What next for Brexit?
Tue 05 Jul 2016
The impact of the referendum on UK employment law
The outcome of the United Kingdom's referendum on membership of the European Union was a shock to many. There also remains a degree of uncertainty as to what happens next – whether negotiations with Europe will commence right away, or whether the now infamous Article 50 of the Lisbon Treaty must first be triggered. Such uncertainty is exacerbated by the leadership struggles taking place in both of the UK's main political parties.
There is also considerable uncertainty as to what the post-Brexit legislative landscape will look like in the UK. What parts of European law will be retained and what parts will be abolished will turn on a number of factors – including the model of European integration the UK adopts going forward, how negotiations with remaining European states progress and the political will of the politicians leading the negotiations at the time.
However, it is important to note that nothing has yet changed. Arguably, the referendum has had little legal effect, and there has been no legal change to the UK's employment regime at all – whether based in domestic or European legislation. The purpose of this note, therefore, is to sketch out some of the areas that might change, to help you and your business to start to plan for the future.
The existing limits on the number of hours an employee can work in any given week and minimum holiday allowances are based on the Working Time Regulations 1998, a piece of UK legislation that gives effect to an EU Directive.
In the past, the UK has opposed elements of the European working time regime, in particular the 48 hour week, and indeed the UK has already achieved a partial opt-out. We therefore anticipate that efforts may be made to change this regulation in the future. In practice, this may have limited impact, as a great number of employment agreements already include an opt-out from the 48 hour working week.
Whilst EU law sets a minimum amount of holiday of four weeks per year, the UK's regime is more generous, at 5.6 weeks. In practice, this usually means 20 days plus the eight public holidays. So the UK would have to very drastically reduce current self-imposed, UK holiday rights in order to fall below the current EU minimum. It seems unlikely, therefore, that withdrawal from Europe would lead to a decrease in minimum holiday requirements. However, Brexit may give UK businesses a stronger hand in deciding what should be included within holiday pay.
Even though the UK is required to maintain its current discrimination regime under EU law, withdrawal from the Union is unlikely to change that regime significantly, as we anticipate it would be politically difficult to achieve. However, the current absence of any cap on compensation for discrimination claims is the result of a European Court of Justice decision from 1993. So, one change we might see could be the imposition of a cap on the level of compensation an employee can claim in discrimination cases, similar to the cap on unfair dismissal compensation.
The law surrounding general, one-off or small scale redundancies is unlikely to change. However, the regime governing collective consultation in mass redundancy situations is seen by some as onerous and ineffective. Outside of the EU, the UK may have significantly more scope to change this regime. However, whether that would mean abolishing collective consultation requirements altogether or simply reducing the scope of those requirements remains to be seen.
The "TUPE" regulations protecting the automatic transfer of employees (and their rights) when a business is transferred from one company to another are derived from the EU Acquired Rights Directive. The TUPE regulations are often seen as burdensome, so it may be that a post-Brexit UK government looks to amend them or water them down. However, a complete abolition of transfer rights seems unlikely. More likely changes might include allowing employers more freedom to harmonise terms, or limiting the scope and application of the transfer regime.
We have our own domestic legislation, the Data Protection Act 1998, which governs how organisations must currently process personal data and this will continue to apply following the referendum. A new European data protection regime is being introduced on 25 May 2018 which changes the European data protection regime significantly. As things stand, this regime (the EU General Data Protection Regulation ("GDPR")), will become law automatically in the UK on 25 May 2018, which seems likely to be prior to the UK's exit from the EU. In any event, it is likely that the GDPR will have to become subsumed into UK law after the UK’s exit, since if UK businesses want to trade with businesses in Europe, they will have to prove "adequacy" in their data protection standards by showing standards equivalent to those set out in the GDPR.
A cornerstone of the Leave campaign was reducing European immigration into the UK. However, it seems likely that, if the UK wishes to remain part of the single market (whether within or outwith the EU), it will also have to accept free movement of people. Several leading Leave campaigners have recognised this and the fact that it may lead to no significant overall changes in immigration, despite the referendum result. On the other hand, if the UK were to adopt a different model of interaction with Europe – such as the WTO model – it would have more freedom to enforce tighter immigration controls.
Only once there is a better understanding of what direction the UK's "Brexit" negotiations take, will it be possible to predict what impact Brexit will have on immigration.
Unfair Dismissal, etc:
Critically, many of the UK's most commonly known employment rights, such as the unfair dismissal regime, the right to written terms of employment and notice provisions are based on legislation that is entirely domestic in nature. It is therefore safe to assume that, but for any significant change in the political landscape, these employment protections are unlikely to change with Brexit.
If you have any questions or would like more information please contact a member of the Employment Team.