Much of the UK’s current employment laws are European in origin, including equal opportunities, working time, holiday and unpaid parental leave. With the EU referendum deadline on the horizon, the question arises as to how employment laws would be affected in the event of the UK’s exit from the EU, (‘Brexit’).
Many employment laws have become an intrinsic part of the employment relationship, wholesale removal of such provisions would be a source of great confusion and uncertainty for employers and compliance with revised regulations would incur significant costs.
Working Time Regulations
Rights concerning part-time and fixed-term workers, rest breaks, paid holiday and parental leave all derive from EU directives. Recent case law has established worker’s rights to carry annual leave forward while they are off sick. In addition, overtime and commission payments need to be included in holiday pay. These are becoming increasingly complex areas and it is possible that, in the event of Brexit, the government may want to grant employers wider discretion in dealing with such matters.
The Working Time Directive currently imposes a maximum 48-hour working week, however, employers in the UK already have the ability to ask employees to opt-out of this restriction.
Non-EU derived law: Rights relating to unfair dismissal, unlawful deduction of pay and the national minimum wage do not derive from Europe and are therefore not likely to be affected by Brexit.
Existing protections: Certain employment protections such us those relating to sex, disability and race discrimination and promotion of equal pay already existed prior to the UK’s EU membership. The EU (then the EEC) extended the scope of both discrimination protection and equal pay. Additional anti-discrimination legislation was also introduced in the Seventies covering age, religion or belief and sexual orientation discrimination. The Equal Pay Directive 1975 and a later ECJ ruling established that equal pay went further than the original UK legislation to cover not only equal pay for equal work but also ‘work to which equal value is attributed.’ The UK has placed increased focus on equality and it is highly unlikely that the government would remove these protections upon Brexit.
Above and beyond: Some UK laws even extend rights above and beyond the minimum requirements set by Europe – including enhanced annual leave, maternity and paternity rights and right to request flexible working. Whilst a Brexit vote would open up the possibility for the government to make such provisions less generous, in recent years there has been a general tendency towards broadening the scope of family-friendly laws in the UK. It is therefore unlikely that repealing this legislation may be a priority in the foreseeable future.
A new deal:
The future of EU-derived employment laws depends upon the type of political and economic relationship that the UK negotiates with the EU.
The EU is the UK’s biggest export market, and even if it were to leave the EU, the UK would be likely to continue to play a significant role within trade with the rest of Europe. To do so the UK would need to negotiate new trade agreements. As a condition of any new arrangement, the UK would probably be required to accept EU workplace regulations. Such arrangements already exist for countries within the European Free Trade Association (EFTA) and European Economic Area (EEA). One such example is Norway which is bound by the majority of EU obligations as a precondition of its trade agreements but has no say in how the legislation is formulated.
The suggestion that the UK should be exempt from EU employment law would most likely be met by strong opposition from other Member States, whether or not the UK remains a member. The UK would face EU trade pressure to retain employment rights if it was seen to be unfairly cutting back on legal protections in order to win competitive advantage.
There are certain areas where, depending on the outcome of negotiations of a UK exit, there is a distinct possibility of change:
Compensation for discrimination claims:
There is currently unlimited compensation for successful discrimination claims in contrast with unfair dismissal claims which are subject to a statutory cap. If the UK leave the EU, it is possible that a compensation cap would also be introduced for discrimination claims. Unlike unfair dismissal claims, there is no requirement for two year’s continuous service to bring a discrimination claim, therefore under the present legislation, employers are highly exposed to financial and reputational risk once a claim is made.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) offers protection to employees in the event of a transfer of business or the outsourcing of services whereby the existing terms and conditions of their contract will be carried across when they move from the old employer to the new employer.
Assuming a full EU exit, no EEA membership and no trade agreements, the UK Government would technically be free to amend or repeal the TUPE regime entirely. However, a large number of existing commercial agreements, in particular outsourcing arrangements, are based on the presumption that TUPE will apply to transfer staff in the event of a business change. Removing this regime or changing it significantly would risk a rise in job losses, create uncertainty for employers and would not be popular amongst businesses. However, TUPE is a highly complex area of law and is considered to be particularly burdensome by employers. In light of this, it is possible that Brexit could lead to simplification of legislation (for example relaxation of restrictions on amending terms and conditions and reduced requirements to informing and consulting employees before a TUPE transfer).
Under the current Agency Workers Regulations, after 12 weeks’ service, agency workers are entitled to the same pay and other basic employment rights to comparable employees. This is regarded by employers to be one of the most onerous aspects of UK employment law. As with TUPE above, if the UK negotiated a full exit and did not join the EEA, it could repeal the Agency Workers Regulations altogether. Conversely, if the UK ultimately becomes a member of the EEA, it would continue to be bound by the Agency Workers Directive.
Freedom of movement:
One of the key issues of discussion surrounding the referendum is immigration and freedom of movement. On the one hand, arguments have been put forward for tightening of UK border controls, on the other, immigration is acknowledge as necessary for growth of the UK economy. EU citizens currently have the right to live and work in other Member States; a departure from the EU is likely to bring an end to this right and lead to negotiation of a new agreement. Whilst this may not affect existing non-UK workers, who are likely to be protected by transitional provisions, it may alter future recruitment, leading to an increased emphasis on choosing workers from the UK population and a shift towards the use of skills tests as part of recruitment selection processes. By the same token, equivalent restrictions would probably be imposed on UK worker’s freedom to work in EU Member States.
One of the predicaments which the UK is faced with is its rapidly ageing population. With increased life expectancy of the UK’s population also come cost implications for health, social care and pensions placing increased pressure on a declining working-age population. Arguably encouraging immigration of work-age individuals would go some way to alleviate this situation.
Amendments to requirements in recent years show that the government has been willing to implement changes, even those which narrow the scope for Employment Tribunal claims. In April 2012, the length of continuous service required for an employee to bring an unfair dismissal claim was increased from one to two years and 2013 saw the introduction of Employment Tribunal fees. At this stage it is too early to forecast the government’s next steps with any certainty, however, some future evolutions of employment law arguably will come about regardless of whether Brexit occurs.
It is impossible to say precisely what the relationship between the UK and EU would look like post-Brexit. However, a sudden, drastic departure from the status quo is highly improbable. Any transition to a post-Brexit model would be gradual and a negotiated withdrawal would take at least two years after the UK gives notice of its intention to exit.
Much of EU-influenced practices are now inherent to employment relationships and would therefore take a great deal of time to undo and a significant departure from these would not be desirable to employers. Therefore, the likelihood is that post-Brexit the UK, at least in the short to medium term, would tweak existing employment legislation rather than overhaul it in its entirety.
Trainee Solicitor, Employment Department