Employment Law E-Bulletin – Issue 87

  • Government scraps the sunset clause
  • Proposals to limit non-compete clauses
  • EAT upholds unfair dismissal decision where an employer failed to consider furlough as an alternative to redundancy – Lovingangels Care Limited v Mhindurwa [2023] EAT 65

Government scraps the sunset clause

On the 10th May 2023, the Business and Trade Secretary, Kemi Badenoch, announced the removal of the “sunset clause” from the Retained EU Law (Revocation and Reform) Bill (the “Bill”). The Government introduced the Bill in September 2022, as part of the UK’s legal journey following the Brexit Referendum in June 2016.

In the Bill, the sunset clause was designed to provide a clear end date for retained EU laws in the UK. ‘Retained EU law’ is a category of UK law, based on the EU and EU-derived law which applied to the UK at the end of the Brexit transition period. If put into effect, the sunset clause would have meant that all retained EU law would have automatically expired on 31st December 2023, unless expressly retained.

The abandonment of the sunset clause means that the retained EU law will remain in force in the UK unless it is expressly repealed. The Bill will now be amended to include a list of the retained EU laws that the Government intends to revoke on 31 December 2023. An initial list has already been prepared. There isn’t anything at present within this which stands out particularly from an employment perspective, as those which are employment related include lesser known regulations such as:

  • The Community Drivers’ Hours and Working Time (Road Tankers) (Temporary Exception) (Amendment) Regulations 2006; and
  • The Posted Workers (Enforcement of Employment Rights) Regulations 2016.

Further to this, on the 12th May 2023 the Government launched a consultation on reforms to the Working Time Regulations 1998 (“WTR”), and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). These proposals were originally announced in the Government’s policy paper, Smarter Regulation to Grow the Economy, which was published on the 10 May.

The consultation is seeking views on the following areas, to ensure that the applicable law is fit for purpose for UK employers and workers:

  • record keeping requirements under the WTR;
  • simplifying annual leave and holiday pay calculations in the WTR; and
  • consultation requirements under TUPE.

The consultation closes on 7th July 2023.

This appears to offer certainty for employers and businesses by confirming that there are not going to be any significant changes to key employment legislation. However, seeing as ministers will retain the power to make changes to retained EU law, further changes may be announced further down the line. Employers and businesses will need to stay up-to-date with future announcements and we will be keeping an eye out for these.

Proposals to limit non-compete clauses

On 10 May 2023, the Government announced its intention to introduce new legislation which will restrict the duration of non-compete restrictive covenants to a maximum of three months. This follows the Government’s consultation on measures to reform post-termination non-compete clauses in employment contracts which was launched in 2020.

Non-compete clauses are commonplace with UK businesses to prevent employees from either joining a competitor or setting up a rival business and taking customers once their employment has ended. The Government hopes that the new proposals will increase flexibility for employees to move jobs within the same sector, as well as encourage competition by enabling employees to set up rival businesses at an earlier stage post-termination of employment.

In terms of when this change will be introduced, there is currently no set date for the required primary legislation to be introduced, with the Government stating that this will be when Parliamentary time allows. It remains to be seen whether this policy is one the Government intends to push forward in lead-up to next general election.

Employers will still be able to restrict employee’s activities with the use of garden leave and other post termination restrictions, with the proposals applying only to non-compete restrictions. However, employers should keep alert to when these proposals are implemented as documentation, such as contracts of employment, may need to be updated at this point.

EAT upholds unfair dismissal decision where an employer failed properly to consider furlough as an alternative to redundancy – Lovingangels Care Limited v Mhindurwa [2023] EAT 65

The EAT has upheld an employment tribunal’s decision that an employee was unfairly dismissed where the employer had failed properly to consider furlough, under the Coronavirus Job Retention Scheme, as an alternative to redundancy.

Mrs Mhindurwa (the “Claimant”) was employed as a care assistant by Lovingangels Care Limited (the “Respondent”) from 2018, providing live-in care to a client at home. In February 2020, the client was admitted to a nursing home and the Claimant was no longer required to provide care. The Respondent informed the Claimant that no alternative live-in care work was available due to the COVID-19 pandemic and, after a further meeting, informed her that there was no alternative to redundancy and terminated her employment. The Claimant appealed on the basis that she should be furloughed under the Coronavirus Job Retention Scheme, and her appeal was rejected by the Respondent at the time.

In the first instance the Employment Tribunal held that the Claimant had been unfairly dismissed as the Respondent had failed to properly consider furlough leave, even on a temporary basis, as an alternative to redundancy.

The EAT upheld the decision, stating that the employment judge had been entitled to apply the same approach to furlough leave as he would to any possible alternative to dismissal that an employer might be expected to consider if acting reasonably.

The EAT stated that:

“Determining a claim of unfair dismissal in respect of a dismissal that occurred in circumstances related to the Coronavirus pandemic does not require any variation to the law of unfair dismissal, which is robust enough to deal with such exceptional circumstances.”

There was not a requirement to change the legal test to be applied when looking at whether a dismissal was unfair in the context of the Covid pandemic.

Points to note:

This is a useful reminder of the basics of what will constitute a fair dismissal when it comes to redundancy under the Employment Rights Act 1996. One of the things this will depend on is whether in the circumstances (including its size and administrative resources) an employer has acted reasonably in treating redundancy as a sufficient reason for dismissing an employee.

As part of this a tribunal must consider whether a decision to dismiss an employee falls within a range of responses a reasonable employer could have adopted (the “band of reasonable responses” test). Employers should ensure they consider any possible alternatives to redundancy when engaging in a consultation process. Here it wasn’t that it would necessarily have been unfair to make an employee redundant while furlough leave was available, but rather the lack of consideration of this as an alternative, or a good explanation as to why this had been rejected,  which was problematic.

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