UK: Gazing Into A Crystal Ball: Brexit, Employment And Immigration

Last Updated: 7 July 2016
Article by Anjali Raval

Much has been said about Brexit – the number of articles and reports published in the last few weeks has been overwhelming. Some filled with predictions of doom and gloom; others more optimistic. But that's just what they are at this stage – predictions. We've all become fortune tellers overnight – myself included.

No one can say for certain what's going to happen next. Much will depend on the deal the UK manages to negotiate with the European Union (EU). All we know is that not much will change in the next couple of years. European Commission President, Jean-Claude Juncker, has indicated that there will be no discussions with the UK on a possible post-Brexit relationship until the UK has formally notified the EU of its intention to leave by invoking Article 50 of the Lisbon Treaty. We will then have a two-year "negotiation period" before any of the changes take effect. 

Initial rumblings from the Union have suggested that it is fundamental that any trade agreement with the UK would be subject to the principle of free movement. Essentially, if we want to retain access to the single market, we will have to accept free movement of people. Simple. Again, of course we can't be certain about any outcome. However, politically speaking, it would seem that the Union has its hands tied in this regard. What concessions can it afford to make to the UK without sparking dissent amongst other union members? Free movement of people? The supremacy of EU law? Whilst some UK politicians have stated that they are not prepared to accept certain conditions to access to the single market, it seems to me that, in reality, the bargaining power lies with the EU.

So what does it all mean for the UK? Well that's the million (pound?) (euro?) (dollar?) question that's likely to take years to really determine. However, as the saying goes – we need to speculate to accumulate. 

The best starting point may be to look inwards and consider what arrangements European non-EU members currently have in place. The "Norwegian" and "Swiss" models are the ones currently most cited.  Both have partially surrendered sovereignty in order to gain access to the single market and both accept free movement of people. Indeed, both Switzerland and Norway have far higher levels of EU immigration than the UK as a proportion of their populations. Statistics indicate that if the UK had the same net EU immigration rate as Switzerland, it would mean nearly 400,000 more EU migrants a year.

In terms of immigration to the UK, my prediction is that, in the short term at least, figures for net migration from the EU are unlikely to fluctuate dramatically. If anything, we may see an increase in net migration in the next two years, as the government has indicated that anyone already in the UK before the changes take legal effect will not be repatriated. Businesses are still likely to have a ready pool of applicants from the EU and are still likely to be able to send their employees to work in other EU member states, without any particular additional employment costs. 

If, shock horror, the UK was able to negotiate a way forward with the EU without free movement of people, or negotiations were to fail and UK lost access to the single market completely, this would likely have the unintended consequence of making the UK a much less attractive destination for international businesses, and skilled and educated migrants. However, as it currently stands, I don't think that we need to panic just yet. 

So that's immigration, but what's the deal for employment law? Much was made by the Remain campaign about the fact that we should stay in Europe to "protect workers' rights". Indeed, Jeremy Corbyn, who is now under fire for his apparent apathy towards the Remain campaign, urged Labour voters to support the UK staying in the EU, saying it will protect workers' rights. I suppose it makes for a good headline but it doesn't truly reflect the reality of the situation, for the reasons set out below. 

As we set out in our briefing paper back in April 2016, it is a common misconception that statutory employment rights in the UK derive wholly or mainly from the EU. This is simply not the case.

The following rights derive either exclusively from UK legislation, or from UK legislation which pre-dated later EU directives requiring member states to legislate in respect of the same issues: protection against unauthorised deductions from wages; the right to a statutory redundancy payment; the right to equal pay; protection against unfair dismissal; protection against detriment or dismissal because of trade union membership; immunity from legal action in respect of legal strike action; protection against discrimination at work because of sex, race, nationality, ethnic origin or disability; the right to a national minimum wage; and all those family-friendly rights. I don't know about you, but that seems like a fairly impressive list to me. 

So which major UK employment rights do derive exclusively from EU directives? Protection of employment on the transfer of an undertaking (the "TUPE" Regulations); the requirement to consult collectively in respect of proposals for 20 or more redundancies within 90 days; limits on working time; and the right to statutory minimum paid leave.

EU law is often criticised as burdensome, overly restrictive and costly for businesses, but UK laws, at least in the employment space, have regularly gone beyond the strict requirements of the EU directives. 

Considering the issue of "gold-plating", take, for example, the Working Time Regulations 1998. These provide that UK workers are entitled to a minimum of 5.6 weeks' holiday a year, whereas the minimum required under EU law is only 4 weeks. Then consider the dreaded TUPE Regulations. The concept of service provision change (which relates to outsourcing scenarios) is a UK invention, nowhere to be found in the EU Acquired Rights Directive. Indeed feedback from the business community indicates that the introduction of the service provision change has been well received, to the extent that it provides greater certainty for businesses.

There has been an outcry about the potential effects of Brexit on maternity provisions. This is perhaps fuelled by polls of businesses, which seem to suggest that current maternity allowances are not popular within the business world. The suggestion is that the only reason we have the maternity provisions that we do in the UK is because we are bound by EU law. This is highly misleading and ignores the fact that our maternity provisions are far more favourable than the rights under EU law. Under EU legislation, women are entitled to at least 14 weeks' maternity leave, compared to our significantly more generous entitlement. 

Whilst theoretically the government could make maternity provisions and holiday allowances less generous post-Brexit, it could have done that pre-Brexit if it had wanted to. Indeed, the recent introduction of shared parental leave is an indication of the government's increased support for employment rights. Reducing these allowances is politically unattractive, although it is arguable that the government could use Brexit as an excuse to start making changes. 

Commentators refer to the perennial debate about the maximum 48-hour working week. However, the reality is that this has had little impact in practice, as many businesses already utilise the UK's opt-out provisions contained in the legislation. 

A recent (pre-Brexit) article in The Independent1 referred to the Beecroft report, a controversial report about employment law which was allegedly published by the coalition government in 2012 and then buried. The report advocated, amongst other things, employment at will, opt-outs for small businesses of pension auto-enrolment and certain family-friendly rights, a reduction in the consultation period on collective redundancies and repeal of third party harassment legislation (actually repealed in 2013). The article suggested that, if it were left to the UK government, without any restrictions imposed on it by the EU, the government would start to impose some of the changes suggested in the Beecroft report to "appease" businesses and cut red tape. Whilst this is not impossible, my view is that a knee-jerk reaction or abolition of key employment law by the government is highly unlikely. 

Repealing the Equality Act 2010, introducing length of service requirements, placing limits or caps on discrimination compensation awards? Theoretically, the government could make these changes but in doing so it would be unlikely to win the support of the general public. As I set out above, any radical departure from the status quo would be politically unattractive. In any case, the UK labour market is already one of the least regulated and most flexible in the developed world, notwithstanding its membership in the EU.

So back to looking at Norway and Switzerland. Statistics suggest that from the 23,000 EU laws currently in force, the EEA has incorporated around 5,000, meaning that Norway is subject to roughly 21 per cent of EU law (including the Working Time Directive)2. Switzerland, through its network of  bi-lateral agreements with the EU, is subject to an even higher percentage. Businesses from the countries are required to comply with EU law, including employment legislation, in order to market their products or services in the EU, and they are bound by the jurisprudence of the European Court of Justice in relation to the European laws which they submit to. 

Note that Switzerland does not have full access to the single market for its banking sector and other parts of the services sector, which together make up almost 80 per cent of the UK economy. If the UK wants full access to the single market it is likely that it will have to make even more concessions to the EU than Switzerland.

Assuming that the UK manages to negotiate an arrangement whereby it does not have to submit to European employment law, there is a chance that, even if we do not repeal any of our laws currently in place which implement EU law, our case law could take a significantly different path to European jurisprudence. Take holiday pay as an example: it is not inconceivable that, following Brexit, the UK Supreme Court (assuming an appeal to the Supreme Court of Bear Scotland3 and Lock4) could decide that holiday pay should be limited to basic pay only. However, looking to Norway and Switzerland, currently I still think it is more likely that under any negotiated agreement, in terms of employment law at least, EU law will still reign supreme.

So where do we end up? My prediction? Right at the beginning again. EU aims and legislation are so entrenched in our views of UK good employment practice that our employment laws are likely to remain fundamentally the same, at least in the short to medium term. Moving to a more US-style system where employees receive lower overall protection is potentially possible in the longer term, but it would require a broader cultural change. We need to remember that, even if our government is not bound by EU employment law post-Brexit, which I predict it may well continue to be, the government is bound by five-yearly elections and ultimately, as we've seen from the recent referendum, the people get what the people want. 




Bear Scotland Ltd v. Fulton and another UKEATS/0047/13

Lock v. British Gas Trading Ltd (Case C-539/12)

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