Monthly Highlights – UK Employment Law – April 2023

In April’s instalment, our team identify key takeaways from the Court of Appeal’s decision in Boydell v NZP Pharma Limited surrounding the enforceability of non-compete clauses. We highlight the letter recently published by the Equality and Human Rights Commission regarding the definition of ‘sex’ for the purposes of the Equality Act 2010. We also set out some of the key features of the new Acas guidance on reasonable adjustments for mental health and consider the new Government guidance on ethnicity pay reporting and positive action measures.

1. Non-Compete Clauses – Are they Enforceable?

   In Boydell v NZP Ltd, the Court of Appeal considered whether a non-compete clause could be enforced after severing words from it.

   The facts:

   • Dr Boydell’s contract of employment with NZP Ltd (“NZP”) included a 12-month non-compete clause which prevented him from working for any competing business of NZP or any of NZP’s group companies. After Dr Boydell resigned to work for a main competitor, NZP sought injunctive relief from the High Court to enforce the non-compete clause.  
   • Dr Boydell argued that the non-compete was drafted too widely and was therefore an unfair restraint on trade. However, rather than finding the entire clause to be non-enforceable, the High Court held that some of the wording in the non-compete could be severed, including the reference to NZP group companies, meaning that the remainder of the non-compete was enforceable. The High Court therefore granted the injunction.

   • Dr Boydell appealed against the High Court’s decision, arguing that the clause prevented him from working at any company which produced general pharmaceutical products and therefore, the non-compete went beyond what was reasonably necessary to protect NZP’s legitimate interests.

   The Court of Appeal’s decision:

   The Court of Appeal applied the test in Tillman v Egon Zehnder Ltd to establish if the clause could remain enforceable after removing the group company wording. Namely that:

   1. the words must be capable of being removed without the need to add to or modify the remainder; and
   2. the removal of the words should not generate any major change in the overall effect of the restraints.
      
      

   The Court of Appeal found that the non-compete sought to protect NZP’s specialist work and therefore severing the reference to group companies did not cause any major change to the overall effect of the restraints.

   Key takeaway:

   Whilst this case highlights that employers seeking an injunction to enforce a non-compete may be more successful than previously thought if the business is competing in a specialised area, employers should not see this decision as freedom to draft non-competes wider than is necessary. Indeed, employers looking to ensure non-compete clauses are enforceable are advised to take particular care to ensure that any post-termination restrictions are reasonable and specific to the particular employee.

2. The Definition of 'Sex' in the Equality Act

   On 4 April 2023, the Equality and Human Rights Commission (“EHRC”) published a letter to the Minister for Women and Equalities recommending that the Government redefine “sex” in the Equality Act 2010 (“EqA 2010”).

   The EHRC has suggested that if ‘sex’ is defined as biological sex for the purposes of the EqA 2010, as opposed to the current definition of ‘legal sex’ then it would bring greater legal clarity in eight areas: pregnancy and maternity; freedom of association for lesbians and gay men; freedom of association for women and men; positive action; occupational requirements; single sex and separate sex services; sport; and data collection. However, the EHRC also believes that this could cause more ambiguity in other areas: equal pay; sex discrimination; and indirect sex discrimination. The full response to the letter can be found here.

   The watchdog noted that this was a step towards moving public debate on these issues to a more informed and constructive basis and that the implication of such a change would need to be carefully considered.

3. Reasonable Adjustments for Mental Health under the Equality Act 2010

   The legal duty to make reasonable adjustments only applies where an employee (or job applicant) is ‘disabled’ for the purposes of the Equality Act 2010. An employee will be considered disabled if they have a physical or mental impairment which has a substantial adverse long-term impact on their ability to carry out normal day-to-day activities. Employers’ obligations to make reasonable adjustments therefore apply equally to employees experiencing mental health conditions as for employees with a physical disability.

   Acas has now published specific guidance on reasonable adjustments for mental health (the “Guidance”). In summary, the Guidance outlines:

   • what reasonable adjustments for mental health are;
   • examples of reasonable adjustments for mental health;
   • requesting reasonable adjustments for mental health;
   • responding to reasonable adjustments for mental health requests;
   • managing employees with reasonable adjustments for mental health; and
   • reviewing policies with mental health in mind.

   The full Guidance can be found here. Employers would be well advised to carefully review the Guidance and consider whether their policies are suitable for employees with mental health problems.

4. New Guidance on Ethnicity Pay Reporting 

   The Government has published new guidance on ethnicity pay reporting which mirrors the approach taken by the Government in the gender pay gap reporting published earlier this year. Please see Orrick’s March 2023 UK Employment Law Highlights for a summary of the guidance on gender pay gap reporting published earlier this year.

   The guidance states that ethnicity pay reporting is more complex than gender pay reporting as the analysis can potentially involve many more ethnic groups. The guidance suggests that employers may also have to make decisions on how best to combine different groups to ensure reliable results and that employers should carefully scrutinise the underlying causes for any pay disparities. The full guidance on ethnicity pay gap reporting can be found here.

   The Government have also concurrently published new guidance to help employers operate positive action measures in the workplace. The full guidance can be found here.

   In summary, the guidance suggests that employers should consider:

   • Why action is needed and what evidence there is to support the view that certain groups face barriers in the workplace;
   • What type of action to take and how this will address barriers; and
   • A plan and timeline for delivering the actions, including how progress should be measured, how long the action will be needed for and how to consult and communicate with employees.

For further advice on any of the issues raised above, please contact a member of the London Employment team.