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No Sparklers in New Employment Law Regulatory Bonfire Proposals (UK)
Wednesday, May 17, 2023

Of course it could just be coincidence, but scarcely hours after my post last week concerning the dearth of the employment law candidates for the Brexit red-tape bonfire, out pops a Gov.uk policy paper on “Smarter Regulation to Grow the Economy” containing the first five suggested victims.

And what a woeful little bunch they are, showing a smallness of imagination and ambition completely at odds with the tone of the rest of the paper.  This is essentially an extended rehearsal of how the UK is going to make better regulations by, well, thinking about how they will work first, rather than (now it can be told) “defaulting to regulation with scrutiny of decisions to regulate left too late to materially change course” (or in motoring terms, putting them on the road first and then carrying out the crash-testing).  The view is advanced in the paper that this will limit the number of regulations which “simply make people’s lives that little bit more difficult and annoying“, though it has the grace to admit that being annoying is not solely the province of regulation derived from the EU.  No indeed, the UK can hold its head high in any company when it comes to annoying rules entirely of our own creation, and to reinforce that, the document has music by Elgar, a flypast by a Spitfire and all the Union Jack bunting left over from the Coronation. In addition, Gov.uk traditionalists will be reassured to note the continuing presence in it of a very pre-Brexit level of grammatical errors.

So what of our five proposed candidates for change on the employment law front?  Sadly, none of those I suggested here.  Instead, these:

  1. Removing EU caselaw relating to “time-consuming and disproportionate requirements on businesses [to keep] working hour records“.  There is no real chance that this will (nor should it) reduce record-keeping obligations for night workers or the under 18’s, but what about all the others?  Regulations 4(2) and 9 Working Time Regs currently require the keeping of hours-worked records whether or not the employee has opted out of the 48-hour limit and whether or not there is the slightest likelihood that that limit would ever be breached.  Except where hours records are kept anyway to ensure compliance with the National Minimum Wage Act (which is very unlikely to change in that respect), we rarely see employers maintaining them, and so the suggestion in the policy paper that this “surplus” time recording costs UK employers £1billion a year seems more than a little speculative.  Employers already know that if they cannot prove the hours worked they will be at risk in any litigation around breach of those limits, and that will not change.

  2. Allowing rolled-up holiday pay.  Perhaps this is one of those “next time we shall think about it first” questions, since anyone sitting down to develop a reliable and easily-understood calculation of holiday pay for variable-pay workers on any other basis will inevitably conclude that it is not worth the cost in aspirin and will default to rolling it up anyway, the differences in outcome between that and the statutorily-required scheme being negligible in all but a few cases.

  3. Still on the WTR, removing the distinction between the bare 4-week minimum period required by the Working Time Directive and the extra 1.6 weeks which the UK added of its own volition so as to create a single 5.6 week pot enshrined in law.  In practical terms this makes no difference to anyone until there is a dispute about whether a certain day or amount of holidays is governed by the EU Directive, UK Regulation or individual contract, and the rights and obligations which trail along behind in each case.  This is essentially an argument which an employer is never obliged to have unless it chooses to do so.

  4. Simplifying consultation on a TUPE transfer.  Well, yes and no.  This proposal will allow non-unionised employers of fewer than 50 staff to skip the elected representative stage in any TUPE transfer affecting less than 10 of its people, advancing instead the startling proposition that maybe such employers could consult directly with affected staff in the way that the great majority of employers in such cases already do, and at numbers substantially higher than this proposal suggests.  Apparently, the paper states as if delivering news of great novelty and importance, this “improves engagement with workers”.

  5. Reforming non-compete [sic] clauses to boost competition and innovation“.  I put this in quotation marks to highlight the disparity between what it says and how it will work.  Remember the government’s consultation document from 2020?  This floated two main options in relation to non-competition covenants: that they be banned entirely or that they be valid only if the employee is paid for their duration at a chunky proportion of his/her salary, coupled with some practically unworkable provisions around prior notice if the employer wished to waive them.  Unsurprisingly, neither found favour and they have been replaced in the affections of the government by a much simpler proposal, i.e. that no non-competition covenant can last longer than three months. 

This obviously has nothing to do with either regulation or Brexit freedoms and is a completely bizarre proposition for a government seeking to attract inward investment and to become (it says here) “the most competitive and innovative economy in the world“.  Not only does it put a bus through parties’ freedom to contract as they wish, but more particularly, it fails to recognise that generations of judges over the last century or more have concluded that in appropriate cases, non-competition clauses are both necessary and appropriate to protect the legitimate business interests of employers.  The policy document complains that non-competition covenants sometimes have no purpose, but in that case they neither would nor could be enforced, so that is scarcely justification.  There is a wholly-unevidenced statement that such covenants “inhibit employers from looking for better paying roles and limit the ability of businesses to compete and innovate” and that up to 5 million workers will have greater freedom to move and “even earn a pay rise“.  Which is obviously lovely for the employee, but what the proposal still seems to lack is any recognition that one company’s gain is usually another’s loss, and that the leakage of expertise and connections which non-competition clauses are designed to prevent could easily be fatal to a small tech business of the sort the government would dearly like to encourage.  It also suggests that adequate protection could be obtained through reliance on garden leave, confidentiality and non-solicitation clauses, skating gaily over the fact that what makes non-competition clauses enforceable at all is judicial recognition that those other terms are not consistently effective to protect the legitimate interests of former employers against unfair competition. So overall, what does our first glimpse of de-regulated employment law look like?  Not great, in all honesty.  Permission not to do something most employers do not do anyway (full hours records and consultation without reps in small TUPE transfers).  Permission to do something most affected employers already do anyway (rolled-up holiday pay).  And at the end of a document revolving entirely around freedom from unnecessary legal regulation, proposed new legislation to introduce a totally artificial and actively harmful limit on certain restrictive covenants.  In the seven years since the Brexit referendum, is this really the best we can do?

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