The UK Government has recently announced the first in a series of upcoming regulatory reform packages proposed following the UK’s departure from the EU.

Employment law is the first area to be addressed with the following changes being announced:

- A reduction to the Working Time Regulations’ reporting requirements as follows:

• Removing the requirement for employers to keep records of working hours; and
• Holiday pay:
  • Merging ‘normal’ holiday (4 weeks) and ‘additional’ holiday (1.6 weeks) to create one statutory leave entitlement of 5.6 weeks per year. We wait to discover whether there will also be a change to the method of calculating holiday pay; and
  • Permitting ‘rolled-up’ holiday pay (i.e., allowing holiday pay to be included or “rolled up” in basic pay).

• TUPE regulations will be simplified in that businesses with fewer than 50 employees and transferring fewer than 10 people will be able to consult directly with the employees affected, rather than having to consult with employee representatives.

• Limiting the duration of non-compete clauses to three months. This will not impact non-solicitation clauses or employers’ ability to restrict activities during paid notice periods or paid gardening leave.

It is currently unclear when these reforms will be implemented, but for those which do not require a change to primary legislation, we can expect sometime this year. It is also unclear what impact, if any, these reforms will have in Northern Ireland, where employment law is a devolved matter. What is clear, is that this will be the beginning of a number of changes.

Perhaps the most significant change announced in this package of reforms is the limiting of the duration of non-compete clauses to three months. Non-compete clauses are one of a variety of post termination restrictions available to employers and are generally the more difficult to enforce in the courts. Other common post-termination restrictions are:

1. Confidentiality clauses;
2. Non-solicitation clauses (which restrict an ex-employee from inducing clients and staff to transfer to their new employer)
3. Non-dealing clauses (which restrict an ex-employee from accepting business from their former clients)

There is no proposal to limit the scope of other post termination restrictions at this time.

The enforceability of post termination restrictions including non-compete clauses have historically been regulated by the courts. Case law indicates that they will only be enforceable where they are deemed necessary to protect an employer’s legitimate business interests. Examples of what constitutes an employer’s legitimate business interests include confidential information and business relationships with key customers.

Non-compete clauses have been favoured by employers as a breach of a non-compete clause is generally easy to evidence. Breaches of other restrictive covenants such as non-solicitation and breach of confidentiality clauses are more difficult to prove. However, non-compete clauses are often considered to be draconian, with ex-employees essentially being kept away from working in their chosen field / industry for a certain period of time. As a result, the courts will scrutinise the extent of the restriction, for example, in terms of geographical location and period of restraint, to hold as enforceable only those clauses which are limited to protect the legitimate business interest and no more. Clauses which are tailored to the particular circumstances and employee in question with justification for the time and location covered are much more likely to be enforceable than standard clauses which are applied to all employees.

Comment

The package of announcements made by the UK Government will go some way to simplifying the law for employers. However, employers should give thought as to how best to protect their legitimate business interests given the reduction in scope of non-compete clauses. Some employers may wish to consider longer notice periods or gardening leave clauses to compensate for this proposed change in the law.

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