UK: Brexit: What Are The Likely Implications For Employment Law? (June 2016)

The UK referendum on Brexit took place on 23 June 2016 and, after many months of campaigning from both the Remain and Leave camps, the UK has voted to leave the EU. The impact of the leave vote will largely depend upon the future relationship between the UK and the EU. This will be the subject of lengthy and complex negotiations and much will depend upon the attitude of the remaining Member States.

In light of this uncertainty, many employers have been speculating about what changes Brexit could entail for their workforce. We seek here to provide an insight into the possible implications for employment law in the UK.

Is there going to be any immediate change?

The UK's exit from the EU will not take place immediately. It will only occur following what could be a lengthy period of negotiation. Brexit will then be achieved through the repeal of the European Communities Act 1972. The result of this will be that, unless protective measures are taken, certain pieces of UK legislation which derive from EU law (including much in the employment arena) will fall away. This would be undesirable not least because of the practical problems it would cause.

Accordingly, it is expected that the UK Government would enact saving legislation to maintain the status quo, at least for a transitional period. This would allow EU regulations as well as legislation implementing EU directives, which could otherwise cease to have effect after withdrawal, to continue to apply in the UK.

What will happen to employment law over time?

A wholesale repeal of EU employment rights seems unlikely in the short or even medium term for several reasons.

Depending on the post-Brexit relationship which is negotiated with the EU, there may be an obligation on the UK to maintain (at least certain aspects of) EU employment policy. If the UK benefits from a favourable trade deal with the EU, the EU will not want the UK to undercut its Member States for a competitive advantage by having lower employment standards. Norway, for example, has had to implement key EU directives, such as those on equal treatment of employees and collective redundancies, in return for its working relationship with the EU.

It is also important to remember that EU employment protections are now hard-wired into the UK labour landscape. For example, although the Equality Act 2010 derives from EU law, it seems unlikely that any government would want to be seen to be repealing or watering down anti-discrimination protections. Similarly, the removal of other core rights, such as parental rights and working time laws, would be unpopular amongst employees.

Furthermore, the UK has sometimes gold-plated EU employment protections to exceed EU standards, for example, allowing a longer period of maternity leave than the EU minimum. When the UK has taken the step of increasing protections beyond the EU minimum, it seems unlikely that Brexit, in whatever form it eventually takes, would have an impact on these pieces of legislation.

Of course, many employment protections to which employees have become accustomed in the UK are not EU-derived at all. Unfair dismissal is a UK law concept and the Equal Pay Act 1970 preceded the UK's accession to the EU. As such, unless political forces dictate otherwise, these provisions will not be affected by Brexit.

Which are the most likely targets for repeal?

We set out below those pieces of legislation which are considered the most likely targets for repeal. Other areas which might see some change in favour of employers are collective redundancy consultation rules and protections for part-time and fixed-term workers.

Most likely UK employment legislation to be repealed following Brexit

Agency Workers Regulations 2010

These essentially confer basic employment rights on agency workers similar to those enjoyed by permanent employees. They are highly unpopular with both employers and the current Government. Many commentators believe that this will be the first piece of legislation to be repealed in its entirety.

Working Time Regulations 1998

These impose a 48-hour cap on the working week (subject to an employee right to opt out in the UK) and confer certain rights to holiday pay. Given the opt out, repeal of these regulations may be unnecessary although some employers may prefer to see complete withdrawal so as to remove the employee's power to choose whether or not to opt out. The right to paid holiday is unlikely to be taken away but the ability to accrue holiday whilst on sick leave and the need to include some types of overtime in the calculation of holiday pay may be subject to change.

Transfer of Undertakings (Protection of Employment) Regulations 2006

These are designed to protect the employment rights of individuals on the transfer of a business or the outsourcing of services. Most businesses have become accustomed to their operation and, in relation to outsourcing in particular, rely on the certainty that employees will transfer on a service provision change. Major changes therefore seem unlikely, although minor amendments might be made to enable businesses to harmonise terms and conditions of employment more easily following a transfer.

How about internationally mobile employees and migrant workers?

The impact of Brexit on employers with a mobile workforce or who rely on EU migrant workers is heavily dependent on the relationship which is negotiated with the EU. If the result is a relationship akin to those which Switzerland or Norway have with the EU, very little would change because the UK would probably then have to accept the principle of free movement to at least some extent.

However, if the principle of free movement ceases to apply, then the UK will be free to make its own immigration rules for EU citizens, in the same way that it is currently able to for non-EU citizens.

It is too soon to say how any new immigration rules would be likely to apply. However, the Leave campaign has previously stated that it envisages an Australian-style points-based system being put in place. This may mean that the current points-based system which the UK applies to non-EU citizens could be overhauled and replaced with one immigration system applicable to all those seeking entry to the UK. The Leave campaign has indicated that migrants would be admitted on the basis of their skills, would have to be suitable for the job in question and would have to have the ability to speak good English. If such a framework is to be implemented in place of free movement, it is expected that this could be a lengthy and complex process.

It is unclear whether such a system would largely restrict economic migration to high-skilled/high-value migrants (in the same way as the current UK points-based system for non-EU citizens), thereby reducing the flow of migrant workers doing low-skilled jobs. This could be problematic for some industries (such as hospitality, manufacturing, construction and healthcare) which rely on foreign nationals to make up a significant proportion of the workforce. The London Chamber of Commerce and Industry has warned that this approach could lead to a shortage of workers, predominantly at the low-skilled/low-value end of the workforce.

Should the principle of free movement disappear, the status of both UK citizens currently living and working in the EU and EU citizens currently living and working in the UK, and their ability to continue doing so, may have to be negotiated with each individual Member State. The Leave campaign's proposal is that EU citizens who are already lawfully resident in the UK will automatically be granted indefinite leave to remain (although it is unclear whether this will apply to all such citizens or only those who have acquired upwards of five years of residency in the UK). If this is the case for all EU citizens currently living, working or studying in the UK, Member States may be willing to adopt a similar approach in respect of UK citizens currently based elsewhere in the EU but we cannot be sure that this will be the case.

Next steps

It is our view that little will change in the short term whilst the UK negotiates its exit from the EU. It is during this time that employers should begin preparations for any changes affecting their workforce.

Steps which employers may wish to consider include:

  • auditing your workforce to identify those UK nationals working elsewhere in the EU and EU nationals working in the UK;
  • reviewing any secondment arrangements between the UK and other Member States to assess how these could be terminated if necessary in order to repatriate employees; and
  • to the extent a European Works Council agreement is in place, consider whether any restructuring or other proposals that may be implemented in response to Brexit could trigger a duty to inform and consult the works council.

As the negotiations progress, it will become clearer what further steps may need to be taken in order to prepare for the impact of Brexit on your workforce.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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