What does Brexit mean for UK employment law?

17 August 2016

James Davies from law firm Lewis Silkin has written an informative article which considers some of the potential implications of the UK leaving the EU for employers and employees.

On 23 June 2016, the UK voted to leave the European Union. The implications for the workplace could be huge, as a significant proportion of our employment law comes from Brussels. Once out of the EU, the UK government could in theory repeal discrimination laws, collective consultation obligations, transfer of undertakings regulations, family leave, working time rules and duties to agency workers among other laws. But would the government really do that?

 

Possible implications of a Brexit

Many EU employment protections, such as equal pay, race and disability discrimination laws, and the right of return from maternity leave existed in some form in the UK before being imposed by Europe. It seems unlikely that a UK government would rescind rights that predate European laws. Another reason that the government might be reluctant to repeal employment law protection is that much of it is regarded, by employers, employees and even by politicians, as a good thing. Employment rights such as family leave, discrimination law and the right to paid holiday are now widely accepted; indeed, family leave rights in this country go further than required by EU directives.

One very pragmatic reason for the UK to continue to follow European employment law is that, it will wish to stay in some sort of trading relationship with the EU, its biggest export partner, albeit not full EU membership. The arrangements that Switzerland and countries in the European Economic Area, such as Norway, have with the EU involve adherence to a significant amount of EU employment law. Any trade agreement between the UK and the EU is likely to require something similar.

It will take some time for the UK to extricate itself from the EU. Once the UK has given the EU formal notification of its withdrawal, there will be a two year period in which the parties will negotiate the terms of departure and possibly put in place new trading arrangements. Some commentators believe it will take considerably longer than that to agree exit terms but, unless both the UK and the European Council agree to extend negotiations the UK will simply cease to be a member of the EU at this point.

Even after the process has been completed and the UK has left the EU (and assuming no other restrictions imposed by another free trade agreement), European law might continue to apply in one way or another because disentangling it from UK law will take some time. Some EU-derived laws are contained in secondary legislation made under powers given by the European Communities Act 1972 (ECA), the law that implements EU law in the UK. If the ECA is repealed, all the secondary legislation made under it - such as the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) - will fall away unless preserved by another piece of legislation. The repeal of the ECA would not, however, affect EU law implemented through primary legislation, such as the Equality Act 2010 (EqA). Primary legislation would remain in force until repealed piece by piece.

It is therefore unlikely that all EU law will be removed at once. The approach is more likely to be gradual, with legislation being repealed – or merely modified – over time. So, if freed from European constraints, what is it likely that the government would actually change?

 

Agency Workers

The most likely contender for complete revocation is the Agency Workers Regulations 2010. These are unwieldy, unpopular with business and not noticeably popular with workers either.

 

Discrimination and family leave

For the reasons already mentioned, any wholesale repeal of equality protection or family leave seems improbable. Although the government could repeal the EqA after exiting the EU, it would be a controversial move. It is difficult to imagine many employers arguing that they should be free to discriminate and any change to the existing regime of direct discrimination, indirect discrimination and harassment seems unlikely. There may, however, be some small modifications. It is possible that, following a Brexit, a cap could be imposed on compensation for unlawful discrimination. Another possibility is that the government could change the law to allow positive discrimination in favour of under-represented groups in a way that is currently impermissible under EU law.

Rights to parental and family leave in the UK are a mixture of rights deriving from the EU and rights originating in the UK. UK maternity leave and pay preceded the EU rights and are more generous in some respects. The new right to shared parental leave and the right to request flexible working are both purely domestic in origin. Accordingly, although some critics consider these rights to be a burden on business, there seems little political appetite for their repeal or even for watering them down.

 

Transfer of Undertakings

TUPE can attract a bad press, but the principle that employees should transfer when a business changes hands or is contracted out is often useful for business and is incorporated and priced into many commercial outsourcing agreements. For this reason, although there may be some businesses that would like to get rid of TUPE, it seems more likely that the government would make some small changes to make it more business friendly, such as permitting the harmonisation of terms following a TUPE transfer.

 

Holidays and working time

The right to statutory paid holiday under the Working Time Regulations 1998 (WTR) is also now broadly accepted. However, there are aspects of this right, and of other rights under the WTR, that the government might want to amend if not prevented from doing so by membership of the EU. Various European Court of Justice (ECJ) decisions on holiday pay are unpopular with UK businesses - for example, the right to keep accruing holiday while on sick leave and the fact that holiday pay should be based on all aspects of remuneration, not just basic pay. The government might choose to tweak these laws to make them more commercially acceptable, such as by retaining a right to paid holiday based on basic pay whilst limiting rights to accrue and carry over holiday pay. The UK may also wish to remove the cap on weekly working hours under the WTR. It is less clear that there is a demand to limit the WTR rights to other rest breaks or the protections for night workers.

 

Collective redundancy consultation

Collective redundancy consultation obligations were reduced by the last government. The requirement is now not particularly onerous and it is not clear what might happen to it following a Brexit. Trade unions are likely to fight against any proposal to remove it altogether but employees arguably do not feel strongly about this right (and many do not know about it). On the other hand, it is not obvious that businesses regard it as a burden that should be removed. Similarly, other collective consultation rights such as national and transnational works councils are possible candidates for repeal but the obligations imposed by them on UK businesses are relatively light.

 

Legal precedent

If we retain some EU law following Brexit, the UK courts are likely to continue to regard judgments of the ECJ on those laws as persuasive, even if not binding. In any event, pre-Brexit UK court decisions incorporating ECJ reasoning would remain binding on lower courts and tribunals. It is not clear how far UK courts would be able to treat exit from the EU as a material circumstance that would allow them to depart from precedent. They might do so, but could feel obliged to follow precedent in order to preserve legal certainty.

In conclusion, it seems unlikely that UK employment law will be transformed in significant ways, particularly in the short term.

Lewis Silkin has produced a series of articles on the implications of Brexit which can be accessed here.