E-brief: An employment law update from Lodders Solicitors

Damian Kelly , partner and head of our Employment Law team , gives us an update on recent employment law changes and things to look out for in the near future.

Within this email, Damian will cover:

• TUPE allowance to inform and consult directly
• Post-Brexit employment law changes
• Working Time Regulations
• Changes to holiday pay
• New law: workers to be given all tips

TUPE allowance to inform and consult directly

Under current law, employers cannot consult directly about TUPE transfers with affected employees unless they employ less than 10 employees and there are no employee representatives. Employers currently have to first elect a representative to inform and consult about the relevant matters, unless they already have representatives in place for this.

The government policy papers say that they are “consulting on removing this requirement for businesses with fewer than 50 people and transfers affecting less than 10 employees, allowing businesses to consult directly with the affected employees".

The implications

Employers will be able to inform and consult with employees directly, rather than through an elected representative, where the business has less than 50 employees and the transfer affects less than 10 employees.

This change might be beneficial for businesses as it could improve engagement with employees, simplify the transfer process and reduce the administrative burden on employers.

Post-Brexit employment law changes

The government plans to make changes to the following areas of employment law post-Brexit:

Non-compete clauses

Non-compete clauses are also known as restrictive covenants. An employer may include these in a contract of employment to protect its business, for example, in relation to confidential information and customer connections, after an employee leaves. Non-compete clauses usually prevent an employee from working for a competitor or starting a competing business for a certain period after their employment ends.

Non-compete clauses are generally only enforceable where they are necessary to protect the employer’s legitimate business interests. If a court decides it is either too wide or unnecessary in the circumstances, it will be unenforceable.

The government has recently announced plans to impose a cap of three months, meaning that the maximum period over which a non-compete clause could be enforced would be the three months immediately after termination. However, this will not impact other restrictive covenants (such as non-dealing, non-solicitation, or non-poaching).

The implications

It remains unclear what these proposals mean for current non-compete clauses that are longer than three months. However, this is worth bearing in mind if you are drafting new contracts. For each individual employee, consider whether restrictive covenants are required and if so, which type and length of restriction would be most suitable to protect your business interests.

Working Time Regulations

Under the Working Time Regulations (WTR), there is a requirement for an employer to keep adequate records of workers’ hours to show that the maximum weekly working time limit of 48 hours is being complied with unless the workers have opted out of it.

Complying with WTR

Employers would keep daily records of working hours. The government proposes to remove this requirement, which would mean that employers would no longer need to keep records of their workers’ working hours.

Changes to holiday pay

So-called ‘rolled-up holiday pay’ is currently unlawful. This is where an employer does not pay holiday pay while the worker is on holiday but instead pays holiday pay during the weeks that the worker works, to cover pay due in respect of holiday periods.

The government plans to allow employers to pay rolled-up holiday pay at 12.07% of pay for hours worked. This represents the proportion of 5.6 weeks of statutory annual leave in relation to working weeks of the year. The percentage will need to be increased where workers have additional contractual holiday.

The implications

If the government’s plans are implemented, employers considering paying rolled-up holiday pay should check their contracts of employment to ensure they are compatible.

New law: workers to be given all tips

A new law concerning tips has been granted Royal Assent. The Employment (Allocation of Tips) Act 2003 will require employers to ensure all tips and service charges are allocated fairly between their workers.

‘Fairly’ is not yet defined, but the legislation refers to a Code of Practice, which is yet to be developed. Once available, employers will need to refer to the Code of Practice when determining what would be a fair allocation.

The new law will prohibit businesses from retaining tips paid by credit cards and will require employers to keep written records of all tips and service charges received for three years. If employers fail to comply with the new law, workers will be able to sue their employer.

The implications

The above law probably will not come into effect until 2024, but it is worth knowing about so that you can plan ahead, as it might be difficult to administer, especially for small businesses.

Employers are recommended to implement suitable policies on tips. Such policies should set out how tips are to be allocated and to whom, amongst other things.

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