Proposed changes to Working Time Regulations, TUPE and non-compete clauses

A policy paper has been published by the Department for Business and Trade on 10 May 2023, titled ‘Smarter Regulation to Grow the Economy’ (“the Paper”). In the Paper, the Government have announced a number of employment measures, with the intention behind the policies stated to be “re-thinking” regulation post-Brexit, driving economic growth, and reducing costs for businesses whilst also safeguarding the rights of workers.

The Government propose to reduce reporting obligations currently placed on employers under the Working Time Regulations 1998. The Paper refers to removing the retained EU case law which imposes time-consuming and disproportionate requirements on business to keep records of their workforce’s working hours - this removal is stated to have the effect of helping businesses save ￡1bn per year.

The Paper also proposes to introduce rolled-up holiday pay and to merge the current two separate annual leave entitlements (i.e. the four weeks derived from the Working Time Directive and additional 1.6 weeks from the Working Time Regulations 1998) into one pot of statutory annual leave, whilst maintaining the same amount of statutory leave entitlement overall. These changes will hopefully reduce the administrative burden and complexity of calculating holiday pay.

The Paper goes on to propose changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). These changes are stated to retain the important protections for employees upon a business transfer, whilst reducing the administrative burdens placed on employers. Currently, businesses must elect employee representatives for the purpose of the informing and consulting process required under TUPE unless the business employees less than 10 employees in total (in which case the business can consult with the employees directly). Under the new proposals, businesses with fewer than 50 employees may be able to consult with the employees directly provided that the transfer affects less than 10 employees. Election processes can be time consuming and therefore this is likely to be a welcome change for small businesses.

The Government consider post-termination restrictions (typically contained in contracts of employment) in the Paper - specifically non-compete clauses. The non-compete clause is the covenant preventing an employee competing directly post-termination e.g. by working for a competitor or setting up in competition. The Government state that such restrictions can inhibit workers from looking for better paying roles and in turn, limit the ability of businesses to compete and innovate. In proposals seeking to boost the economy, the Government proposes to legislate (when Parliamentary time allows) to limit the length of non-compete clauses to three months. It is stated that this will give up to 5 million UK workers greater freedom to switch jobs and boost their income, whilst also boosting the wider UK economy and increasing productivity by widening the talent pool.

In respect of the proposed changes to the Working Time Regulations, the Government says it will consult on these proposals but that it intends for the changes to come into effect “this year”. As stated above, the proposed limits on post-termination restrictions are to be implemented “when Parliamentary time allows”, however no timeframe has been provided for when the TUPE changes may be brought into effect.