Some UK employment laws could be set for a shakeup after 31 December 2023, as part of the post-Brexit legal reform envisaged by the government's "Brexit Freedoms Bill." The precise impact of this Bill, including which of its powers will be exercised and to which legal areas, remains unclear. However, given the EU genesis of so many UK employment laws, global employers with UK operations should have on their radar the possibility of significant employment law reform.
What is the Brexit Freedom Bill?
The Retained EU Law (Revocation and Reform) Bill, also known as the "Brexit Freedoms Bill," will result in the removal from UK statute books of certain laws that were retained from the EU following Brexit. Unless restated or replaced by 31 December 2023, many of these EU laws will automatically lapse (known as "sunsetting"—see below).
Employment is an area of UK law that has strong EU links, such as laws on business transfers, maternity and parental leave, fixed term employment, etc. However, the government is yet to indicate how it plans to address retained EU employment laws, meaning there is considerable uncertainty as to what the legislative landscape will look like after 2023.
What will be the consequences of the Brexit Freedoms Bill?
From the end of 2023, the Brexit Freedoms Bill will result in:
- Certain EU laws being revoked, unless:
- The government exercises its right to extend this deadline to June 2026, which is currently unlikely.
- They have been restated as UK law. The power to restate does not provide much flexibility to change the wording of the law, but it does provide the ability to clarify or consolidate it.
- They have been replaced with a new UK equivalent, which does not need to be interpreted in line with EU law. Such replacement legislation cannot, however, increase the law's regulatory burden.
It is important to note that this "sunsetting" does not apply to all law derived from the UK's time in the EU. By way of example, most of the Equality Act 2010, which provides the framework of protections against discrimination, will be out of scope of these sunsetting powers. Conversely, regulations on agency workers, part-time employment, and some health and safety rules are examples of areas that could potentially be sunsetted.
- The removal of some directly effective rights and obligations provided under EU treaties and directives.
- It becoming easier for UK courts to depart from case law derived from the Court of Justice of the EU, as well as the general principles of EU law (such as proportionality).
- EU law no longer having supremacy over domestic UK law.
Which employment laws have the greatest probability of being impacted?
We anticipate that the most likely changes will be in relation to:
- The average weekly working hour limit of 48 hours, under the Working Time Regulations 1998. This might be lifted or amended, although, in practice, the impact could be minimal, given that employees typically consent to opt out of this limit during their onboarding.
- Rules applying to the automatic transfer of employment following company acquisitions/mergers (known as "TUPE"). In particular, current restrictions on the ability to change the terms and conditions of transferred employees can impede or undermine the post-acquisition integration of businesses.
- Holiday pay and entitlement. There is currently considerable uncertainty in this space, such as in respect of rollover rights, whether variable pay must be factored in, etc.
We do not currently anticipate that there will be a widespread move to deregulate the employment space, particularly as both the current government and opposition parties are in favour of introducing certain new pro-employee rights. For example, various non-EU legislation is currently being considered in respect of flexible working requests (a day-one right to make the request, etc.), sexual harassment (including employer liability for third party harassment of employees), and various "family friendly" rights (including new leave rights and an extension of family leave-related redundancy protection).
Next Steps
Hopefully, as 2023 progresses we should get greater clarity from the government on their proposed plan of action, so employers with a UK presence are well advised to keep the Brexit Freedoms Bill firmly on their radar.
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