focused on the regulatory framework. Whilst fundamental reform to the regulatory framework is not expected, the government does appear to be open to exploring ways of introducing efficiencies into the regime and reducing the administrative burden on firms.
For further information, see this publication from our Financial Regulation group: SMCR Review: HMT, FCA and PRA invite feedback on Senior Managers Regime.
For more information on employment issues under consideration, see our publication: Review of the Senior Managers and Certification Regime.
Sustained and widespread strike action continues to dominate the headlines this year. The Strikes (Minimum Service Levels) Bill is progressing through Parliament. The Bill sets minimum service levels (“MSLs”) in the event of a strike being called in certain sectors, including health, transport and education. Following a call to strike, the employer may issue a work notice identifying workers it requires to work in order to ensure the MSL is met. Failure to comply with the work notice by the trade union or by individual workers would lead to loss of protection.
Consultations on MSLs for rail, ambulance, and fire and rescue services closed in May 2023. The outcome of the consultations will feed into how MSLs will be set, which will likely vary across each of the sectors. Once the Bill has been enacted, regulations would also need to be passed before the power to apply MSLs could be used so this will impact the overall timeframe.
However, in response to a complaint by the TUC that UK government policy was in breach of the right to strike, the International Labour Organization, a UN agency, has asked the UK government to provide further information and to facilitate discussion on whether existing and prospective legislation is in conformity with international law on the right to strike. It remains to be seen how this will affect the progress of the Strikes (Minimum Service Levels) Bill.
Any reforms may well be short lived if the Labour Party win the general election next year, having already committed to repealing the legislation if it were to be introduced.
The judicial review of the Conduct of Employment Agencies and Employment Business (Amendment) Regulations 2022, which repealed the ban on agency workers covering for workers on strike, was heard in the High Court at the beginning of May. The unions alleged that the government failed to consult on the Regulations prior to their introduction and that they are in breach of article 11 of the European Convention on Human Rights, which protects the right to strike. The outcome is awaited so it remains to be seen whether the Regulations will be able to lawfully remain in place.
For more information about the repeal of the law banning agency workers from covering strikes, see our blog: Law banning agency workers from covering during strikes is repealed.
For more information on the legal framework of strike action in Europe, see our guide: European guide to strike action – restrictions and minimum service levels.
Pay reporting and transparency
In a bold step forward in tackling and enforcing equal pay, the EU Pay Transparency Directive has been formally approved by the European Parliament and Council. Its far-reaching measures include gender pay reporting, compulsory pay audits, bans on asking about salary history, and information rights for workers to request information about their colleagues’ pay and ask questions about their employer’s gender pay gap.
Although the Directive (once locally implemented) will only strictly impact EU employers and non-EU employers operating in EU member states, it is likely to raise UK employees’ expectations regarding pay transparency and pay gaps, and influence the development of future regulation in the UK.
For more information, see our publication: The EU Pay Transparency Directive: What do UK employers need to know?
You can also find out more on our dedicated webpage here.
Retained EU Law (Revocation and Reform) Bill
Last month, the government proposed to replace the 31 December 2023 ‘sunset’ date (that is, the date when all EU-derived secondary legislation was due to automatically expire) with a list of all the retained EU laws to be revoked. The reversal of the position, that retained EU law will remain unless or until it is expressly repealed, will be welcomed by many for restoring certainty.
The government has already confirmed that it does not intend to change workers' rights under the Bill and that no amendments to the Equality Act 2010 are expected. This has been affirmed by the government’s publication of a list of all of the EU laws that it intends to revoke under the Bill at the end of 2023 which contains just three employment regulations (relating to matters that are obsolete and/or trivial). However, the Bill still has the potential to have a significant impact on employment law given that it abolishes the principle of the supremacy of EU law and removes the effects of the general principles of EU law. This will have important implications for the courts’ interpretation of EU-derived employment law rules.
For more information on the Bill, see our blogs: Counting down to the end of EU law in the UK and Goodbye EU law.
New workplace rights and protections
Private Members’ Bills
The government has been advancing its employment agenda by supporting various Private Members’ Bills, including:
- The Employment (Allocation of Tips) Bill
- Protection from Redundancy (Pregnancy and Family Leave) Bill
- Carer's Leave Bill
- Neonatal Care (Leave and Pay) Bill
- Employment Relations (Flexible Working) Bill
- Worker Protection (Amendment of Equality Act 2010) Bill
- Workers (Predictable Terms and Conditions) Bill
The first of these government-backed Bills to be passed was the Employment (Allocation of Tips) Act which received Royal Assent on 2 May 2023. Secondary legislation enacting the new measures along with a code of practice are expected to come into force in 2024 when employers will have a responsibility to fairly allocate all tips, gratuities and service charges to workers by no later than the end of the month. A new right to request information relating to an employer’s tipping record will also be introduced, so employers will need to ensure they are keeping appropriate records. Employers in the hospitality sector in particular should take note.
On 24 May 2023, the Protection from Redundancy (Pregnancy and Family Leave) Act, the Carer’s Leave Act and the Neonatal Care (Leave and Pay) Act received Royal Assent signalling a significant strengthening of workplace rights for new families and carers. New protections include enhanced redundancy protection during pregnancy and after a new parent has returned to work, one week’s flexible unpaid leave for carers, and up to 12 weeks’ leave for parents of babies receiving neonatal care. Secondary legislation will be introduced in due course. Employers will need to consider introducing new and/or updated workplace policies to reflect these new rights and whether they wish to offer enhanced levels of protection.
Whilst there is no guarantee that the remaining Private Members’ Bills will become law, they have now made significant progress through the various legislative stages which makes it more likely that they will succeed.
For more information about new family rights on the horizon, see our publication: New family friendly rights.
For more information about changes to the flexible working regime, see our blog: Flexible working: a new regime.
For more information on potential changes to the law on harassment at work, see our blog: Changes to the law on harassment in the workplace are on the horizon.
Fire and rehire
The consultation on the draft Code of Practice on Termination and Re-engagement closed in April 2023. Given it was long in the gestation, it is likely that the government will move promptly to bring it into force.
While the Code doesn’t ban the practice, it requires employers to follow detailed and prescriptive requirements when terminating and re-engaging employees on new less favourable terms and conditions. As good practice, employers considering undertaking workforce processes involving dismissal and re-engagement should begin factoring the guidance on consultation into their processes and explore whether any alternative options are available.
For more information about the draft Code, see our publication: Draft code of practice on dismissal and re-engagement.
Acas has recently published two new guidance notes on supporting employees’ mental health at work:
The guidance will be helpful for managers navigating sensitive conversations around mental health and to prescribe good practice. Employers may wish to review existing sickness policies with mental health in mind to ensure they are suitable and consider whether any other policies are necessary, such as a reasonable adjustments for mental health policy (which Acas suggests would be beneficial).
Even where an employee might not satisfy the legal definition of ‘disability’, Acas advises that employers should nonetheless try to make reasonable adjustments which could help with staff retention and create a healthy culture.