Implications Brexit employment law perspective

Implications of Brexit from an employment law perspective

On 23 June 2016, the UK public voted to leave the EU. The Prime Minister subsequently announced an intention to serve notice of withdrawal under Article 50 of the Treaty on European Union no later than March 2017. Based on Article 50, the EU Treaties shall cease to apply to the UK on the earlier of the date of entry into force of the withdrawal agreement that the UK negotiates with the Union or (more likely), two years after the UK has notified the European Council of its intention to withdraw, unless the European Council unanimously agrees to any UK request to extend this period.

The current expectation is that the whole of the two year period will be needed to negotiate the exit provisions, therefore, in practice the British exit (Brexit) date should not be before 2019, i.e. March 2019 if notice is given in March 2017.

The government has also announced the “Great Repeal Bill” which will be put before Parliament in May next year and will repeal the European Communities Act 1972 that currently gives EU law direct effect in the UK and primacy over UK law.  Whilst there appear to be a number of constitutional issues which are not unique to employment related legislation, its stated aim is to transpose the body of existing EU law into UK law insofar as possible such that EU law will cease to apply in the UK on the day the UK leaves the European Union. It will then be left to Parliament to amend, repeal or improve the transposed legislation after “appropriate scrutiny and debate”.

What are the latest implications of Brexit on employment law?
  • The government has been quick to deny that workers’ rights will be eroded following the Great Repeal Act. The Prime Minister has commissioned an independent report with an apparent view to increasing worker protection in the context of current working practices and has pledged employee representation on Remuneration Committees.
  • The current Prime Minister thus gives no indication that we should expect drastic changes to entrenched and long-standing employment concepts following Brexit. The terms of our future relationship with the EU may in part determine how much flexibility there could be in any event. By way of example, Norway’s status within the EEA but outside the EU means that it is still required to adhere to EU employment legislation. It is currently very unclear what trading arrangements will be reached and consequently how far EU employment legislation will need to be adhered to.
What employment matters are most likely to undergo change?
  • Many aspects of UK employment law are outside the scope of EU law or in excess of EU requirements, including minimum wage legislation, unfair dismissal rights and certain holiday and parental leave rights. However, numerous EU concepts have become entrenched in the workplace such as TUPE, many aspects of discrimination law and collective redundancy requirements.
  • The following areas may be susceptible to change post Brexit:
    • Holiday Pay: Recent ECJ decisions have established that workers must accrue holiday during sick leave and that holiday pay should include certain variable elements of pay, beyond an employee’s basic pay, notably overtime and commission. The position in respect of the latter was confirmed recently in the case of Lock v British Gas by the Court of the Appeal which upheld earlier decisions of the Employment Appeal Tribunal, that domestic legislation should be interpreted to give effect to EU law such that results-based commission should be included in the calculation of holiday pay.  Thousands of cases are going through the Tribunals to determine how the UK courts must approach this matter, with substantial potential liabilities for a large number of employers. Given the potential exposure for UK businesses, it is plausible that the government may seek to restrict employee rights in relation to these aspects of holiday pay.   
    • TUPE:  It is unlikely that TUPE would be repealed in its entirety because it has become embedded into UK business practices, and the protection it affords to employees in the event of an asset transfer or outsourcing is generally considered to be reasonable and in the interests of business and employees.  However, significant restrictions on harmonising terms and conditions after a transfer cause employers real difficulty and may be the subject of change.
    • Discrimination: In part, the Equality Act 2010 codifies previous discrimination legislation that has existed in the UK for some time, particularly in relation to sex, race and disability, and most believe that there will not be wholesale change in this area of law. However one change which we might see is a cap on compensation for discrimination claims, the removal of which was a result of European case law. Such a cap would represent a significant change and would be welcomed by most employers. Age discrimination is a protected characteristic which many believe could also be subject to change.
    • Agency workers: The Agency Workers Regulations 2010 are notoriously unpopular because of the requirement that after a 12 week period agency workers must receive the same working terms and conditions as permanent employees. Before they were implemented into UK law the government resisted them and indeed the 12 week waiting period was a concession made for the UK. It is possible that these Regulations could be repealed following Brexit.
Freedom of movement
  • The Prime Minister has now made it clear that one of her key priorities in the negotiations with the EU will be to control immigration from within the EU.  This is likely to affect current and future workers from the EU who are working in the UK and UK nationals working within other EU countries, who may be subjected to similar and reciprocal restrictions on working rights. We are likely to see greater control of EU immigration but this will need to be balanced against maintaining trade links with Europe, either as part of the single market or otherwise and the potential impact on migrants from other important trading partners outside the EU (and EEA) such as the US, China and India. As many UK businesses depend on having a wide pool of labour and talent this is likely to become an acute issue.
What do businesses need to be doing and what can we help you with?
  • You should consider auditing your workforce – in the UK and in Europe – to identify where employees who are working/based outside of their country of origin may be impacted by post-Brexit immigration regimes. It is possible that EU nationals who are working in the UK and/or UK nationals who are working in EU member states will be eligible to obtain permanent residency and/or dual citizenship which would be likely to preserve working rights and, potentially, freedom of movement following Brexit. It is also possible that those employees who do not yet qualify for permanent residency/citizenship would be able to apply for a residence card as evidence of their right to live/work in that country. This could prove to be a useful way of demonstrating when an employee first began exercising his EU Treaty rights in a country, particularly if the protection of an employee’s legal status (when based on EU principles) has a cut-off point in a post-Brexit immigration regime. We can assist with undertaking an immigration audit and with any residency (temporary/permanent) and citizenship applications. You should also review any pending expatriate arrangements and we can advise on any immigration applications that could be made now, ahead of Brexit.
  • Brexit has given rise to a number of reported incidents of racial harassment within certain communities and many EU nationals have reported being made to feel unwelcome and vulnerable.  It is possible that employers will start receiving grievances and claims based on incidents within the work place.   Harassment and anti-bullying policies should be reviewed and diversity training should be considered as measures to mitigate the risk of such claims arising.
  • There are reports of businesses losing contracts as a result of the uncertainty over the future and of redundancies as a result. Some businesses have already started relocating their staff from the UK to other EU jurisdictions.  You should ensure that any redundancy policies are up to date and check the requirements of any European Works Council arrangements, in preparation for any restructuring proposals which may arise.

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