On 10 May 2023, the government announced its proposals for reforming employment law post-Brexit in its policy paper, Smarter Regulation to Grow the Economy, the main headline of which was the decision to reverse the sunset date from the Brexit Bill.
The new policy paper sets out the first series of reforms in the government’s vision for a post-Brexit world and in particular focuses on how current EU derived regulations can be improved to reduce burdens on businesses. This new package is noted as seeking to improve regulations in employment law following the UK’s departure from the EU ‘whilst maintaining UK labour standards which are some of the highest in the world’.
Sunset date thrown onto the Brexit bonfire
The abandonment of the sunset clause in the Retained EU Law (Revocation and Reform) Bill (also known as the Brexit Bill), comes as a surprise to many, especially given the large volume of commentary that was written about it both after the Bill was initially announced and during the passing of the Bill through the House of Commons.
The Bill was originally designed to ensure that all UK law derived from the EU would cease to have legal effect on 31 December 2023. This date was coined the ‘sunset date’. The exceptions were where a law was reviewed and restated in new UK legislation prior to the sunset date or if a minister opted to delay the sunset date for specified EU laws until 23 June 2026 – the 10 anniversary of the Brexit Referendum.
This new announcement means the sunset date will be removed and any EU law will remain binding unless the law is expressly repealed – i.e. a total reverse of the original concept. There is a published list of the EU laws that the government intends to throw out on 31 December 2023. Any laws not on this list will remain binding on the UK post 31 December 2023. Looking at the list, there doesn’t appear to be any significant employment laws being carved up as wood for the bonfire just yet.
Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
One of the areas the government has proposed changes to, however, is TUPE and in particular informing and consulting employee representatives. Currently, under TUPE, employers must give affected employees the chance to elect employee representatives with whom to inform and consult in relation to a proposed transfer. Elected representatives could be a recognised trade union or an existing employee representative group, but if these do not exist, an employer has to carry out an election process. There is an exception for micro-businesses (employing fewer than 10 employees) in which employers can consult directly with affected employees, rather than with elected employee representatives.
The government proposes to extend this exemption to small businesses (employing fewer than 50 people with the TUPE transfer affecting less than 10 employees). It is intended this will save businesses red tape and improve engagement with workers and simplify the transfer process whilst protecting workers’ rights. However, will only benefit small businesses, with the obligations to elect employee representatives for larger businesses remaining. It is unlikely that this will have a significant impact and will not generate the reduction in red tape that many employers had hoped for. We have previously advocated the idea that TUPE consultation should reflect the obligations that employers are familiar with under the collective redundancy rules but that is a long way from what is being proposed.
A welcome simplification in calculating statutory holiday pay?
The government is also proposing (subject to consultation) a number of changes to the Working Time Regulations 1998 (‘WTR’) as it has identified the disproportionate burdens in relation to recording working hours and other administrative requirements under the WTR.
The first proposal it to introduce rolled-up holiday pay so that workers can receive their holiday pay with every payslip – they would not receive pay when taking time off but would have received that relevant salary within previous payroll periods. Currently, under EU case law, rolled up holiday pay is prohibited (a major concern was that employees would not take leave if they did not receive payment in the pay period which followed); however some employers continue to use this method as the most practical solution for calculating holiday pay for atypical workers such as zero-hour workers.
The second proposal is that the current separate ‘basic’ and ‘additional’ leave entitlements under the WTR are merged into one entitlement overall. Currently, workers are entitled to 5.6 weeks statutory leave (equivalent to 28 days for a full-time worker). This comprises of 4 weeks’ leave as derived from EU law under the Working Time Directive with the additional 1.6 weeks deriving purely from UK law. The EU judgments regarding the calculation of holiday pay are all based on the original 4 week period with the application of the rules to the additional leave subject to interpretation by the courts. It is proposed that merging these separate leave entitlements into one pot will ensure that both types of leave are treated consistently in terms of carry-over of leave, and rescheduled holidays due to sickness (as the current rules vary depending on the type of leave being taken). Whist this would be a welcome introduction for employers, no details have been provided yet by the government on what this will look like practically. It might however pave the way for the calculation of holiday pay to revert to contractual pay only without reference to commission and overtime – only time will tell.
The final proposal is to remove the requirement that employers keep individual working time records for its workforce. Currently under the WTR, employers are to keep and maintain adequate records showing that they are complying with the rules on maximum working hours (for employees who have not opted out) and protections for night workers. Many employers do not comply with this obligation in any event and so this is unlikely to have any obvious impact.
The government has also announced that it plans to limit the length of non-compete post-termination restrictions in the employment context to 3 months. A non-compete clause can play an important role in protecting businesses as it can restrict an individual from working for a competing business after they have left their job. However, the government has recognised that these can be unnecessarily burdensome insofar they have become a default of too many employment contracts, often fulfilling no purpose and can prevent workers from looking for better paying roles. This consequently limits the ability of businesses to compete and innovate. Legislating on this will take place “when parliamentary time allows” and so it remains seen as to how quickly, if at all, such laws will be implemented. The government does not believe that this will interfere with an employer’s ability to use paid notice periods, gardening leave or other post-termination restrictions such as non-solicitation clauses.
It remains open to the government to cast aside all employment related EU law when each of the (hundreds) of specific regulations and rules come under individual scrutiny. It might be argued that logic has played a part here – there was no way in reality for so many pieces of legislation to be properly reviewed before the sunset date and consequently the extension would probably have been applied in many cases. What might be assumed from these initial proposals is that the plans for reform are perhaps much narrower than many employers might had hoped. Time will tell, but maybe it is reform and opportunity that will end up on the bonfire?