Employment law implications of a Brexit

What would the new UK / EU relationship look like?

The short answer is that no-one knows. The UK must give a two-year notice to leave the EU, followed by a period of negotiation to agree the terms of withdrawal. If no agreement is reached, exit will automatically occur at the end of the two year period. There is no comparable precedent of this, so there is significant uncertainty as to what the new relationship would be. Possible alternatives include:

• Norwegian model – European Economic Area but not EU. The UK would have to make financial contributions to the EU, would be bound by much of EU law but would have no vote or formal role in making these laws. Free movement rules would continue to apply. Whilst the financial burden would likely reduce, it would still need to make substantial contributions under this arrangement.
• Swiss model – European Free Trade Association but not EEA. The UK could negotiate bilateral agreements with the EU directly, although each agreement would need to be separately negotiated and would most likely incorporate EU legal principles. The UK would be required to adopt free movement rules to gain access to the internal market.
• A completely new arrangement. It is unknown what form this could take, but it is likely that the EU will not allow the UK to remain part of the internal market without it complying with its rules, in particular legislation regarding employers and employment standards.

EU law

EU employment law has been incorporated into UK employment law in a number of ways. These include by Parliament enacting “primary legislation” such as the Equality Act 2010, “secondary legislation” which are EU regulations passed in to UK law by Government ministers, such as the Agency Workers Regulations, and by the UK courts interpreting, and following precedents set, by decisions of the Court of Justice of the European Union (“CJEU”).

1. Primary legislation – e.g. the Equality Act 2010

These are freestanding laws, so despite the fact that they were originally enacted to give effect to EU law, they will remain in force on a Brexit. There would therefore be no immediate impact of a Brexit on the Equality Act 2010. Whilst the Government could repeal this law, it is unlikely to do something so controversial. It would cause huge upheaval and confusion for businesses and the market in general. Instead what is likely is that specific elements of primary legislation will be amended in a piecemeal process. It is thought that, in relation to discrimination law, the Government may choose to introduce a cap on discrimination compensation, similar to that of unfair dismissal. This is currently incompatible with EU law.

2. Secondary legislation – e.g. TUPE, Working Time Directive and Agency Worker Regulations

Government ministers have specific powers under the European Communities Act 1972 to introduce EU regulations into UK law. The Government would likely repeal the 1972 Act upon a Brexit, which would mean that all of the Regulations passed under the powers granted by the 1972 Act would cease to have effect, as there would be no enabling primary legislation.  It is therefore unlikely that a wholesale repeal of the 1972 Act would occur. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”), the Working Time Regulations 1998 (“WTR”) and the Agency Workers Regulations 2010 are examples of such secondary legislation.

• Although there have been issues with TUPE, it is unlikely the Government would make any fundamental changes due to the uncertainty that would be caused to businesses, and in particular those businesses with outsourcing models. Instead, it is likely that the Government would make small changes to make it more business friendly.
• A complete revocation of the WTR is unlikely as the rights conferred to workers under them have now broadly been accepted by most employers. Issues remain with the WTR focus on holidays and the right to holiday pay, and, in particular, it could be that the government chooses to limit the rights of employees to accrue and carry over holiday pay into following years.
• The Agency Workers Regulations 2010 are universally unpopular with employers, are complex and difficult to implement in practice. Therefore, the Government may therefore be more likely to completely revoke these.

Family Friendly Rights

These rights derive from a mix of primary and secondary legislation and it is unlikely the Government would choose to diminish these. For some time the movement has been towards extending these rights, and in some cases UK legislation gives more generous rights than EU laws. For example, the right to shared parental leave and the right to request flexible working are purely domestic measures and were not introduced because of EU law. It is therefore unlikely that a Brexit would mean a diminution of these rights.

Decisions from the Court of Justice of the European Union

The UK courts are currently required to interpret EU derived laws in accordance with the rulings of the Court of Justice of the European Union (“CJEU”). On a Brexit, the CJEU would no longer have jurisdiction and the UK would no longer be bound by its decisions. This will mean judges of the higher UK courts will have greater freedom to make decisions. However, it is likely however that judges will treat CJEU decisions as persuasive (at least in the short term), and will follow precedents set by CJEU judgements, unless a materially different circumstance justifies a departure.

Free movement of workers

The principle of free movement has encouraged workers from all over the EU to come to the UK for employment, and vice versa. It is unclear exactly what would happen to these individuals upon a Brexit, as they would no longer have the automatic right to live and work in the UK (neither would a UK individual in an EU member state). The UK could choose to apply its current immigration system, whereby skilled workers and students can obtain visas to live and work here for a limited period of time. Whatever the decision, it is likely to have a significant impact on businesses with employees from EU member states.

Conclusion

It seems unlikely that the UK will sever all ties, so there may be no dramatic change in the immediate future. However it is clear that a Brexit will result in some upheaval to UK employment law, with Parliament introducing changes and making amendments to legislation in a piecemeal way.

Merrill April