Non-compete clauses to be capped at three months as the Government announces post-Brexit employment law measures

11 May 2023

The Government has announced a number of employment law measures in its policy paper: Smarter Regulation to Grow the Economy. The measures are intended to create a more competitive and productive economy by reducing existing regulation which the Government considers places an unnecessary burden on business, impedes competition or acts as a block on innovation. The proposed measures target three areas: non-compete clauses, the Working Time Regulations and TUPE.

  • Non-compete clauses: the Government intends to legislate to limit the length of non-compete clauses to three months. This is expressly stated not to interfere with the use of paid notice periods, i.e. gardening leave, non-solicitation clauses or confidentiality clauses. No detail is provided on the impact on paid non-competes or indirect restrictions, nor is there commentary on how this will impact non-competes in sale agreements, or in carried interest agreements or other quasi-employment documents such as consultancy agreements. The policy paper estimates that this change will affect up to five million UK workers. This radical change would require primary legislation, which the Government’s paper notes will be introduced "when Parliamentary time allows" – no further consultation or timeframe is indicated at this time.
  • The Working Time Regulations: the Government will consult on proposals to improve how the Working Time Regulations work including removing “time-consuming and disproportionate” requirements on businesses for working hour records to be kept for members of the workforce as well as reducing the administrative burden and complexity of calculating holiday pay. Here the Government is proposing to introduce "rolled-up holiday pay", and merging the separate leave entitlements (basic and additional) into one entitlement to annual leave, while maintaining the same amount of leave entitlement overall.
  • TUPE: the Government will consult on removing the requirement to elect employee representatives in TUPE consultations for businesses with fewer than 50 employees and transfers affecting less than 10 employees, allowing businesses to consult directly with the affected employees.

In a further development, the Government has announced a fundamental change of approach to its declared mission of removing all retained EU law from the UK statute book. The plan had been to repeal automatically any measure that was not specifically saved, with effect from 31 December 2023. The huge volume of measures ultimately derived from EU law, affecting every area of Government, has generated a total reverse of the default position, as announced to Parliament yesterday. The plan now is to table a list of measures that are to be repealed, so that everything not on that list will be retained – at least for the time being. The list of measures to be repealed has also just been published. The only employment measures appear to relate to posted workers and working hours for tanker drivers – if that remains the full list, this Bill will be of little relevance to HR teams and employment practitioners.