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Non-compete restrictions limited to 3 months and other headline employment law reforms announced

Posted on 10 May 2023

The UK Government has today announced the first post-Brexit reforms to employment laws, in a move it asserts will improve employment regulation, reduce red tape and "create a more competitive and productive economy". The announced changes are:

1. Non-compete restrictions to be limited to 3 months

The Government accepts that non-compete restrictions in employment arrangements can play an important role in protecting businesses, but has decided that unnecessarily burdensome clauses have become the default. Accordingly, when Parliamentary time allows, the Government will legislate to limit the length of non-compete clauses to 3 months. The announcement stresses that employers will still be able to rely on non-solicitation clauses (and, while not expressly mentioned, presumably other types of restrictive covenants such as non-deal and non-poaching covenants).

2. Holiday pay and working time records obligations to be updated

The Government says that the Working Time Regulations 1998 currently impose disproportionate burdens on employers and will therefore consult on and reform them this year. The proposals include:

  • reducing the administrative burden and complexity of calculating holiday pay. The Government proposes reintroducing rolled-up holiday pay (which EU caselaw had said could no longer be operated);
  • merging the current core 4 weeks and 1.6 additional weeks leave entitlements into one pot of statutory holiday – at present, different rules apply to the operation of the two types of leave entitlement; and
  • removing the current requirement on employers to keep working hour records.

3. Simplifying TUPE consultation requirements for small businesses

At present, there is a very limited exception on the general obligation of employers to inform and consult with appropriate representatives of the affected employees about a proposed TUPE transfer. This exception currently applies to micro-businesses where the employer has fewer than 10 employees and certain conditions apply, in which case the employer can inform and consult with the affected employees directly rather than with employee representatives. The Government proposes to extend the existing exception to businesses with fewer than 50 employees and where the TUPE transfer affects less than 10 employees.

While employers will want to see the detail of all these proposals in order to properly prepare for them, those employers who make use of non-compete restrictions may wish to start reviewing their arrangements now and consider how best to adapt them to the new regime.

If you would like more information on how best to manage employment law reform in your business, please get in touch with your usual Mishcon de Reya contact or with a member of the Employment team.

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