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The EU (Withdrawal) Act - what does it mean for employment law?

27 June 2018

That’s it - we’re leaving. You can Remoan all you want to, but yesterday was a momentous milestone in the history of Brexit with the EU Withdrawal Bill receiving Royal Assent and becoming the European Union (Withdrawal) Act 2018.

As a result of the Act - available here - it is now law that the UK will leave the European Union at 11pm on 29 March 2019, with the European Communities Act 1972 being repealed. Only fresh legislation could delay or overturn the UK’s departure.

What does this all mean from a legal perspective, particularly for employment law? Here are some of the main takeaways:

  • Under section 2 of the Act, “EU-derived domestic legislation” continues to have effect in domestic law on and after “exit day” – that is, 29 March 2019. So it’s “as you were” for things like TUPE and the Working Time Regulations.
  • Under section 3, “direct EU legislation”, so far as operative immediately before exit day, will remain part of domestic law on and after that date. This confirms, for instance, that your General Data Protection Regulation compliance programmes were not in vain and you will continue to have to comply with the GDPR.
  • Section 5 does away with “the principle of supremacy of EU law” insofar as it applies to any law passed on or after exit day. However, that principle continues to apply “so far as relevant to the interpretation, disapplication or quashing of any enactment or rule of law passed or made before exit day”. This means that if there is an inconsistency between an EU directive and UK domestic legislation implementing that directive, you can still argue that it should be resolved in favour of the directive.
  • But it gets more complicated. Even though the supremacy of EU law principle is abolished, it can continue to apply “to a modification made on or after exit day of any enactment or rule of law passed or made before exit day if the application of the principle is consistent with the intention of the modification”. This would seem to mean that if, say, the UK rules on collective redundancies in the Trade Union and Labour Relations (Consolidation) Act are amended post-Brexit, it could still be argued that the revised provisions should be interpreted in line with the Collective Redundancies Directive. This is so long as applying the principle of supremacy would be “consistent with the intention of the modification” – whatever exactly that means.
  • Also under section 5, the EU Charter of Fundamental Rights will not be part of UK law from exit day. So arguments over whether Tony Blair’s government did or didn’t secure an “opt out” from the Charter back in 2007 become so much ancient history. However, “fundamental rights or principles which exist irrespective of the Charter” are retained – the upshot being that you can still run human rights arguments based on other sources, most obviously the European Convention on Human Rights and the common law.
  • Section 6 enacts the long-held Brexiteer dream of escaping the jurisdiction of the European Court of Justice (“ECJ”). Courts and tribunals will not be bound by any principles laid down, or any decisions made, on or after exit day by the ECJ, and cannot refer any matters to it. But this is then qualified by a series of further, rather baffling provisions:

    • While not being “bound”, courts and tribunals may “have regard to” anything done on or after exit day by the ECJ (and the EU itself) “so far as it is relevant to any matter before the court or tribunal”. In other words, if the ECJ issues a decision after exit day which is potentially relevant to determining your dispute on discrimination or agency workers or whatever, you can still direct the tribunal or court towards it. The word “relevant” replaced the word “appropriate”, which appeared in an earlier draft. This was supposedly to avoid courts and tribunals having to make “policy decisions” on whether or not to follow EU law, although “may have regard to” still suggests an element of choice.
    • It is also provided that any questions as to the meaning of any “retained EU law” (covering both ECJ case law and any domestic case law based on EU laws) must be decided, provided the law remains unchanged after exit day, “in accordance with any retained case law and any retained general principles of EU law” and “having regard… to the limits immediately before exit day of EU competences”.
    • And then a “but” to the “but”: the Supreme Court is not to be bound by any retained EU case law, and neither is the High Court when sitting as a court of appeal. Nor indeed is any court or tribunal “bound by any retained domestic case law that it would not otherwise be bound by”. In deciding whether to depart from retained EU case law, the Supreme Court and High Court must “apply the same test as it would apply in deciding whether to depart from its own case law”. Current Supreme Court guidance allows a decision to be departed from “when it appears right to do so” – this allows plenty of flexibility and surely increases the likelihood of appeals in any cases with an EU law dimension.
  • After much debate over “Henry VIII powers”, section 7 of the Act limits the ability of ministers to make changes to retained EU laws without further legislation. However, section 8 allows ministers to make regulations to “prevent, remedy or mitigate any failure of retained EU law to operate effectively, or any other deficiency in retained EU law arising from the withdrawal of the UK from the EU”. For example, if a retained EU law provides for a referral to an EU entity, this would allow ministers to issue regulations providing for a referral to a replacement UK body instead without the need for additional legislation. These powers are time limited, to two years from exit day.
  • Under Schedule 3, there is to be no right of action in domestic law on or after exit day based on a failure to comply with any of the general principles of EU law. In the employment context, this will most obviously affect causes of action based on the general principles of equal treatment and non-discrimination embodied in the EU Treaty. Schedule 4 abolishes any right in domestic law to damages in accordance with the so-called Francovich rule – in other words, there will no longer be any right for UK citizens to argue that the UK Government has caused them loss by failing to implement EU law effectively.

What might yet change, in these turbulent political times? Unquestionably, the new Act provides the legislative basis for a “hard Brexit” - if no further laws are passed, that is where we will end up. But what happens if a withdrawal agreement is reached with the EU? (That is definitely an “if” at the moment, rather than “when”…) In this scenario, there is provision for regulations to be made which would make consequential amendments to the Act, perhaps the most obvious of which would be opting back into the jurisdiction of the ECJ - at least in some respects - until the end of a transitional period ending on 31 December 2020. If there is agreement with the EU under Article 50(3) of the EU Treaty that “exit day” should be changed from 29 March 2019, there is power for a minister to lay regulations before Parliament that would vary this. 

Much will depend on the Government’s proposals on trade and customs relations with the EU, to be set out in more detail in the coming weeks. Future significant dates include: 31 October 2018, by when the Government must make a statement setting out the steps it has taken to seek to negotiate a customs arrangement with the EU; and 21 January 2019, by when the Government must inform the House of Commons if no agreement has been reached with the EU and set out proposals for how it intends to proceed.

We can expect many twists and turns yet. This is a drama that is set to go to the wire, whether businesses and employers like it or not.

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