Brexit - a brave new world for employment law in the UK?

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The people have now spoken and the UK has voted to leave the European Union.

Whilst no one has a crystal ball, it will take years to know the impact of this historic decision. UK plc, like the population at large, will now have to focus on overcoming the challenges thrown up by our future departure and seek to maximise the new opportunities that may arise.    

Whatever the current uncertainty about ‘life outside the EU’ and what this might mean for the UK in terms of trade, investment, the free movement of labour and immigration, from a pure employment law perspective employers can draw some reassurance that in the medium term there are unlikely to be any significant changes. Here are some of the reasons why:

We are not going to be making a swift exit

We are in virgin territory now, even for the EU, and there is very little likelihood that the UK’s position will be clarified soon. The only legal pathway out of the EU is via Article 50 of the Lisbon Treaty. Article 50 provides for a period of negotiation, to allow a member to give notice of their intention to leave, and come to an agreement for their future relationship with the EU. Failing this, the member then leaves the EU two years after giving notice, although this can be extended, and most commentators believe that  it would take considerably more than two years for the UK to reach agreement on all aspects of its EU relationship. The referendum outcome itself does not represent formal notification by the UK, so there may be some further delay, potentially for some time, before the UK actually gives what amounts to notice to quit.. Given the scale of the task ahead in negotiating terms for the UK’s future relationship with the EU, it is probably realistic to anticipate that agreement is unlikely to be reached within the  2 year deadline. The only other country to have left the EU was Greenland – with a population of 55,000. Its exit deal was substantially limited to fishing, but took three years to complete.

Many key areas of employment law (including some of the most fundamental) derive solely from UK policy and legislation.    

The right not to be unfairly dismissed, the right to be paid the national minimum/living wage and the right not to suffer unlawful deductions of wages don’t stem from the EU, but are derived directly from UK legislation. These fundamental principles of UK employment law will therefore remain legally unaffected by Brexit.

Much EU derived employment law has been brought into effect by UK primary legislation.

On departure from the EU (which will likely be in several years’ time), the UK may no longer have to give effect to EU directives – much will depend on the terms of the agreement dealing with the UK’s exit from the EU. However, as many existing EU Directives have been brought into effect in the UK by statute, or primary legislation, they will remain in force post exit unless or until amended/repealed. Changes to primary legislation require parliamentary approval and parliamentary time - the latter will be a scarce resource for some time to come. So, for the medium term – several years to come – there will be little change.

Need to offer as much stability and reassurance as possible  

EU derived employment law, such as agency workers’ rights, working time and TUPE, implemented in the UK by secondary legislation, (regulations), is arguably easier to ‘unpick’. But even here,  there is unlikely to be much of an appetite for substantial changes at the point of the UK exit – which could be well beyond 2019. Norway for example, as a member of the EEA, and with access to the single market, is bound to comply with EU law, and the UK’s new arrangement with the EU might be very similar.

Current ‘gold-plating’ of EU legislative minimums suggest limited change

In a number of areas of employment law, UK employee protection already exceeds the minimum currently prescribed by EU legislation. For example, the level of entitlement to maternity and shared parental leave and the right to 5.6 week’s holiday under the Working Time Regulations (as opposed to the 4 week minimum provided by the European Working Time Directive). The UK’s withdrawal from the EU is unlikely therefore to result in a great deal of future change, as the UK has already exceeded the minimum requirements of EU law.

Political risk

Many EU derived entitlements, gold-plated or not, are now the expected ‘norm’ in the workplace, particularly for the higher skilled millennials now so much in demand. Such entitlements have been transposed into employment contracts and enshrined in employment handbooks and policies. Employment protections are also be provided for in commercial agreements, for example exit provisions relating to the operation of TUPE. It would be politically and commercially risky for any future post Brexit Government to be seen to be hastily dismantling key employee protections at a time when workers are feeling especially vulnerable, (even in those areas of employment law which have historically been criticised for being ‘overly influenced’ by the EU, such as discrimination and working time). In addition, employers themselves are unlikely to thank the government for taking steps at this point which are likely to introduce yet more uncertainty into commercial arrangements/negotiations as well as risk further antagonising trade unions at a time businesses can little afford additional workplace disruption. The coalition consulted widely on changes to TUPE, but did little, partly as businesses warned of the commercial implications of change to a reasonably settled structure.

Negotiating with the EU from the outside

As part of negotiating a new trading relationship with the EU in whatever form this ultimately takes, (whether as a member of the European Free Trade Association (EFTA) in relation to the European Economic Area (EEA), or through bilateral trade agreements bespoke to the UK), a prerequisite to any future trade deals in relation to the single market is likely to involve the UK agreeing to operate in accordance with at least more core aspects of EU social and employment legislation.    

What does exit mean for existing employment case law?  

If, on ceasing to be a member of the EU, the UK does not renegotiate a relationship similar to that of an EFTA member, (EFTA members still being subject to the judgments of the European Court of Justice (ECJ)), UK courts and tribunals will no longer need to make preliminary references to the ECJ or be bound by its rulings and judgments or interpret UK law in a way compatible with the law of the EU.

However, even in these circumstances, it is unlikely that UK courts and tribunals will simply choose to ignore all pre-existing ECJ case law/judgements. In all probability, the existing body of binding employment case law from UK higher courts - the Employment Appeal Tribunal, the Court of Appeal and the Supreme Court - will continue to be applied regardless of prior ECJ influence, unless or until these same higher courts decide to deviate for them on a case by case basis, having as they will a freer hand to decide the ‘correct’ interpretation of relevant domestic legislation without the need to assume an intention to comply with EU law. So, Brexit itself will not act as a silver bullet to wipe away the impact of recent high profile employee-friendly judgements relating to holiday pay calculation and holiday and sickness absences. But post exit, and for some time thereafter, employers and employees alike should probably steel themselves for some greater level of judicial volatility/uncertainty, depending on the terms of the UK’s exit agreement.

Areas of employment law which might be most ripe for some limited reform?   

Although EU exit is unlikely to result in a wholesale move away from our current employment law regime, or, as with Norway, result in no change at all, there may be some potential to adapt the impact of some EU derived aspects of employment law which are particular unpopular with employers.  For example:   

  • The introduction of a compensation cap for discrimination claims  
  • Reducing the restriction on post TUPE harmonisation
  • Amending the Working Time Regulations to give employers greater discretion
  • Removing the 12 weeks equal treatment entitlement for agency workers.

Whether and when such moves might happen in practice is very uncertain, and highly dependent upon the nature of the UK’s future agreements with the EU.   It will be some time before the dust starts to settle and the full impact of our departure from Brexit becomes clearer for the UK as a whole. The future shape of employment law just one of the myriad of issues in the mix, but it is very unlikely that there will be any change for some years to come.

Author

Principal Legal Adviser

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