Employment Law Coffee Break | Reforms to working time, TUPE and non-competes; stress in the workplace; and an update from our incentives team

Government announces reforms to working time, TUPE and non-compete provisions

As part of a "series of upcoming regulatory reform announcements, focusing on how we can improve regulation across the board to reduce burdens, push down the cost of living and drive economic growth", the UK government has announced a number of employment law reforms in its policy paper "Smarter regulation to grow the economy".

Working Time Regulations

Stating that the Working Time Regulations (WTR) (which are derived from the EU's Working Time Directive (WTD)) "place disproportionate burdens on business", the government has proposed:

• Working time records: removing retained EU case law that imposes time-consuming and disproportionate requirements on business for keeping records of working hours; and
• Holiday pay: reducing the administrative burden and complexity of calculating holiday pay, including proposals to permit rolled-up holiday pay, so that workers can receive their holiday pay with every payslip; and merging the current two separate leave entitlements into one pot of statutory annual leave, while maintaining the same amount of statutory leave entitlement overall. The WTR currently provides for four weeks paid annual leave derived from the WTD and an additional 1.6 weeks paid annual leave provided for simply under the WTR.  

The government has stated that it will be consulting on these proposals with a view to making changes "this year". From the announcement, it is unclear whether the government's consultation will expressly address the uncertainties that currently exist on how holiday pay is calculated and which have arisen from case law emanating from the European Court of Justice, but it seems likely that this will need to be considered in the proposals to merge the existing two separate leave entitlements.

The government is already consulting on proposed changes to the statutory regime for calculating holiday entitlement for part-year and irregular hours workers to ensure it "is proportionate to the time they spend working" – about which, read more here.

TUPE

While recognising that the Transfer of Undertaking (Protection of Employment) Regulations (TUPE) provide "important protections for employees and provide a legal framework for transfers of staff", the government is proposing to make "some simplifications… to reduce administrative burden without changing employee rights".

The announcement states that "for businesses with fewer than 50 people and transfers affecting less than 10 employees" the government will be consulting on removing the requirement for consultation to take place through employee representatives and instead allow businesses to consult directly with the affected employees.

It is unclear whether a business will need to employer fewer than 50 people and the transfer affects less than 10 employees (our emphasis) or, whether just one of the conditions needs to be satisfied, to benefit from this new proposal.

The government states that not only will this "save businesses with red tape" but it will also "improve engagement with workers". A micro-business exemption already exists for businesses with fewer than 10 employees enabling them to consult employees directly.

Non-compete clauses

The government published a consultation at the end of 2020 on potential reforms to non-compete clauses in employment contracts. In a move which the government states will "give up to 5 million UK workers greater freedom to switch jobs, apply their skills elsewhere and even earn a pay rise", it has stated that it intends to legislate "to limit the length of non-compete clauses to 3 months" and which will provide employees with "more flexibility join a competitor or start up a rival business after they have left a position".

While the government recognises that non-compete clauses "can play an important role in protecting businesses who invest in their staff", it notes that "unnecessarily burdensome clauses have become a default part of too many employment contracts, including where they fulfil no purpose" and "can inhibit workers from looking for better paying roles, and limit the ability of businesses to compete and innovate".

Non-compete provisions are currently an important contractual term for businesses in some sectors and particularly where businesses are looking to protect their important interests following the departure of senior or highly skilled employees. If legislation is introduced, employers will need to revisit their contractual terms to address any vulnerabilities and ensure that contracts provide adequate protection (it is unclear whether any proposals will apply to existing non-compete provisions with durations greater than three months or whether the new reforms would only affect future contracts).

The government has stressed that its proposals to limit non-compete clauses "will not interfere with the ability of employers to use (paid) notice periods or gardening leave or to use non-solicitation clauses" and that "these reforms will not cut across arrangements on confidentiality clauses."

No express mention is made of non-poaching provisions which are also commonly used in employment contracts alongside non-compete and non-solicitation provisions.

Retained EU Law (Revocation and Reform) Bill 

Kemi Badenoch, Secretary of State for the Department for Business and Trade, has also announced in a statement (10 May 2023) that the government is tabling an amendment to the Retained EU Law (Revocation and Reform) Bill which "will replace the current sunset in the Bill" (which essentially sought to revoke all retained EU laws unless they are specifically retained), "with a list of the retained EU laws that we intend to revoke under the Bill at the end of 2023". However, the government "will retain the vitally important powers in the Bill that allow us to continue to amend EU laws, so more complex regulation can still be revoked or reformed after proper assessment and consultation" and "will still fully take back control of our laws and end the supremacy and special status of retained EU law by the end of 2023".

Next steps

We now await the consultations on the proposals to reform the WTR and TUPE regulations; it seems likely that these will be published sooner rather than later with the government's announcement stating that it intends to introduce reforms to the WTR this year. 

How soon legislative proposals relating to reforming non-compete clauses in employment contracts will proceed is perhaps less clear, with the government stating that it will introduce legislation "when parliamentary time allows". Given the government's wider focus on economic growth and taking measures which cut red tape for businesses, the legislative agenda looks set to be a busy one, particularly as we start moving towards preparations for the next general election.

The non-compete proposals bring into wider focus the need for businesses to consider the suitability of any post-termination restrictions on a case by case basis to ensure they reflect the current market for the sector in which the business is operating and each individual's working practices. Increased hybrid working risks masking warning signs of behaviours which may be indicative of unfair competitive practices and employers therefore need to consider what appropriate safeguards should be put in place.

New Acas advice for employers on managing stress

Mental Health Awareness week this year runs from 15 to 21 May and, in the run up, Acas has launched new advice for employers (and employees) on managing stress.

This follows a survey in March 2023 which revealed that a third of British workers (33%) believe that their organisation is not effective at managing work-related stress and 63% are feeling stressed due to the rising cost of living. "Stress" is defined by the Health and Safety executive (HSE) as "the adverse reaction people have to excessive pressures or other types of demand placed on them". The advice points out that stress is not an illness in itself, but that it can affect a person's physical and mental health and, if not properly managed, can lead to burnout, anxiety and depression as well as raising the risk of physical illnesses such as heart disease, back pain and digestive conditions.

The advice takes a practical look at:

• The causes and signs of stress – addressing workplace causes as well as outside factors and sets out warning signs to look out for.
• Understanding the law on work-related stress – covering an employers' duty of care and responsibility to carry out risk assessments and take steps to prevent or reduce work-related stress.
• Supporting employees with work-related stress – including guidance for managers and adjustments that can be made.
• Preventing work-related stress – including clear policies, a supportive culture, training, good work-life balance and accessible support (both internal and through outside support services).

With the increased cost of living impacting on the mental wellbeing of so many employees, it is essential that employers have effective policies, support systems and training in place to help recognise employees showing signs of suffering from stress and to assist their managers and colleagues in effectively supporting them, as well as helping employees to take positive steps themselves.

Employers should take an inclusive and nuanced approach to stress management in their workplace by addressing any specific considerations relating to particular groups of employees more susceptible to stress, either as a result of their particular role or their personal circumstances or characteristics.

Neurodivergent employees may experience heightened sensitivity to certain challenges and processes within the organisation and therefore need particular adjustments to their workplace or duties to address any risk factors; those with physical or mental health challenges, caring responsibilities or other personal circumstances placing them under more pressure or making them more susceptible should be similarly considered.

Employees in frontline roles or those in high-pressure industries may also be more at risk of stress due to the nature of their work, as well as those facing job insecurity against the backdrop of the rising cost of living.

Taking positive steps to prevent work-related stress has a number of positive outcomes: improved performance and productivity, reduced absence levels and less employee disputes are just a number of the advantages of actively addressing employee stress and creating a supportive and inclusive workplace culture. Please get in touch with your usual Osborne Clarke contact for help with training, policies or any other initiatives relating to managing stress for your employees.

Join us at our webinar on mental health and wellbeing in the workplace

As part of our Eating Compliance for Breakfast webinar series, we will be discussing the business case for an effective workplace wellbeing strategy, including the legal, financial and ESG drivers for making sure that the management of workplace mental health risk is prioritised. We will also take you through some practical steps for developing and implementing your strategy, including positioning the topic and business case with senior stakeholders in your business. Please join us on Tuesday 16 May by registering here.

Our latest Employee Incentives update

Our latest update from our Employee Incentives team covers annual reports for employment-related securities arrangements and recent improvements to tax-advantaged plans and international developments in Germany and the Netherlands.

Companies operating employment-related securities arrangements are reminded that the deadline to file their annual returns for the tax year ending 5 April 2023 is 6 July 2023. HMRC has made changes to the templates and additional mandatory information is now required, so companies should allow extra time to complete their returns this year.

If you have any questions on employee incentives, please do contact your usual Osborne Clarke contact or partners, Michael Carter and Anika Chandra.