Anna Fletcher
Partner
Article
29
Back in February we identified a number of proposed legislative changes for 2023 in Employment essentials, the 2023 forecast: Part one - The legislative horizon. As we began 2023 we had several Private Members Bills on specific aspects of employment and equalities law adopted by the Government and making their way through Parliament. And, of course, the 'biggie' - the Retained EU Law (Revocation and Reform) Bill 2022-23 ('REUL Revocation Bill'). Uncertainty was the theme.
Mid-way through the year and some progress. Four of the eight employment specific Bills have been passed, although they all require secondary legislation before their provisions come into force with no confirmed dates for when that may be. Another four are still making their way through Parliament with a couple now looking increasingly doubtful. As for the 'biggie', the REUL Revocation Bill, on 10 May 2023 we had a dramatic reversal of the sunset clause, and the Bill passed into an Act on 29 June 2023, becoming the Retained EU Law (Revocation and Reform) Act 2023 (REULA 2023). While we are no longer facing a bonfire of all EU-derived employment legislation, it is not as simple as saying 'no change'.
As much uncertainty remains, here Gowling WLG's Employment, Labour & Equalities team look at the current position on the expected employment legislative changes. What do we know for certain and what remains to be determined? In part two, we will share our pick of 10 expected case law developments.
On 10 May 2023, the Government announced that it was abandoning the sunset clause in the REUL Revocation Bill to provide "certainty for business by making it clear which regulations would be removed from [the] statute book".
On 26 June 2023, the House of Lords agreed to the final Government motions on the REUL Revocation Bill rather than press for amendments on environmental protection and parliamentary scrutiny. This enabled the Bill to proceed to Royal Assent (passed into an Act) on 29 June 2023 and will come into effect from the end of 2023.
As originally drafted, the vast majority of EU law was to be automatically revoked at the end of 2023, unless a statutory instrument was passed to preserve it. That position has essentially been reversed. Now, everything will continue to be retained (at least for the moment) unless specifically revoked. In terms of employment legislation, only three regulations are going which relate to posted workers and European Cooperative Societies (which have been irrelevant since the end of the Brexit transition period anyway). The Government has expressly confirmed that it does not intend to reform family leave rights, 'atypical' workers' rights, and information and consultation rights, save for a small change in relation to TUPE. In addition to the relatively small proposed change to TUPE, significant changes are proposed to aspects of the Working Time Regulations (see below).
However, REULA 2023 remains controversial due to the wide-ranging ministerial powers to unilaterally restate, revoke, replace or make alternative provisions for EU derived legislation without Parliamentary oversight using secondary legislation. Also, a significant degree of uncertainty remains as the Act abolishes the general principles of EU law from applying and it also gives UK courts and tribunals greater discretion to depart from retained EU case law. This may lead to a potential increase in litigation with lengthy appeals as claimants and respondents seek to overturn the effect of long-standing embedded EU case law.
On 12 May 2023, the Department for Business and Trade published the 'Consultation on reforms to the Working Time Regulations, Holiday Pay, and the Transfer of Undertakings (Protection of Employment) Regulations'.
The majority of the consultation relates to changes it proposes to make to the Working Time Regulations 1998 (WTR) - the poster-child for complaints that EU regulations undermine flexibility, increase costs of hiring staff and cause unnecessary red-tape.
The Government is consulting on proposals to:
Under proposal 2, regulations 13 (4 weeks' leave derived from EU law) and 13A (1.6 weeks' leave derived from UK law) of the WTR would be replaced with one regulation setting out a single entitlement to 5.6 weeks of paid annual leave under which:
As for clarifying the minimum rate of holiday pay, currently reg 13 leave must be paid based on 'normal remuneration' covering some additional payments such as regular overtime and commission following much EU case law. However, reg 13A leave is only required to be paid in accordance with ss221 to 224 Employment Rights Act 1996 - for those with normal working hours and whose pay does not vary with amount of work done, this is simple basic pay without any additional bonuses or overtime. The consultation recognises that requiring employers to pay 'normal remuneration' for all 5.6 weeks could cause significant additional costs, while reducing the minimum to basic pay would have a financial impact on workers. The consultation does not contain any concrete proposals for how holiday pay should be calculated, simply that defining 'normal remuneration' in legislation would be 'significantly challenging' and asks for views from employers and workers on how holiday pay should be defined. There is no easy or obvious answer here.
While no concrete proposals for how holiday pay must be calculated generally are set out, proposal 3 does propose making rolled-up holiday pay lawful. Rolled-up holiday pay arrangements provide that a specific part of a worker's wages represents holiday pay. As payment in respect of a period of holiday is spread throughout the year, the worker is then paid nothing when they physically take the holiday. The Government is proposing allowing rolled-up holiday pay to be paid at 12.07% of pay, as this is the proportion of statutory annual leave in relation to the working weeks of each year. This will have significant benefits for use in relation to casual/irregular hours workers.
This consultation does not address how these proposals will fit with the (now closed) 'Consultation: Calculating holiday entitlement for part-year and irregular hours workers' on other reforms to holiday entitlement for workers who work only part of the year or irregular hours.
The earlier consultation deals with how annual leave accrues for part-year and irregular hours workers as opposed to how that leave should be paid. The proposed change is that workers only accrue leave in proportion with the total annual hours they work. For part-year workers, the annual holiday allowance would be based on hours worked in the previous 52 weeks (including weeks not worked) × 12.07% and for agency workers based on 12.07% of the hours worked at the end of each month of an assignment.
One to watch!
As for TUPE, the 'Consultation on reforms to the Working Time Regulations, Holiday Pay, and the Transfer of Undertakings (Protection of Employment) Regulations' proposal relates to information and consultation where a small number of employees are being transferred.
Currently under the Transfer of Undertakings (Protection of Employment) Regulations 2006, micro businesses with fewer than ten employees may inform and consult affected employees directly if there are no existing appropriate representatives in place (for example, if there is no recognised trade union). Larger businesses, however, are required to arrange elections for affected employees to elect new employee representatives if they are not already in place, which can add to the complexity of the TUPE transfer process. The Government is proposing to remove the requirement to elect employee representatives for the purpose of TUPE consultation for:
These changes simply extend the current exception for micro businesses and in the latter case will most likely apply to small service provision changes such as outsourcing part of a function. In both situations, businesses meeting these criteria will be able to consult directly with employees, but only where no existing employee representatives are in place. If employee representatives are already in place, then the employer would still be required to consult with them.
While there are no other changes are being proposed to TUPE, the consultation does make a general call for how the TUPE regulations 'could be improved' beyond these proposals.
On 24 May 2023, three new Acts were passed that will give parents and unpaid carers new protections at work. All three new Acts will require secondary legislation to bring the provisions into force "in due course" with some significant detail awaited.
In July 2019, the Government announced it is considering 'high level' reforms for reforming parental leave and pay 'with a view to achieving greater equality in parenting an at work'. The review was to consider options ranging from tweaks to exiting forms of leave to a bold 'wiping the slate clean and start again' to develop a new modern comprehensive suite of family-related policies.
On 29 June 2023, the 'Parental Leave and Pay Good Work Plan: Proposals to Support Families Government Response' was finally published after COVID-19 delayed matters. Tweaks or bold action? Well, as the Government states in the Response 'we recognise that these changes to parental leave are not the radical reforms that some respondents argued for' – so very minor tweaks.
Only three tweaks are proposed to paternity leave. Paternity leave is available to employed fathers/partners who have completed six months' service with their employer into the 15th week before the week the baby is due. They can take up to two weeks' paid (at statutory rate) paternity leave to support the mother and to care for the child (equivalent provision also applies in relation to adoptions). The majority of the existing provision for paternity leave and pay will remain unchanged save for:
These changes will be introduced via secondary legislation and expected to take effect from April 2024.
The Response also confirms that no changes are proposed to shared parental leave and unpaid parental leave.
The fourth new piece of employment-related legislation is The Employment (Allocation of Tips) Act 2023 which was passed on 2 May 2023. The Act will make it unlawful for businesses to withhold tips from their employees. The measures are expected to come into force some time on or after 2 May 2024, following a consultation and secondary legislation with the official date of commencement to be confirmed later this year.
The Act will be supported by a new statutory Code of Practice which will provide businesses and staff with advice on how tips should be distributed.
Two flexible working employment Bills are still making their way through Parliament.
The Worker Protection (Amendment of Equality Act 2010) Bill which, amongst other things will re-introduce protection from third-party harassment subject to an 'all reasonable steps' defence, is now very much in doubt.
In light of concerns largely over freedom of expression and exercise of academic freedom, more than 40 amendments have been added by the House of Lords to dilute the Bill and even more significantly parliamentary time is likely to run out before the Bill can be passed.
The Strikes (Minimum Service Levels) Bill introduced at the start of the year is currently back in the House of Commons to debate the House of Lords amendments. This highly controversial Bill will allow the Secretary of State to make 'minimum service regulations' for strikes in 'relevant services' in the fields of health, transport, education, fire and rescue, border control, and nuclear decommissioning and radioactive waste management service. As the House of Commons is unlikely to agree to the latest House of Lords amendments, the Bill will be delayed while the Government tries to find a way forward.
On 12 May 2023, the Government announced that it intends to introduce new legislation to limit the duration of non-compete provisions to three months. The announcement comes alongside the long-awaited response to the 2020 consultation on the reform of non-compete clauses in employment contracts. The proposals only apply to employment and worker contracts and not to non-competes in other types of contracts, such as sale and purchase agreements. The legislation is not intended to impact non-solicitation clauses or confidentiality clauses. It is also not expected to introduce any restrictions on garden leave.
The proposals, however, raise a number of questions, including:
The Government's press release does not specify when the new legislation is likely to be introduced, stating only that this will happen 'when parliamentary time allows'. As previous calls to limit non-compete clauses by legislation have been seen as unnecessary, whether this will see the light of day is questionable.
On 11 April 2023, a failure to prevent fraud offence was added to The Economic Crime and Corporate Transparency Bill 2022 (ECCT). Under the proposed new offence:
A new factsheet: Failure to prevent fraud offence has been added to the Government's series of factsheets on aspects of the ECCT Bill. The Bill is currently at the report stage before the House of Lords.
If you have any questions about this article, or about employment law in general, please get in touch with Anna Fletcher or Connie Cliff.
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