On 10 May, the Department for Business and Trade (the “DBT”) released the regulatory reform update “Smarter Regulation to Grow the Economy” – the first in a series of updates on how the government intends to reform regulations to support economic growth.  This first package of updates addresses employment regulations, which the DBT have identified as a key area to reduce the administrative burden on UK businesses following the UK’s departure from the European Union. The aim of these reforms is to boost the UK economy by cutting red tape for UK businesses, whilst maintaining UK labour standards.  The government’s updates suggest there will be deregulation in the following three areas of employment law:

  • The Working Time Regulations 1998 (the “WTR”);
  • The Transfer of Undertakings (Protection of Employment) (“TUPE”) Regulations 2006; and
  • Non-compete clauses.

    Reducing WTR reporting burdens

    The WTR contains a range of obligations relating to working time and calculation of annual leave entitlement and pay. The DBT “will be consulting” on a range of reforms to the WTR, though it is unclear when this will take place.

     Current LawDBT Consultation
    Working time records (Reg. 9)Employers must maintain adequate working time records for their employees to show that their workers have not worked beyond the 48 hours per seven days of work limit (unless the employee has opted out of this limit).  Remove retained EU case law which places additional requirements on businesses regarding their working hour records.  The DBT suggest this will save UK businesses around £1 billion a year.
    Calculation of statutory annual leave (Reg. 13 and 13A)There are two separate leave entitlements for UK employees, 20 days of leave derived from EU law and 8 days of leave derived from UK domestic law, giving employees a total of 28 days of statutory annual leave.Merge the two separate leave entitlements into “one pot” of statutory annual leave. Maintain the same amount of total statutory leave entitlement.
    Rolled up holiday (whereby an employer pays  employees at a slightly increased hourly rate to account for pay when the employee is on holiday, rather than paying them when they take their holiday, eliminating the need to calculate an employee’s holiday entitlement and reducing administrative burdens)Technically unlawful in the UK based on European Court of Justice judgment (Robinson-Steele v RD Retail Services, Clarke v Frank Staddon Ltd, Caulfield & others v Hanson Clay Products Ltd (formerly Marshalls Clay Products Ltd) (joined cases C-131/04 and C-257/04).Propose to introduce rolled-up holiday pay.

      Simplifying information and consultation obligations in a TUPE context

      The TUPE Regulations provide protections for employees when the business/organisation for which they work transfers to new ownership. The DBT is consulting on simplification of information and consultation requirements in a TUPE context.

      Currently, businesses (of any size) cannot consult directly with affected employees when there are no employee representatives. Instead, they must go through a process of electing new employee representatives and then consult with the appointed representatives. The DBT proposes to remove the requirement to appoint employee representatives: (i) when a business has fewer than 50 employees; and (ii) where a transfer will affect less than 10 employees.  In either of these circumstances, employers will be allowed to consult directly with the affected employees. 

      The DBT have suggested this will improve engagement with workers and simplify the transfer process, reducing administrative burdens for businesses.

      Limiting the length of non-compete clauses

      UK employment contracts often contain non-compete clauses which restrict employees from working for competing businesses after they leave their job.

      The DBT proposes introduction of legislation to limit the length of non-compete clauses to three months.  The aim of this proposed legislation is to provide employees with greater flexibility to look for better paying roles or to set up a rival business, thus increasing the capacity for innovation in UK businesses by making it easier to acquire new talent.  The DBT suggest these reforms will give up to five million UK workers greater freedom to switch jobs.

      However, employers will still be able to use other available options including (paid) notice periods, garden leave, and non-solicitation clauses to protect their businesses and investment in staff.  Additionally, these reforms will not undermine the use of confidentiality clauses.

      It is unclear when the legislative process on non-compete clauses will begin, but the DBT have stated the government intends to legislate on the issue when Parliamentary time allows.

      In March 2023, Deputy Attorney General Lisa Monaco and Assistant Attorney General Kenneth Polite of the Criminal Division announced a three-year Pilot Program on Compensation Incentives and Clawbacks. A group of Covington attorneys recently published an article with Bloomberg that offers practical guidance for companies looking to stay ahead of the curve on the use of compensation mechanisms to incentivize compliance and disincentivize non-compliance.

      Employment law in Ireland has been particularly dynamic in recent years.  Covid and its aftermath transformed the workplace and created a more determined approach to employment regulation. In consequence we now have a raft of new legislation and associated workplace codes of practice. 

      Continue Reading Recent Employment Law Developments in Ireland

      2023 will likely see employment lawyers and HR professionals (in the UK and further afield) grappling with a number of key employment-related legal and policy developments. In this alert we highlight some of the most important ones.

      1. Brexit: The Employment Law Fallout

      When the UK left the European Union on 31 December 2020, a “snapshot” of existing EU law was retained to prevent a legal vacuum. To accelerate the UK’s decoupling from the EU, the government introduced the Brexit Freedoms Bill in September 2022. The Bill provides that many EU-derived laws will be revoked (“sunset”) by default on 31 December 2023 (although there is an option to extend this deadline for specific laws until June 2026). 

      Since many of the laws that protect workers are derived from the EU, this could have a huge impact on some of the UK’s employment laws. The government may elect to revise key laws or, in theory, remove them in their entirety. These include the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”), the Maternity & Paternity Leave Regulations 1999 and the Working Time Regulations 1998 (which dictate maximum weekly working hours among many others). It is currently unclear what approach the government will take – we will be keeping a close eye on developments.

      1. Flexible and Hybrid Working

      Employers will need to consider new rules surrounding the right to request flexible work. In its response to its “Making Flexible Working the Default” consultation, which closed in December 2021, the UK government has said it will pass secondary legislation to give employees the right to request flexible working from their first day of employment (rather than requiring them to meet a 26 week service criteria). 

      In addition, the Employment Relations (Flexible Working) Bill, which is expected to become law sometime this year, proposes to allow employees to make one flexible working request every six months (as opposed to once a year). Employers currently have three months to provide employees with their response – the Bill would reduce this to two months, and impose a new duty on employees to discuss alternatives to the request (if rejected). 

      In a post-pandemic world, many employers are making policy decisions about working practices and flexible or hybrid working arrangements. Particularly when it comes to assessing risks of remote working arrangements, there are a number of key considerations to be borne in mind, including tax implications, immigration requirements, potential indirect discrimination risk and health and safety obligations. (For more on this, see our recent alert.)

      1. Diversity and Inclusion Initiatives: Tensions with Existing Laws and Standards

      Employers face calls from a range of stakeholders – governments and regulators, shareholders, civil society and workers themselves – to strengthen efforts to foster diverse workplaces. While the UK government no longer appears to be pursuing mandatory ethnicity pay gap reporting requirements, it is expected to publish guidance on voluntary reporting, for example. Outside of the UK, U.S. shareholder activism is driving audits of workplace racial equality measures by a number of companies. 

      As this pressure mounts, lawyers and human resources professionals are required to navigate some interesting tensions, including, for example, putting in place actions to promote diversity without falling foul of the fairly narrow scope of “positive discrimination” permitted by the Employment Act 2010. The UK government is also grappling with these tensions. On January 24, 2023, for example, the government rejected proposals from the Women and Equalities Committee (in July 2022 report) to consult on making menopause a “protected characteristic” under the Equality Act 2010 (rather than women having to present themselves as suffering from a disability in order to make an effective discrimination claim). This was reportedly due to a fear this could discriminate against men.

      1. Workforce as a Key Component of the “ESG” Movement

      Compliance with national and international standards surrounding treatment of a company’s direct workforce and workers within the supply chain is central to a number of rapidly evolving legal and enforcement trends. In many jurisdictions, we are seeing a range of laws relating to prohibition of forced labour and other labour rights, including import bans and due diligence laws. As companies bolster compliance efforts to meet evolving requirements and best practice, in-house employment and human resource departments, both within the UK and further afield, are likely to be called on to assist in implementing workplace policies and procedures.

      Further, new reporting laws, including the EU’s recently approved Corporate Sustainability Reporting Directive (“CSRD”) are going to require subject companies to report on a number of “social” standards, including the treatment of workers both in a company’s direct workforce and within the supply chain (see our recent post). For companies subject to the requirements (which will include certain, large UK companies with a significant EU presence), it is likely that employment law and HR experts will be asked to advise on the social aspects of these reports.

      1.  A Myriad of Other Legislation, Consultations and Guidance to Watch

      Consultation on holiday calculation:  On 12 January, 2023, the government opened a consultation on calculating holiday entitlement for part-year and irregular hours workers. The consultation is in response to last year’s Supreme Court judgment in Harper Trust v Brazel, the consequence of which was to entitle part-year workers to a larger annual paid holiday entitlement than part-time workers who work the same total number of hours across the year. It proposes introducing a holiday entitlement reference period to ensure that holiday entitlement and pay is directly proportionate to time spent working. The consultation will remain open until 9 March, 2023.

      Sexual harassment: A new law will require employers to go further to protect their employees from instances of sexual harassment. The Worker Protection (Amendment of Equality Act 2010) Bill proposes to re-instate potential liability (which was repealed in 2013) for employers in instances where their employees are sexually harassed by third parties. In addition, the Bill will subject employers to a positive duty to take all reasonable steps to prevent sexual harassment of their employees in the course of their employment. Employees need not always bring these claims themselves: if there is a suspected breach of this duty, the Equality and Human Rights Commission may undertake strategic litigation, investigation and enforcement activity regardless of whether an individual has submitted a legal claim to the employment tribunal. Tribunals will be allowed to uplift employees’ compensation by up to 25 percent in cases where it is shown that the employer failed to uphold this duty.The Bill is currently at the report stage in the House of Commons, to be discussed in Parliament on 3 February, 2023.

      Data privacy guidance: The Information Commissioner’s Office (“ICO”) recently published draft guidance on two key employee data issues. Consultations are closing in January and we can expect finalised guidance to be published in the coming months. 

      • Employee monitoring: The draft guidance suggests that employers should, among other things, consult with employees where monitoring is being introduced (unless there are good reasons for not doing so); conduct impact assessments relating to the carrying out of that monitoring (even where there is no strict requirement to do so); and asks that employers expect the bar for privacy to be higher when monitoring employees’ home working (as opposed to working in the office).
      • Health information: The draft guidance aims to provide practical guidance about handling the health information of workers in accordance with data protection legislation. Its advice covers topics such as handling sickness and injury records, obtaining information from medical examinations and guidance as to when sharing health information may be permissible. This guidance should be particularly useful for employers given that health information is among the most sensitive personal information they will process for workers.

      Recent legislation allows employers to continue offering first-dollar telehealth coverage without jeopardizing the ability to contribute to a health savings account (“HSA”), but only through the end of the 2024 plan year.

      Background – HSA Eligibility

      Employees can make and receive pre-tax contributions to HSAs to use for qualified medical expenses. To be “eligible” to make or receive contributions to an HSA, you (a) must be covered by a high deductible health plan (“HDHP”), and (b) may not have other non-HDHP coverage that covers benefits before the HDHP deductible has been met.

      Certain types of coverage, like dental and vision care, is disregarded in determining whether an individual is “eligible” to contribute to an HSA. Disregarded coverage does not have to be coordinated with HDHPs. This means that participants can receive “first-dollar” coverage for disregarded coverage and still be eligible to make or receive contributions to an HSA.

      Continue Reading Employers Can Continue to Cover Telehealth Benefits Before HDHP Deductible Is Met

      As we discussed in a previous post, effective January 1, 2023, California employers must include pay scales in job postings, and a similar bill in New York was awaiting signature by Governor Kathy Hochul. The California Labor Commissioner has now issued guidance to assist employers in complying with the new law, and the New York State bill was signed into law on December 21, 2022 and is set to take effect on September 17, 2023.

      Continue Reading Update on California and New York Pay Transparency Laws

      On January 5, 2023, the Federal Trade Commission (“FTC”) issued a groundbreaking proposed rule that would, if finalized:

      • prohibit most employers from entering into non-compete clauses with workers, including employees and individual independent contractors;
      • prohibit such employers from maintaining non-compete clauses with workers or representing to a worker that the worker is subject to a non-compete clause; and
      • require employers to rescind any existing non-compete clause with workers by the compliance date of the rule and notify the affected workers that their non-compete clause is no longer in effect.

      The FTC’s notice of proposed rulemaking explains that the FTC considered possible limitations on the rule—such as excluding senior executives or highly paid employees from the ban—but it ultimately proposed a categorical ban on post-termination non-competes.  The only exception is for non-competes related to the sale of a business.  However, even this exception is unusually narrow: it would only apply to selling business owners who own at least 25% percent of the business being sold.  (The proposal also would not apply to most non-profits, certain financial institutions, common carriers, and others who are also outside the scope of FTC regulation.)

      Continue Reading FTC Proposes Rule to Ban Most Non-Competes

      On October 1, 2022, the District of Columbia’s new ban on non-compete agreements (the Ban on Non-Compete Agreements Amendment Act of 2020, as amended by the Non-Compete Clarification Amendment Act of 2022 (the “Act”)) went into effect. The final version of the Act is far less restrictive than originally anticipated and permits non-competes with highly compensated employees, non-competes paired with long-term incentives, and certain anti-moonlighting policies.

      Key Takeaways

      • As of October 1, 2022, non-competes are prohibited in the District with limited exceptions.
      • Generally, employers can still enter into the following types of non-competes with District employees:
        • Non-competes with highly compensated employees that do not exceed one year; provided 14 days’ advance notice is given to the employee. 
        • Non-competes paired with a long-term incentive.
        • Non-competes entered into in connection with the sale of a business.
      • The Act permits specified workplace policies like confidentiality or non-disclosure policies, anti-moonlighting policies/outside employment restrictions, and conflict of interest policies. However, the employer must provide the policies to employees before October 31, 2022, within 30 days after acceptance of employment, and any time such policy changes.
      • Violations of the Act carry both administrative penalties and civil liability.
      • Prohibited non-compete agreements in effect before October 1, 2022, are not subject to the Act and remain in effect. However, employers should consult with legal counsel before amending these agreements.
      • Non-solicitations of customers and employees are not explicitly considered non-competes under the Act.
      • The Act does not apply to the terms of a valid collective bargaining agreement.
      Continue Reading D.C.’s Scaled-Back Non-Compete Ban Is In Effect

      As interest rates rise and the threat of a recession looms, many employers are beginning to struggle with balancing the cost of maintaining their workforce with an expected decrease in profits. The frequent result of such a balancing act is a mass layoff. While a reduction in workforce may be inevitable, below are options that employers can consider to try to avoid that outcome. For all of these alternatives, employers should apply any changes consistently across the workforce to avoid claims of inequity or discrimination.

      Continue Reading Avoiding Layoffs In an Uncertain Economy