Brexit - Implications for employment
Published 28 June 2016
You will all have seen this morning's news that the UK have voted to leave the European Union. What happens now and what does this mean for employment and pensions law?
The UK is required to give two years' notice of its intention to leave the EU. Disentangling the UK from its commitments is likely to be a lengthy process. The UK and the EU will also have to agree the terms of exit and any trade agreement. Those terms could well include a requirement that the UK adhere to some, or all, EU employment and social policy. As such, employment and pensions law is unlikely to change in the short term. Please click here to read our more detailed analysis on employment and on pensions.
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What does Brexit mean for UK employment law?
In our view it is very unlikely that there will be a repeal of huge swathes of employment law – more likely to be a tinkering around the edges, over some time. There is unlikely to be any immediate change and even in the long term it is probable that EU law will continue to exercise significant influence.
There are various reasons for this:
- It is a common misconception that employment rights in the UK derive wholly or mainly from the EU. The reality is that significant aspects of our employment legislation are purely domestic, such as unfair dismissal, statutory redundancy pay, union related legislation, national minimum and living wage.
- Some EU employment laws, when introduced, merely subsumed protections that were already provided by UK employment law. For example, UK equal pay, race and disability discrimination laws preceded the relevant EU anti-discrimination legislation.
- Although a common complaint is that EU law is overly burdensome, some aspects of UK laws in fact go beyond that which employers are required to do under EU law, such as family friendly rights (maternity, paternity etc.), statutory holiday and service provision changes under TUPE, so these "gold plated" UK standards are also unlikely to change.
- Certain aspects of EU derived law are now so entrenched in our society, such as those which deal with equality, that it is unlikely the Government would repeal such laws, particularly in areas where there is material political consensus.
- The UK and the EU will also now have to agree the terms of exit and any trade agreement. Those terms could well include a requirement that the UK adhere to some, or all, EU employment and social policy – as is, for example, the case with Norway's trade agreement with the EU.
Despite the above there are some areas where Brexit may have more impact. Instead of sweeping away EU-derived employment legislation, the Government may modify some legislation to make it more palatable to UK businesses. In our view, prime candidates for change are:
- Discrimination – cap on maximum compensation, removal of the ability to assert associative discrimination claims.
- Repeal of the unpopular Agency Workers Regulations.
- Working time – limiting the calculation of holiday pay to basic pay, limiting the right to accrue holiday pay whilst on sick leave.
- TUPE – making it easier to harmonise terms following a TUPE transfer, reducing compensation for failure to consult.
- Immigration was obviously a central topic of the debate. There are, of course, many nationals of other EU member states living and working in the UK, as well as large numbers of UK nationals living and working in other EU countries. Following Brexit, these individuals may no longer have the automatic right to remain. This may well cause significant problems for employers in some industries with the consequence that there may be fewer available skilled workers, leading to increased wages and delays to projects. In addition, UK staff may not be able to move so freely to work on projects in Europe. Much will depend on what the UK is able to negotiate as part of any trade agreement.
- Legal uncertainty is likely to arise in relation to the status of case law decided by the European Court of Justice (ECJ) and this is likely to be problematic for employers who are defending claims. Technically, when the UK leaves the EU, the ECJ will no longer have jurisdiction over the UK courts and its future decisions will not be binding. However, some areas of domestic employment law have been defined as a result of the ECJ's decisions and those aspects of decisions would remain binding. Equally, the UK courts may still look to future non-binding ECJ decisions for guidance.
At this stage speculation as to the impact of the UK leaving the EU is just that – speculation. What is certain is that nothing is going to happen overnight and the process of leaving will be complicated. The UK is required to give two years' notice of an intention to leave the EU therefore disentangling the UK from its commitments is likely to be a lengthy process. This is likely to be the most difficult time for business, as there will be considerable uncertainty during any transition period.