Does all employment law in the UK derive from the EU?

A large proportion of the employment law which subsists in the UK derives from EU law.  To name a few aspects, discrimination, collective consultation on redundancy, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), family leave entitlements, the Working Time Regulations 1998 and The Agency Worker Regulations 2010. However, much of the employment law protection available in the UK is given effect by legislation which has been enacted in the UK, in order to give ultimate effect to EU legislation. Only a small portion of employment law set out in EU legislation has a direct effect on UK Employees.  It is only this second portion which would automatically fall away on Brexit, depending of course on the terms the UK and EU may agree for such exit.

Much of the protection offered by EU Law and enacted in the UK by local legislation protects rights which are nationally established and protected regardless of the EU laws,  for example, discrimination and family leave rights.

What will Brexit mean for employment law in the UK?

As with many different aspects of the political landscape, the effect of Brexit on UK employment law is uncertain. It seems highly unlikely that the current UK conservative Government would seek to abandon all employment law protection completely.  Many of these protections are seen as positive by both business and individuals, and if the UK wants to continue to trade with EU countries as part of the single market, it is likely it will need to be able to offer comparable protections in respect of employment rights, in order to compete with and be entitled to supply or work with EU countries. Abandoning these protections may put European businesses off allowing the UK access to the single market, as it would be perceived to give the UK an unfair competitive advantage, as complying with employment protections can be seen as costly for a business.

What are the likely changes we will see to UK employment law following Brexit?

In the absence of any certainty, we can only speculate as to the likely changes to UK employment law.  As mentioned above, it is unlikely that the current UK Government would seek to abandon all UK employment law principles.  However, it may consider amending specific areas of employment law that are heavily dictated by EU law. The following have been cited by commentators as the most likely to be amended:

  • TUPE (Transfer of Undertakings Protection of Employment and Regulations 2006). This legislation, which protects employees’ rights when a business is transferred from one entity to another, are often much maligned by businesses. However, it is unlikely that the protections would be repealed: they are in the public interest, and can, in fact, be very useful in business dealings.  It is conceivable, however, that they will be amended to make consultation on transfer easier for businesses, and to permit businesses to harmonise the terms of employees who transfer over, following a TUPE transfer. This is currently prohibited by EU case law.
  • The Working Time Regulations 1998.  These provisions contain the right for workers to have paid holiday, and a prohibition on working hours exceeding 48 a week, unless an employee has freely opted out of the cap.  The right to paid holiday has been enjoyed by employees in the UK historically, and it is unlikely that this will be repealed.  Indeed the UK offers 5.6 weeks paid holiday, where the EU requires a minimum of just 4 weeks, so the UK has already elected to go beyond its EU obligations in this regard. However, Brexit would mean the UK would no longer need to consider EU case law in the interpretation of these rights.  It seems likely that the current UK Government will address confusion and concerns arising from EU case law over what should be included in the calculation of “normal” pay for holiday pay (i.e. if commission is normally paid, it should also be paid for holiday), and the accrual of holiday during sickness absence.  Changes may be introduced to limit and simplify these entitlements. In addition, the current UK Government may consider removing the cap on a 48 hour working week, as this is widely disregarded by businesses in any event, and many industries see all workers opted out.
  • The Agency Worker Regulations 2010.  These regulations extend the rights of agency workers, and they are unpopular with many businesses.  Their implementation was relatively recent, so the rights have not “bedded in” as much as the more established employment protections in the UK.  These regulations arise from EU requirements, and remove some of the flexibility and commercial appeal for businesses of hiring agency workers .  This is the most likely piece of legislation to be scrapped, and not replaced, following Brexit, and gives the UK the option of offering a more competitive workforce in the UK, an important selling point for businesses considering moving their workforce following Brexit.
  • Immigration implications.  The free movement of people will be a cornerstone of the Brexit negotiations.  If Brexit involves exit from the treaty for the free movement of people within the EU, businesses will need to be aware of immigration implications, including needing to ascertain whether current employees remain entitled to work in the UK, and the need to check the entitlement to work within the UK for EU citizens.
  • Discrimination.  It is unlikely that protection against discrimination would be repealed on Brexit.  This is a series of protections which existed historically in the UK, and it seems highly unlikely that it would be removed, nor even that there is appetite to do so, given that it is generally accepted to be in the public interest.  What may happen, however, is the introduction of a cap on compensation awards for discrimination so that they are limited in a similar way to claims for unfair dismissal. This has been suggested in the past, but is currently prohibited by EU law.

What are the time scales for any changes as a result of Brexit?

The possible changes set out above are unlikely to be at the forefront of the difficult Brexit negotiations.  Assuming that the mechanism used for leaving the EU is the triggering of Article 50, Brexit must take place within two years from the date on which Article 50 is triggered, and it is unlikely to be triggered before the end of 2016, according to latest statements. Any changes which dilute EU rights will not come into force until after Brexit has happened.

Are any other plans pertaining to employment rights on the horizon?

In addition to the potential changes to employment law in the UK which Brexit will bring, the implications of the referendum vote have also led to the UK having a new Prime Minister, Theresa May, as at 13July 2016.  Two days before Theresa May became Prime Minister she launched her national leadership campaign, and gave a speech focusing on the UK becoming a “country that works for everyone”.  One of the key principals which she mentioned was her intention that employees would, under her leadership, benefit from representation on boards of companies.  A key aim of this policy is to curb executive pay, and also to make companies accountable to their workers when making big decisions.  The principle of having employees on the board of directors echoes provisions that have been in place in Germany for over 40 years, has been promoted by the Labour, Liberal Democrat and Green parties previously, along with the trade unions, so has wide support and is welcomed by many as being a step to increase accountability and securing employee rights.

Some commentators on this policy do, however, suggest that having employees on board may slow down decision making and innovation, as employees may not offer an independent level of scrutiny and may be more inclined to protect ongoing employment than to welcome innovation and change. There is a possibility that this could be perceived as uncommercial.  At this delicate time for the UK economy, such changes will no doubt be met with scrutiny of this type.

Mrs May also suggested it would become mandatory to disclose the ratio of executive pay against the average worker’s pay.  This appears to build on the trend for accountability measures that have recently been introduced, such as the modern slavery statement, the Gender Reporting Obligations and the “name and shame” provisions of the National Minimum Wage legislation, and will no doubt be welcomed by employees and shareholders.

Goodman Derrick Employment Department

The Employment Department at Goodman Derrick LLP focuses on finding practical and workable solutions for its clients in all areas of employment law and practice. We advise and act for employers and also for employees.

Whether changes may arise as a result of Brexit, or are made by the Government in place from time to time, the team can advise you and your business on the best course of action for forward planning, compliance, or for future proofing existing arrangements. Please contact the employment team if you have any questions on Brexit or any other employment related issue. We would be very happy to discuss and explain how we could help you.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.  If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.