Business secretary Kemi Badenoch launched the proposals last week in a policy paper, ‘Smarter regulation to grow the economy’. The launch coincided with Badenoch’s announcement that she was dropping the sunset clauses in the Retained EU Law (Revocation and Reform) Bill, which many lawyers had warned would damage business interests and cause chaos.
The proposals include legislating to restrict non-compete clauses to three months, which, the paper states, will not interfere with employers’ ability to use gardening leave or non-solicitation clauses, nor will it affect arrangements on confidentiality clauses.
The government would also reform the WTR, removing the current requirement on employers to keep working hour records, reintroducing rolled-up holiday, which has been deemed unlawful by EU case law, and merging the separate ‘basic’ and ‘additional’ leave entitlements under the WTR into one entitlement to annual leave.
Charlie Barnes, head of employment legal services at RSM UK, said the change to non-compete clauses could be ‘significant’ for businesses, ‘particularly in niche innovative industries where the pool of competition is limited’.
Barnes warned it could ‘have the reverse effect on innovation if companies feel unable to protect themselves from a key employee leaving to join a competitor, taking confidential information with them, in just three months. If these changes are made, such businesses will need to revisit contracts of employment to require longer paid notice periods or garden leave clauses to keep senior leavers away from competitors for more than three months.
‘This will impose a larger financial burden on businesses.’
Barnes said the WTR proposals may not create as big a boost for businesses as the government anticipated, since employers would still be required to keep records of working time in order to comply with national minimum wage legislation and holiday pay obligations.
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