What will Brexit mean for UK employment law?

By Rachel Suff, Public Policy Adviser (Employment Relations) at the CIPD

Now that the country has voted to leave the European Union, one of the burning questions in the workplace is, what will happen to the significant body of employment law that derives from Brussels? Over the past decades, EU directives have affected workers’ rights across the economy. For individual rights, employment protection legislation ranges from working time and annual holidays, rights for women and family-friendly policies, to anti-discrimination legislation and ‘atypical’ workers. Collective rights can be grouped under the core areas of collective redundancies and Transfer of Undertakings (Protection of Employment) Regulations [TUPE], European Works Councils, and information and consultation.

Will a renegotiation of the UK’s relationship with the EU spell far-reaching changes for the employment relationship and many of the laws that govern it? Many HR professionals must be wondering how the workplace will be affected when Article 50 is triggered and the UK Government embarks on negotiations to structure a new relationship with the EU. Following the ‘leave’ vote, in theory the field could be open for a government to amend employment law if it could gain parliamentary approval. However, in reality the legal framework under which EU-derived employment law is transposed into UK law is complex and will not be straightforward to dismantle, even if there is the political will to do so. Also, nothing will change in the short-term.

A complex picture

Typically, European law is initiated in Brussels through directives and, once agreed, transposed into national legislation across all of the Member States. EU-derived law has been incorporated into UK law using a range of legal approaches including secondary legislation under the European Communities Act 1972, such as TUPE, as well as through standalone acts of Parliament, such as the Equality Act 2010.

The Working Time Directive is one of the most high-profile elements of EU-derived law affecting employment – before it was transposed into UK law, UK workers did not have a statutory right to paid annual holiday. The Directive ensured that all workers should be entitled to at least 20 days’ paid annual holiday, but the UK Government increased this entitlement to 28 days, including bank holidays. This is a perfect example of how the UK Government has chosen to ‘gold-plate’ some aspects of EU law, providing more generous provision for UK workers.

Further, one of the other main provisions of the Working Time Directive – that a worker’s working week would be limited to 48 hours – is already subject to an opt out in the UK. This Directive alone illustrates the complexity of how the UK transposes different aspects of EU law and how the wider domestic context influences its interpretation. For instance, successive governments have promoted family-friendly provision in workplaces and it’s hard to imagine a policy shift that aims to undermine this direction of travel in relation to EU-derived regulation.

A leap into the unknown

Any analysis of what the future holds for EU-derived employment law is based on speculation, and reliable commentary will have to wait until we see what appears on the negotiating table. Ultimately, any changes to workplace rights will depend on the shape of the political and economic relationship that the UK negotiates with the EU. However, trade agreements that would allow the UK continued access to the single market or joining the European Economic Area, like Norway, could require the UK to still accept the majority of EU regulations. Further, there will be legal and practical challenges associated with any attempt to unravel EU-derived requirements from non-EU-derived requirements, especially where case law has drawn on domestic courts’ interpretation of EU Directives and on European Court of Justice (ECJ) rulings.

An article on the CIPD’s HR-inform site by Anthony Fincham (partner and head of employment at CMS Cameron McKenna LLP) says that the UK ‘would be sailing into unchartered waters’ by leaving the European Union, including in the area of employment law. The author points to the ‘whole swathe of national employment legislation that incorporate EU rights and principles that will remain unaffected by Brexit unless, and until, these laws are repealed.’ He also makes the point that a UK Government would be unlikely to remove protections in the workplace against discrimination, or scrap the principle of equal pay, as its own legislation pre-dates the UK joining the EU.

Perhaps less will change than imagined

Analysis by legal experts Lewis Silkin before the ‘Brexit’ vote concludes that very little would change: EU-derived law is so embedded in UK law that it would be very complex to unpick, and would typically require new legislation. As already emphasised, what happens to UK employment law ‘will depend upon how the Government tries to extricate itself from the EU’, says the article: ‘If the Government simply repealed the European Communities Act, those regulations passed under it like TUPE would probably fall away,’ says Lewis Silkin, while freestanding acts of Parliament, such as the Equality Act, would remain in force. ‘A more realistic approach following an exit from the EU would be to maintain the status quo and start addressing particular laws individually over time; this could be by repealing them or merely tinkering’ say the authors.

There is also the important question of case law, and what would happen to precedents already set by the Court of Justice of the European Union (CJEU) and European Court of Justice (ECJ). In the view of Lewis Silkin:

‘On leaving the EU, the ECJ would no longer have jurisdiction and its future decisions would not be binding on UK courts. It seems likely, however, that if we retain any laws originating from the EU (which is probable) our courts would still take account of future ECJ judgments as persuasive, albeit not binding, when ruling on those laws. In that case, the ECJ would continue to exert an appreciable influence.’

Overall, with the major caveat that what happens to EU law depends on the future negotiating agenda, there is more likely to be a tinkering with specific areas which have been less popular with UK employers, such as the Agency Workers Regulations, the cap on discrimination payments, collective redundancy consultations and aspects of the Working Time Directive. We should remember that, on the whole, employers are not opposed to most aspects of EU legislation – when we surveyed CIPD members 10 years ago, the main areas that proved less popular were those relating to agency workers and working time.

The UK’s flexible labour market

One final important point to bear in mind is that the UK already has more flexibility than is sometimes realised over employment law, and has very different regulation on protection from unfair dismissal and on collective labour law to that in place in much of Europe, because these aspects are principally left to Member States.

This degree of flexibility has enabled the UK to maintain one of the most lightly regulated labour markets in the OECD in terms of employment protection legislation. On this measure, only the United States and Canada have lighter touch employment regulation than the UK (Employment regulation and the labour market, CIPD, 2015).

Nonetheless, it is sometimes argued that employment regulation is fine for larger organisations with HR departments, which have the resources to deal with red tape but is much more difficult for small and micro businesses to cope with. However even this claim does not stand up to closer examination. Successive surveys of SMEs by the Department for Innovation and Skills (BIS) finds that employment regulation comes a long way down the list of issues that small business see as creating obstacles to success. In the most recent 2015 BIS survey, just 13% of SMEs identified employment regulation as an obstacle to success.

Finally, it must be remembered that recent changes to the unfair dismissal qualification period and the introduction of fees for employment tribunal applications emanated from the UK, not Brussels, as did the introduction of the shared parental leave regulations in April last year.

In the view of the CIPD, we have an appropriate employment regulation framework in the UK, providing sufficient flexibility for employers and appropriate employment protection for workers. We will be making this case to Government as the debate about the UK’s relationship with Europe develops.

Update:
Please take our short pulse poll in association with People Management magazine, which asks 'How will Brexit affect your organisation'. 

Thank you for your comments. There may be a short delay in this going live on the blog page as we moderate the comments added to our blogs.

  • Anonymous
    Anonymous

    the biggest and most fundamental short term impact is very likely to be movement of labour  issues.  This change is almost certainly going to severely slow down our ability to fill difficult vacancies.  The UK has a lack of skills in some key functions and, even if we decide to adopt a points system for entry, almost by definition that will be significantly slower than a free labour market.  Same for those people we want to use to help lead businesses / activities in Europe.  Significantly we will also likely lose the pension transportability that was finally starting to come in.

  • Anonymous
    Anonymous

    Maybe the Highly-Skilled Migrant Programme will be 'resurrected', and the recruitment of skilled Foreign Nationals from outside the EU will be given new impetus. This has been very difficult over the past few years..

  • Anonymous
    Anonymous

    Thank you for the clarification.  However it is still widely felt that the fee regime in the tribunal system has priced out access to justice.  Will the CIPD be raising this with the Government once Article 50 has been invoked and the outcome of negotiations are known?

  • Anonymous
    Anonymous

    Great article, thank you.

  • Anonymous
    Anonymous

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  • Anonymous
    Anonymous

    Many thanks everyone for your comments so far. Just to let you know that we will be posting another blog very soon about Brexit and the potential impact on the ability of employers to access skills and talent from within the EU - as a couple of you pointed out, the impact on free movement does seem to be one of the most pressing concerns following the referendum result. Another comment asked about tribunal fees - this was a domestic development when the UK Government introduced the fee system three years ago, and we are awaiting the publication of the Government's impact review, which we would have expected by now, with interest. Last week the Justice Committee in Parliament published its own review and one of its conclusions was that the level of fees had impacted on people's access to justice at work. We are talking to stakeholders about this and other potential changes to the tribunal system and will be following up on it with members and policymakers in due course. Rachel Suff

  • Anonymous
    Anonymous

    Great article.

    Thank you (-:


  • On the question of pension transferability, all is not lost at this stage - we simply do not know what will happen. Let's not forget that other non-EU countries have already entered into agreements with the EU on this subject - foe example Swizerland in 200/20021

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  • Anonymous
    Anonymous

    It's true to say that in many cases UK employment law goes beyond EU regulations - for example with holiday time pay.

    But it's still of vital importance that as we move into a post Brexit world employee rights groups keep a close eye on new developments and how UK courts rule on the issues that are sure to arise from our exit from the EU.

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