On 24th June 2016, the outcome of the UK’s referendum on its relationship with the EU was clear – 52% of the electorate voted to leave. Employment and HR professionals are only too aware the extent to which EU Directives are the root of our domestic employment laws. Discrimination, working time regulation, family leave rights, protection for atypical workers and the rights of employees on the transfer of a business, to name a few. So what will happen now?
Background
There are a number of options for the future relationship between the UK and the EU, including:
- Norwegian model: membership of the European Economic Area (EEA), full access to single market, required to accept majority of EU laws, free movement applies as it does in the EU
- Swiss model: member of European Free Trade Association (EFTA) but not the EEA, access to EU market is governed by a series of bilateral agreements, doesn’t have a general duty to apply EU laws but does have to implement some EU regulations to enable trade, free movement applies, including of people
- Turkish model: joined the EU Customs Union, is not part of the EEA or EFTA and has access the EU market under World Trade Organisations (WTO) rules
- A bespoke and unique UK model: The default position, should there be no deal reached before Brexit takes effect, would be that trade rules would default to WTO rules. The WTO sets rules for international trade that apply to all members, no free movement, no obligation to apply EU laws although traded goods would still have to meet EU standards and some tariffs would be in place on trade with the EU.
Employment Law Specifics
The UK’s employment laws are shaped by many influences, a major one being the EU. The Leave campaign heralded that EU derived laws were intrusive in the UK’s workplace and unnecessary red tape for businesses. The Remain campaign argued that such laws provide workers with essential and fundamental protections. Aside from whether or not these are accurately held views, following Brexit taking effect, Parliament will be able to repeal any statutes and regulations it so chooses, in theory.
It is highly unlikely that the government, whichever party and leader is at the helm, will completely change all UK employment laws that implement EU Directives as we know them. Our domestic employment laws are so ingrained in legislation derived from Brussels that it will take a long time before we see any real diverges, if ever. It will be seen as politically unattractive to change things too much as it would place great costs on businesses to ensure compliance and cause confusion and uncertainty for employers.
As mentioned in our Brexit article pre-23rd June, in further evidencing an unlikelihood for immediate drastic change, many EU laws are in fact considered good industrial practice (such as not to discriminate against workers on the grounds of a protected characteristic). In some cases, the UK has even decided to ‘gold plate’ and enhance the EU stipulated minimum standard, for example:
- The EU stipulated a minimum standard of 20 days annual leave for full time workers but the UK decided to offer 28 days;
- The EU stipulated a minimum standard of 14 weeks’ maternity leave and the UK offers up to 52 weeks;
- The UK decided to extend transfer of undertaking protections to include service provision changes, where an organisation insources, outsources or retenders a service.
Further, the UK had in force the Equal Pay Act 1970 (which was replaced, along with all other discrimination legislation, in the codifying Equality Act 2010), and this obviously pre-dated the UK becoming part of the EU in 1973. It is therefore difficult to see why and how any UK government would legislate to substantially change such fundamental laws following our exit.
Should there be any changes, it is far more likely that the UK’s government will change some aspects of existing employment regulation which has proven to be unpopular with British businesses and aspects that will be unlikely to be seen as overly contentious by other member states, trade unions and the UK generally. We are unlikely to see drastic changes to what are seen as fundamental rights and freedoms, such as discrimination laws and family friendly rules. Aspects which could be vulnerable to change, in our opinion, include:
- TUPE: the rule against post-transfer harmonisation of contractual terms for employees who have moved from the transferor in line with employees’ terms already working for the transferee is seen by organisations as unduly onerous so the government may seek its removal.
- Annual leave: the right for holiday to continue to accrue during sick leave is an unpopular EU rule with British businesses, so is the rule that holiday pay should be calculated on all aspects of remuneration, including commission, and not just basic pay. Exiting the EU would enable the government to simplify these burdensome rules.
- Agency workers: the Agency Worker Regulations 2010 have proven unpopular with British businesses, in particular the rule that atypical workers be offered the same terms and conditions as employees following 12 continuous weeks in assignment, and so that may be removed.
- Discrimination compensation: there are concerns that any payout for a successful discrimination claim in the employment tribunal is uncapped so the government may seek to assist businesses by limiting potential payouts in introducing a discrimination award cap.
During the exit negotiations, the UK is likely to want to maintain strong trading relationships with other member states and, if we do, it is thought to be likely that the UK will have to demonstrate that it has minimum employment protections in place in order to be an attractive trader. It is still not known what type of model an independent UK should seek to implement but, as an example, if it follows Norway by becoming a member of the EEA post Brexit, we’ll have to comply with current EEA rules. This would mean remaining subject to much EU employment law anyway, including TUPE, collective consultation requirements, working time rules and, temporary agency worker requirements. If we do seek to become part of the EEA, very little is likely to change and the status quo would appear to be inevitable.
It is important to emphasise that the fundamental right not to be unfairly dismissed will be unaffected by the UK’s status within the EU. It is additionally worth noting that some employment rights granted by the UK signing up to the European Convention on Human Rights will be unaffected – such as the right to join a trade union. The UK’s status as a signatory to the ECHR is unaffected and separate to its membership of the EU.
Also, in terms of ECJ case law, as outlined in our earlier Brexit article, former ECJ decisions are likely to live long as domestic authority. These judgments have become UK law either through an Act of Parliament or by courts citing and following an ECJ decision in its own case law, as it is currently obliged to do, and these cases in themselves become binding authority.
Free Movement of People
Free movement of workers is a central pillar of EU membership and was a key focus for the Leave campaign who wanted to end the automatic right of EU citizens to travel and work freely in the UK, without the need for immigration permission.
In short, we don’t know what will happen to any citizen of another EU country that you employ here in the UK. This will be a central issue for the Brexit negotiations with other member states. The Leave campaign promoted the adoption of a points-based system for immigration, such as the one currently operated in Australia. There is, however, a chance that thousands of existing EU workers currently in the UK may no longer qualify to work here if they don’t satisfy the criteria under such a system.
Many believe that we should expect ‘business as usual’ pending exit negotiations. But, in the long term, legislative change could be vast depending on the model the UK adopts for life outside the EU for those organisations relying on non-UK EU nationals for their workforce. We would expect that transitional rules would enable any EU citizen currently living and working in the UK to stay here. We would expect the same to apply to any UK citizen living and working in other EU countries.
Post Brexit, if a model is adopted where the UK is not obliged to permit free movement of people (such as the Turkish model), it could be more difficult for the UK to recruit individuals from Europe and, as such, the talent pool available to UK businesses would diminish. Individuals may prefer other EU countries, attracted by free movement within, and view coming to the UK as too restrictive and too much of an administrative burden. If the UK, once no longer in the EU, implements new controls on future EU citizens seeking to live and work here, it stands to reason that other EU countries may impose reciprocal controls on UK citizens seeking to live and work in any of the remaining EU countries.
Summary of employment law after Brexit
It is impossible to predict with any degree of certainty how the UK’s legal and HR world may change following our exit from the EU. We don’t know who will be Prime Minister, whether a Leave or Remain campaigner, when or if Article 50 will be triggered (with the referendum being non-binding and merely advisory on Government), what model the UK will seek to adopt and what relationships will look like between the UK and other EU countries. There is a lot up in the air, making it all very uncertain and difficult to predict what the future has in store for UK employment laws and the position of EU workers in the UK. This uncertainty will likely extend to years.
In looking for some clarity in this highly uncertain time, we predict for the aforementioned reasons that there are unlikely to be any major changes to discrimination and family friendly laws at least in the short to medium term. We expect any changes to be in relation to the harmonisation of contractual terms following a TUPE transfer, annual leave, agency worker rules and possibly a cap on discrimination awards.
In the meantime, remember the laws you must abide by today are the same as they were before the result of the referendum was known. Going forward, we’ll keep you up to date on developments.
