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Employment law changes announced by government as ‘bonfire’ of EU laws is scaled down

Posted: 11/05/2023

In a move that had been anticipated for some time, the Secretary of State for Business and Trade, Kemi Badenoch, announced in a ministerial statement yesterday that the wholesale ‘sunsetting’ of EU derived legislation on 31 December that was proposed by the Retained EU Law (Revocation and Reform) Bill (REUL Bill) was to be abandoned. Acknowledging that the proposals had caused ‘legal uncertainty’ for businesses, the Secretary of State confirmed instead that the government will publish this week a list of approximately 550 pieces of legislation that will be revoked by the end of 2023, with all remaining EU law staying on the statute book for the time being at least. 

Questions as to what this would mean for UK employment law were answered, in part, by the publication the same day of the policy paper Smarter Regulation to Grow the Economy, which states the government’s intention to ‘cut red tape for businesses and save £1 billion per year whilst safeguarding the rights of workers’. The policy paper proposes changes to two pieces of EU-derived law, together with an additional proposal in respect of non-compete provisions:

Working time

The policy paper confirms that the government will consult on removing the retained EU law that requires businesses to keep records of daily working time for almost all members of the workforce (enacted in the UK by regulation 9 of the Working Time Regulations), claiming that this will save businesses £1 billion per year. How businesses will be able to ensure compliance with the regulations without keeping such records will presumably form part of the consultation.

The government is also proposing to merge the current 20 days’ holiday granted by the Working Time Directive with the additional eight days granted in the UK under the regulations, to create one single right to annual leave. This may be sensible, as having two sets of leave often leads to complication and uncertainty for employers. In practice, however, workers may find that the value of their holiday pay is decreased, as ‘EU leave’ is calculated more generously, taking into account a worker’s ‘normal remuneration’, which can include overtime and commission, whereas UK leave would only take into account the worker’s normal hours.

A final change is in respect of rolled-up holiday pay, where workers receive an uplift in pay instead of annual leave. Although this is not permitted by the regulations, concerned as they are with health and safety, rolled-up holiday pay is a common practice, particularly in the case of casual workers whose holiday entitlement can be difficult to calculate. Under the new proposals, rolled-up holiday pay will be permitted – it is to be presumed that there will be a requirement for any such pay to be separately and distinctly recorded on the employee’s payslip to avoid abuse.


The policy paper confirms that the government will consult on removing the requirement to elect employee representatives for the purpose of TUPE consultation for businesses with fewer than 50 employees and for transfers which affect fewer than 10 employees (it is not clear whether both of these requirements need to be met or whether one will be sufficient). Instead, businesses will be allowed to consult directly with the affected employees. The government suggests that this move will simplify the transfer process while protecting workers’ rights, and this would seem to be a sensible move. It is not clear what will happen where there are existing employee representatives, such as a union, in place, although it is likely that most smaller employers will not have such arrangements.

Non-compete clauses

The government is proposing that non-compete clauses in employment contracts should be limited to three months, to give greater flexibility to employees and to boost the UK economy. Whether or not a non-compete clause goes wider than is necessary to protect the employer’s ‘legitimate business interests’ is frequently the subject of dispute, and this move would provide some certainty for employers and employees alike, although many employers will feel that three months will be insufficient to protect their interests, particularly in the case of senior employees. The proposal does not cover other post-termination restrictions such as non-solicitation and non-dealing clauses, nor will it affect confidentiality obligations. If this proposal is enacted, employers may seek to impose restrictions on departing employees in other ways, such as alternative post-termination restrictions, or longer notice and garden leave periods.

What to take away

Yesterday’s policy paper would seem to provide some certainty for employers and their advisers, who until now have had little idea about the post-REUL landscape. However, the situation is still far from clear: it is currently proposed that the change to non-compete provisions will be introduced when parliamentary time allows, and it is by no means certain that the current government will be in power long enough to bring it into force. In relation to REUL, the provision in the Bill that will end the supremacy of EU law means that, even where the current law is not directly changed, it may be interpreted differently in future by the UK courts and tribunals. Moreover, the Bill grants a minister power to revoke or amend EU derived legislation, meaning that further changes may be on the cards. Employers and their advisers will be watching carefully for future developments.

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