Show notes
The government has suggested a variety of changes to employment law in its policy paper ‘Smarter Regulation to Grow the Economy’, with Working Time Regulations, TUPE, and restrictive covenants in the spotlight. Employment experts Ian Pace and Rebecca Cairney consider what this might mean for employers.
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Transcript
Ian Pace: Hi there, and welcome to the Employment Insights Podcast. This is the fifth podcast in our series. We've discussed hot topics in employment law, and what they mean for you and your business. My name is Ian Pace. I'm a partner in the employment team based in Manchester. I'm Joined again today by my North West colleague, Rebecca Cairney, who is a principal associate based in our Liverpool office.
Rebecca Cairney: Hi Ian, and hi, everybody.
Ian: So Rebecca, I understand there's been some quite exciting news recently announced by the Government in relation to some proposed changes to the law. Would you mind just talking us through the ‘Smarter regulations to grow the economy’ policy paper? Firstly, this thing about Brexit; obviously Brexit's been big in the news, and we've discussed in previous podcasts the Retained EU Law Revocation Reform Bill (snappy title), and last time we talked about that, it was passing through the Commons at the end of last year and, as we said in that podcast, it contains a controversial, what's called the “sunset clause”, which effectively meant that by the end of this year 2023, any European laws not being confirmed as UK law or re-written into UK law would simply be put on the bonfire, and wouldn't apply. Rebecca, could you just talk about how things have progressed there, and what's happened recently?
Rebecca: Yeah, absolutely. So we know from previous discussions that this “sunset clause” will have the potential to impact in some significant areas from an employment law perspective. So things like the working time regulations, the transfer of undertakings regulations, or TUPE, agency worker regulations, and all the way up to maternity and parental leave. A lot of people are actually really concerned about this, and how much there looked like there was to do before the end of this year, as well as a lack of certainty as to what was going to change, and what was going to stay. So on 10 May, the Business and Trade Secretary actually announced some proposed changes to the bill and as stated that the sunset clause should actually be removed, and has instead proposed that it's replaced with a list of around 600 items of EU law to be retained. The Government has stated that they want to retain the right to amend and revoke EU law. But I think they now accept that by removing this sunset clause it will allow time for proper assessments and consultations to take place on what exactly should remain and what should be removed. So the bill does still need to be debated and progressed through the House of Lords, but it is now expected that that sunset clause will be removed. The area of focus does still seem to be very much on employment law. The Government has said they're aiming to save businesses up to around £1 billion per year through deregulation, but have made clear that they are still looking to retain the rights of workers.
Ian: With all of that in mind, what sort of employment law do you think is up for reform?
Rebecca: The working time regulations have been one area that the Government has mentioned. Again, TUPE is another area, which I think will come as a delight to employment lawyers and HR business partners, and also restrictive covenants is another area.
Ian: You mentioned working time regulations. What do you think the proposed changes are likely to be to the working time regulations?
Rebecca: So we know that this provides a number of important worker protections, so limits on working hours, break times, etc. But it does come at a huge cost to employers who have, I suppose, the sometimes monstrous task of recording the exact working hours of every worker in their business. This is a huge burdensome, and time consuming, administrative task, and the proposal is to reform the requirement for employees to have to record all hours. It's not clear how the reforms will impact the recording requirements as yet and they are unlikely to be removed completely as this could also have an impact on how employers calculate the national minimum wage, for example, and the Government has therefore suggested that there will firstly be a consultation set out in relation to its proposals to take a view from businesses as to how it should change, and to the extent it should change. Another area for the working time regulations that is up for reform is holiday pay. And again, I think this will be welcome news to many. At the moment, again, employers are faced with a really burdensome task, with complicated rules around how holiday pay should be calculated, especially in those areas where we've got workers who were working irregular hours. The proposal is to allow rolled up holiday pay back as something that employees can do. This essentially means that workers receive more pay than the hours that they've worked in a set period, but that pay also includes their holiday pay entitlement. So, rather than being paid holiday pay when the holiday is actually taken it will be rolled up into their normal pay periods. They've also suggested that the two different types of statutory holiday that we have at the moment, so the four weeks of European leave and the 1.6 weeks of UK leave, will be combined so that all statutory leave will fall into the same pot and which again will have an impact on how holiday pay is calculated.
Ian: That's really interesting. You mentioned there about the rolled up holiday pay. We know that some employers do still pay rolled up holiday pay, and they just make it quite clear and transparent in the way that it's being paid. And technically, it is a breach of the working regulations, but provided that it is transparent most number of employees do go forward with it. There are, I suppose, the health and safety issues that are related to that which is why it is technically unlawful. So it looks as though the Government is sort of moving away from this sort of health and safety angle on that, and just moving more in terms of employer convenience. And the thing with statutory holiday, I think, regardless of what your views are on the idea of doing away with EU law, I think that will actually simplify things rather than to have these two holiday entitlements, the working time regulations, and the additional and the European leave, and to have all 5.6 weeks of leave, should hopefully simplify matters. That's really interesting. You mentioned also about TUPE. What's going to happen with TUPE?
Rebecca: So there's not a great deal of change here. Considering how complicated and far reaching the TUPE regulations apply, the proposal is simply to remove the requirements to elect employee representatives as part of the consultation period. But that's where there are less than 50 people in the business, and less than 10 employees impacted by the transfer. So not a great deal of change. It's also not really clear at the moment whether this is only applicable in situations where both of those criteria are met. So, for example, you've got a small business with a small transfer or whether it would be satisfied by one or the other. So either a small business or a big business where it's only a small number of individuals who are impacted. Still a bit of uncertainty there, and probably some disappointment for many who we were hoping for more simplified rules in this area. The Government has said that the aim of this change is to simplify the process and increase engagement with employees directly, and but there are no other proposed changes at this time.
Ian: It will interesting to see how that one goes. It's a complex area of law, and you wonder after consultation, whether there may be some more proposals on the table to simplify things. It’s one to keep an eye on, that one. Finally, restrictive covenants. Obviously restrictive covenants, these are the clauses which tend to be included in more senior employees’ contracts of employment, so service agreements, and director service agreements, and they tend to try to prevent those individuals from competing against the business, or taking away or poaching employees or customers after they've left. What changes, if anything, do you think we'll see here?
Rebecca: So specifically, this is only going to impact non-compete clauses. So those clauses that prevent employees from working for a competitor, like you say, or from setting up a competing business after they've left a job. The aim, I suppose, of non-compete clauses is to protect employers but the Government has said that by proposing changes to the non-compete clauses, they are aiming to increase innovation and boost competition, and they're looking to restrict non-compete clauses to a maximum period of three months. They've said this should give employees more flexibility and freedom when leaving a role to start a business or move jobs. But I suppose importantly to note on this, the Government has also confirmed that there is not going to be any impact on garden leave rules or paid notice periods. So it will be interesting to see how this applies in practice. They have said that there won't be any expected impact on any other restrictive covenants. So like you say, the non solicitation of employees or customers.
Ian: My first thought is it would be interesting to see where it goes, but it seems a little bit half-baked at the moment. If there's not going to be any impact on garden leave rules, surely the answer to employees who are seeking to protect the business will be to increase the amount of time that the individual is on garden leave, so take them out of the business whilst they may remain employed by the business, taking them out the business, and what contacts they might have before the termination day. So it's an interesting one, and again with non solicitation, you may be able to compete with the business 3 months afterwards but if you can't team steal, and those individuals still have those contacts, then you wonder how effective that's going to be? That's interesting. Okay, so that's really helpful, Rebecca. A really good summary of some of the changes we definitely want to keep an eye on. I think I’m right in saying that the bill will be going before Parliament this week or next week.
Rebecca: It should be debated by the House of Lords so we'll keep an eye on that.
Ian: One to update on in the next podcast. That's really helpful. So it's clear that a lot is going on this year, it's set to be a really busy year for the Government, and potentially for employers to get to grips with all these changes. The point really to make here is that these are only proposed changes at the moment, and they are subject to the government passing those new laws to implement the changes. In terms of timescales, nothing is clearly set out yet, and the Government said that it will only be when parliamentary time allows and we've seen from past history what that means. Your guess is as good as ours in terms of what parliamentary time means. We'll continue to cover these topics throughout the year, and we will keep you updated on where things are up to, and what else you can expect. But between now and then, if you need any assistance with anything employment law related then please contact me. My email address is ian.pace@weightmans.com or Rebecca on rebecca.cairney@weightmans.com. In the meantime, thanks very much for listening, and thanks Rebecca for your thoughts today, and we look forward to hearing from you soon.
Rebecca: Thanks, Ian, take care.