What does Brexit mean for UK employment law?

On 29 March 2017, the Prime Minister, Theresa May, wrote to the European Council to give notice of the UK’s intention to leave the European Union. This was the formal “Article 50” notice required under the Treaty on European Union for a member state to withdraw from the EU. Under Article 50, the EU must now negotiate an agreement with the UK “setting out the arrangements for its withdrawal, taking account of the framework for its future relationship”. The parties have two years to conclude this withdrawal agreement.

In her letter, Theresa May confirmed the government’s intention to pass legislation to repeal the European Communities Act 1972 (ECA)  – the act that gives effect to EU law in this country– and convert EU law that currently applies in the UK into stand-alone UK law. This is the so-called “Great Repeal Bill”, although it will not actually repeal anything, and it is needed to prevent any gaps in legislation caused when EU law ceases to have effect. The day after the Prime Minister’s letter, the government published a white paper setting out how it envisages this legislation will work.

Broadly, the act will repeal the ECA, convert EU law into domestic law and give the government power to tinker with the resulting legislation to correct laws that will no longer operate effectively and to reflect the content of the withdrawal agreement. It should be noted, however, that the proposed powers to enable ministers to amend legislation without Parliamentary scrutiny are controversially wide and the government might struggle to pass this aspect of the legislation.

Once we have left the EU, the government could in theory repeal all of our current employment law coming from Brussels. This is a large body of legislation that includes discrimination laws, collective consultation obligations, transfer of undertakings regulations, family leave, working time rules and duties to agency workers among other laws. But would the government really take such extreme action?

On 17 January 2017, the Prime Minister Theresa May gave a major speech on the Government’s objectives for exiting the EU, setting out the principles which will guide the process. The white paper re-affirms those principles. In both speech and white paper, the government confirmed it would seek to “protect and enhance” workers’ rights, claiming that it would both safeguard rights granted by EU law and seek to build on them.   

Whether or not all EU employment rights are as secure as the government currently claims, many of them, such as equal pay, race and disability discrimination laws and the right to return from maternity leave existed in some form in the UK before being imposed by Europe. It seems unlikely that a UK government would rescind rights that predate European laws. Moreover, much of European employment law is regarded, by employers, employees and even by politicians, as a good thing. Employment rights such as family leave, discrimination law and the right to paid holiday are now widely accepted; indeed, family leave rights in this country go further than required by EU directives.

Process and timescale for Brexit

Now notice has been given, there will be a two-year period during which the parties will negotiate the terms of departure and possibly put in place new trading arrangements. Some commentators believe it will take considerably longer than that to agree exit terms but, unless both the UK and all the other EU member states agree to extend negotiations, the UK will simply cease to be a member of the EU at this point (i.e. from 29 March 2019).

The Government’s aim is to agree a new free trade agreement with the EU. It seems highly unlikely that full agreement on a permanent, long-term trade deal could be achieved within the two-year negotiating period mentioned above, but perhaps a transitional arrangement could be put in place. The Prime Minister has said that she envisages a “phased process of implementation” for any new trading partnership with the EU.

It is possible that a new trade agreement between the UK and the EU – whether temporary or permanent – could require adherence to a certain amount of EU employment law. This is the case for the arrangements that Switzerland and countries in the European Economic Area, such as Norway, have with the EU. While the Prime Minister has made it clear that she envisages the UK leaving the EU in such a way that it is no longer a member of the Single Market, this would not seem to rule out a Norway or Swiss-style arrangement on a transitional basis.

“The Great Repeal Bill” will enable a gradual, piece-by-piece approach with legislation being repealed – or merely modified – over time. Despite the Prime Minister’s promise to preserve and protect workers’ rights mentioned above, it is likely that the Government, when freed from European constraints, will be tempted to tinker with certain aspects of current employment regulation. Which areas would the Government be most likely to change?

Agency workers

The most likely contender for complete revocation is the Agency Workers Regulations 2010. These are unwieldy, unpopular with business and not noticeably popular with workers either.

Discrimination and family leave

For the reasons already mentioned, any wholesale repeal of equality protection or family leave seems improbable. Although the Government could repeal the EqA after exiting the EU, it would be a controversial move. It is difficult to imagine many employers arguing that they should be free to discriminate and any change to the existing regime of direct discrimination, indirect discrimination and harassment seems unlikely. There may, however, be some small modifications. It is possible that, following a Brexit, a cap could be imposed on compensation for unlawful discrimination. Another possibility is that the Government could change the law to allow positive discrimination in favour of under-represented groups in a way that is currently impermissible under EU law.

Rights to parental and family leave in the UK are a mixture of rights deriving from the EU and rights originating in the UK. UK maternity leave and pay preceded the EU rights and are more generous in some respects. The new right to shared parental leave and the right to request flexible working are both purely domestic in origin. Accordingly, although some critics consider these rights to be a burden on business, there seems little political appetite for their repeal or even for watering them down.

Transfer of undertakings

TUPE can attract a bad press, but the principle that employees should transfer when a business changes hands or is contracted out is often useful for business and is incorporated and priced into many commercial outsourcing agreements. For this reason, although there may be some businesses that would like to get rid of TUPE, it seems more likely that the Government would make some small changes to make it more business friendly, such as permitting the harmonisation of terms following a TUPE transfer. Read our further thoughts on the implications of Brexit for TUPE here.

Holidays and working time

The right to statutory paid holiday under the Working Time Regulations 1998 (“WTR”) is also now broadly accepted. However, there are aspects of this right, and of other rights under the WTR, that the Government might want to amend if not prevented from doing so by membership of the EU. Various European Court of Justice (ECJ) decisions on holiday pay are unpopular with UK businesses - for example, the right to keep accruing holiday while on sick leave and the fact that holiday pay should be based on all aspects of remuneration, not just basic pay. The Government might choose to tweak these laws to make them more commercially acceptable, such as by retaining a right to paid holiday based on basic pay whilst limiting rights to accrue and carry over holiday pay. The UK may also wish to remove the cap on weekly working hours under the WTR. It is less clear that there is a demand to limit the WTR rights to other rest breaks or the protections for night workers.

Collective redundancy consultation

Collective redundancy consultation obligations were reduced by the last government. The requirement is now not particularly onerous and it is not clear what might happen to it following Brexit. Trade unions are likely to fight against any proposal to remove it altogether but employees arguably do not feel strongly about this right (and many do not know about it). On the other hand, it is not obvious that businesses regard it as a burden that should be removed. Similarly, other collective consultation rights such as national and transnational works councils are possible candidates for repeal but the obligations imposed by them on UK businesses are relatively light.

Legal precedent

If we retain some EU law following Brexit, the UK courts are likely to continue to regard judgments of the ECJ on those laws as persuasive, even if not binding. In any event, pre-Brexit UK court decisions incorporating ECJ reasoning would remain binding on lower courts and tribunals. It is not clear how far UK courts would be able to treat exit from the EU as a material circumstance that would allow them to depart from precedent. They might do so, but could feel obliged to follow precedent in order to preserve legal certainty.

Conclusion

In conclusion, it seems unlikely that UK employment law will be transformed in significant ways as a result of Brexit, at least in the short term. In the medium term the Government may start to tweak it to make it more “business friendly” and there may be one or two laws that are repealed altogether. It is difficult to envisage, however, a wholesale “bonfire of regulations”, at least without a radical cultural and political shift. In the longer term, however, if the UK is outside the Single Market, there will inevitably be a growing divergence between UK and EU employment law.