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Brexit – potential implications for UK employment law

5 April 2016

On 23 June 2016, the UK voted to leave the European Union. Sarah Hooton looks at the likely implications for UK employment law.

An overnight change?

It is likely to be at least two years before the exit actually occurs, during which negotiations will take place as to the terms of such an exit. Following this, although in theory the UK government could repeal all EU law, this is highly unlikely to happen. Many of the rights set out in EU law are rights that the government (and most employers and employees) would wish to retain. For example, although EU law sets out rights in respect of discrimination and, in theory, the Equality Act 2010 (which sets out provisions to prevent discrimination within the UK) could be repealed, such a move would be controversial: it is hard to envisage arguments now being put forward that it is acceptable to discriminate on the grounds of any of the existing protected characteristics (race, sex, age etc.).

Further, there would still be a need for a relationship with the EU and any trade agreements are likely to set out the minimum levels of protection required regarding employment law and what, if any, changes can be made. For example, if the UK seeks a similar model to Norway, it is likely to have to agree to most aspects of EU social and employment policy.

A recent government document1 has suggested that there could be “up to a decade or more of uncertainty” dealing with an exit, future arrangements with the EU and trade deals with countries outside the EU. There is therefore likely to be some considerable time before the full employment implications of such an exit are known or felt.

What employment changes could be considered?

Some employments rights within the UK are purely domestic rights and would not be affected by EU membership, for example unfair dismissal rights. Others actually go beyond what EU law requires, for example family friendly leave rights. Some will have been incorporated within employees’ contracts and many more will form part and parcel of a collection of employment rights that employees now expect and employers accept should govern how the employment relationship works. There is likely to be a lack or appetite for, and/or a significant resistance to, any changes to such rights.

What seems more likely in the current climate is a scaling back of some of the protections offered. For example:

Discrimination laws

There have been some suggestions that a cap could be imposed in discrimination cases to bring them into line with unfair dismissal cases. This is a proposal that has been made by the CBI for some time. The CBI argues that the absence of a cap, and the publicity given to high discrimination awards, leads to individuals having unrealistic expectations as to appropriate settlement levels. Any such cap would be highly unlikely to be lower than the current unfair dismissal cap.

Other changes could include legislation in respect of injury to feelings awards, which would set greater guidance for which level should apply or, theoretically abolishing such awards all together. Changes could be made to how conflicts should be dealt with between different protected characteristics (for example between religious beliefs and sexual orientation). Positive discrimination could also be permitted in respect of under-represented groups, for example to assist in creating more balanced boardrooms.

TUPE

Although TUPE is seen by many as being unduly complicated, its protection of employment principles can be useful for organisations. If there was a complete repeal, there would be considerable commercial issues for existing outsourcing agreements which have been drafted (and priced) on the assumption of TUPE applying on the termination of those agreements.

It is highly unlikely that TUPE would be repealed in its entirety but this does not mean that further changes would not be made to it. For example, amendments could be made to allow it to be easier to harmonise terms and conditions of employment following a transfer. Such an amendment could have significant implications within the public sector where services are outsourced to the private sector, leading to a move away from centrally agreed terms and conditions.
This type of amendment which, on the face of it, appears to simplify matters, may still lead to confusion and uncertainty. For example, such changes could lead to conflicts between any new statutory provisions and existing UK case law on the principal purpose of the TUPE legislation.

Holiday and working time

Still a topical issue, the European influence on holiday pay is seen by many as unwelcome. As the removal of the right to a minimum level of statutory holiday would lead to considerable resistance from employees and unions alike, it is unlikely that the Working Time Regulations 1998 would be repealed in full. However, amendments could be made to revert to the previous position of basic pay being the appropriate methodology of calculating holiday pay for those with normal working hours. Restrictions could also be imposed to move away from the European cases allowing for holiday to be accrued during sick leave and carried forward.

Agency workers

The Agency Workers Regulations 2010 have been unpopular with businesses and are seen as being complex to comply with in practice. The rights granted have not yet become as entrenched as some other employment rights and therefore the resistance to their removal in full is unlikely to be as high as for some of the more established employment rights.

Collective consultation

Changes have already been made to reduce the periods of time during which consultation should take place and these could be reduced further. At this stage, it is unclear how much resistance there would be to such a proposal from the unions, or how much of a demand there would be from employers for such a move.

What about the Court of Justice?

The European Court of Justice would no longer have jurisdiction over the UK courts and any future decisions made by it would not be binding. However, the existing bank of UK case law which considers and applies the Court of Justice’s decisions would still apply and would bind lower courts and tribunals, subject to their ability to distinguish decisions on the particular facts of the case or where the decisions relate to legislation which has been repealed or amended. Courts and tribunals may also see future Court of Justice decisions as persuasive, leading to a continuing alignment in how cases are dealt with. There will inevitably be a period of uncertainty both in respect of the extent to which European decisions will continue to influence UK case law and in respect of how any new legislation introduced will be interpreted by courts and tribunals. 

Freedom of Movement?

There are a large number of citizens of other EU countries currently living and working within the UK and the outcome of the vote does not currently affect their right to remain and work. Much was made of the issue of EU immigration into the UK during the Brexit campaign but as yet it remains unclear what the extent of the impact of the Brexit decision will be on this issue. This will depend upon the terms of exit that are agreed and it may well be that the free movement of workers will remain a key requirement of access to the single market; this is certainly the stance currently advocated by Germany.

Other options could include a system similar to that currently in place within the UK for non-EU workers. However, this only applies to “skilled roles”, which could result in a number of less-skilled current EU workers not qualifying, and would require employers to apply for sponsorship licences. It remains unclear whether any exceptions would be allowed for those currently in post. 

EU workers who have lived and worked within the UK for at least 5 years could also consider applying for permanent residence.
No action is required by employers of EU workers until there is further clarity as to the terms of any exit; however, employers may wish to consider reviewing their current workforce, particularly where less-skilled EU workers are employed, to identify any particular areas where recruitment may be an issue if freedom of movement is not maintained.


1 The process for withdrawing from the European Union – February 2016.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

Sarah Hooton

Sarah Hooton

Professional Development Lawyer

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