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The Continuing Impact of Brexit in 2023

December 22, 2023

We are approaching the 4-year anniversary of Britain’s exit from the European Union. One would hope that the nation would have adjusted to post-Brexit life. However, as with most sectors, the legal profession is having to react to reforms which continue to alter its landscape.  Continuing with our reflections on 2023, Jack Boyle takes a look at some of the issues where Europe still influences our employment laws.   

Employment law seems to have survived the changes implemented by the Retained EU Law (Revocation and Reform) Bill, which came into force this year. The controversial sunset clause, which would have resulted in any EU derived employment laws ceasing to be effective in the UK at the end of this year, was abandoned.  However, in mid-2023 the government completed consultations on reforms on retained EU Employment law, with particular interest in reforming Holiday Pay, Working Time, TUPE and Restrictive Covenants.  Here is an update on where matters stand.   

Holidays

Holiday pay is enshrined in the UK Working Time Regulations 1998 and combines the 4-week entitlement taken from EU law with an additional 1.6 weeks under UK law. At present, these periods are expressed as separate holiday entitlements. The EU period has been subject to long standing case law decisions which broadly mean that employers have to include regular payments like overtime and commission in holiday pay. The case law decisions do not apply to the additional 1.6 weeks’ leave under UK law (it seems ridiculous and impracticable that a worker could be paid differently for the two different types of leave).  Regardless, the government rejected a proposal to combine these into one single leave period.  However, legislation has been put in place, likely to come into force from 1 January 2024, restating different rights (derived from case law) to carry over untaken leave: (1) all leave (5.6 weeks) can be carried forward if not taken due to family leave such as maternity; (2) the EU 4 week leave can be carried forward if for a maximum of 18 months if not taken due to sickness; and (3) carry forward the EU leave which a worker did not take where the employer has not given the worker an opportunity to take the leave.   The same regulations also provide definitions of how to calculate ‘regular pay’ for the EU portion of holiday pay.

Working Time in relation to holiday entitlement

The UK government consulted on whether it would be sufficient to calculate holiday entitlement using a 52-week reference period for part-year or irregular workers. This has come following the Supreme Court decision in Harpur Trust v Brazel where it was ruled that the 5.6 weeks’ annual leave entitlement under the Working Time Regulations 1998 should not be reduced pro rata for “part-year workers” – those who are employed for the whole year but only work some weeks and not others.

Draft legislation has since been proposed confirming that, from 1 January 2024, holidays for part-year workers will accrue at the rate of 12.07% of hours worked, and can be paid at that rate on rolled up basis.  Note that this only applies to part-year workers, those working irregular hours and agency workers.  Readers will be aware that rolled up holiday pay was previously unlawful. 

On a separate working time note, legislation has confirmed that there is no requirement for employers to record daily working time (clarifying concern caused by another EU case which decided daily work did have to be recorded).   

TUPE

The current TUPE requirements to elect employee representatives can be time consuming.  There is an exemption for small employers (those employing fewer than 10 employees). The government has crafted draft regulations meaning that this small business exemption is increased to cover business with fewer than 50 employees.  It also allows any business undertaking small transfers (fewer than 10 employees transferring) to consult directly with their employees on TUPE transfers, if there are no existing employee representatives in place.  These are set to be in force from 1 January 2024.

Restrictive Covenants

The consultation also proposed imposing a maximum duration of 3 months on non-compete clauses.  This restriction would not apply to things like non-solicitation and non-dealing restrictions, nor would it impact an employer’s ability to restrict activities during garden leave.  This appears not to have made it into any legislation at present.   

Take away tips

  • Keep on top of staff who are not taking their holidays and issue them written reminders that if they do not use the leave by the end of the leave year, it will be lost.
  • If your practice is to pay overtime etc in the first 4 weeks of leave but not the additional 1.6 weeks, breathe a sigh of relief that you don’t have to change this.
  • Watch this space for more updates. 

If you have any questions about this, or any other Employment law issue, then please get in touch with the Blackadders Employment team with offices throughout Scotland.

The opinions expressed in this site are of the author(s) only and do not necessarily represent the opinions of Blackadders LLP.

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