Legal development

The government plans to grow the economy how does this impact employers

Insight Hero Image

    The government has recently published a policy paper titled 'Smarter Regulation to Grow the Economy' which contains some pretty radical proposals affecting non-compete clauses, and also addresses some of the administrative hassles which employers face with TUPE and complying with their working time obligations.

    What is a non-compete clause?

    Non-compete clauses are included in employment contracts to curtail an employee's ability to work for a competitor or set up a competing business for a specific time period after the termination of their employment. Provided that the scope of these clauses are reasonably necessary to protect an employer's legitimate business interests, they provide an effective way for employers to, for example, protect their confidential information.

    What is the government proposing?

    Over two years has passed since the government's consultation on a possible reform of post-termination non-compete clauses in employment contracts closed.

    When Parliamentary time allows, the government will introduce legislation to limit the length of non-compete clauses to a mere three months. Employers will still be able to use paid notice periods, garden leave and non-solicitation clauses, and the change will not impact confidentiality provisions in employment contracts.

    We will have to wait and see whether this legislation is ever implemented but at first blush this is a sweeping change. If the proposals proceed, employers may need to revisit their non-compete clauses in employment contracts.


    The purpose of The Transfer of Undertakings (Protection of Employment) Regulations ("TUPE") is to protect employees if the business in which they are employed changes hands. Its effect is to move the employees and most of the liabilities associated with their employment from the old employer to the new employer.

    Currently, TUPE imposes a duty on the transferor and the transferee to inform (and in some circumstances consult with) appropriate representatives of their affected employees. Appropriate representatives may be existing workplace or trade union representatives, or they may be elected specifically for the purpose of TUPE. Businesses cannot consult employees directly without employee representatives.

    What is the government proposing?

    The government is consulting on removing the requirement to elect these employee representatives for businesses with less than 50 people and for transfers affecting less than 10 employees. This would allow businesses to consult directly with the affected employees.

    Clearly any changes to cut red tape will be welcomed by employers, although in practice the proposed change will have limited effect because of the numbers of employees involved.

    Working Time Regulations

    The Working Time Regulations impose a number of administrative headaches for employers around record keeping for example, which the government is proposing to reform this year.

    What is the government proposing?

    Firstly, the government intends to remove retained EU case law requiring businesses to keep working hour records for almost all members of the workforce. Secondly, the administrative obligations around the calculation of holiday pay will hopefully be reduced. The introduction of 'rolled-up' holiday pay, so that workers can receive their holiday pay with every payslip, and merging the separate 'basic' and 'additional' leave entitlements into one entitlement of statutory annual leave is proposed.

    On the face of it, removing these administrative burdens will cut costs for all employers and the sooner this is done, the better.

    Further information

    For more information on any of the issues raised in this briefing, please speak to your usual Ashurst contact or to any of the people whose contact details are given below.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


    Stay ahead with our business insights, updates and podcasts

    Sign-up to select your areas of interest