Brexit and employment

United Kingdom

There were a lot of mixed messages during the Brexit campaign as to what would happen with UK employment laws, many of which derive from membership of the EU. Following the referendum, the Secretary of State for Exiting the EU stated “the Great British industrial working classes voted overwhelmingly for Brexit. I am not at all attracted to the idea of rewarding them by cutting their rights”. Latterly in May this year the Prime Minister announced that no EU workplace protections would be repealed.

We now have the European Union (Withdrawal) Bill 2017. Key provisions are:

Section 2.1 EU – derived domestic legislation, as it has effect in domestic law immediately before exit, continues to have effect in domestic law on and after exit day

Section 3.1 direct EU legislation, so far as operative immediately before exit day, forms part of domestic law on and after exit day

There has been some academic debate on what these sections really mean. Taking them at face value and having regard to the Prime Minister’s statement, we can be confident that nothing will change on day one should the UK leave the EU. The extent to which the UK would then have a free hand to repeal and amend EU derived legislation will largely turn on what agreement may be reached on our future relationship with the EU. The price of a two year transitional arrangement, which represents current government policy, might well be maintaining existing workplace laws and the incorporation of any new EU directives or other measures during that period. Then, of course, beyond transition membership of or access to the single market might involve similar commitments.

The main UK employment laws which come from the EU are:

  • Transfer of Undertaking (Protection of Employment) Regulations (“TUPE”)
  • Collective redundancy consultation
  • Agency Workers Regulations
  • Working Time Regulations
  • Works councils
  • Data protection
  • Anti-discrimination laws

Subject to the points made above, all of these could in time be candidates for repeal or amendment. Speculation as to which is complicated by the obvious point that much may depend upon which party is in government at the time. All one can do now is identify areas where we might see change.

It is surely inconceivable that there would be a wholesale repeal of the panoply of laws preventing discrimination in the workplace. It would, however, be possible to cap compensation for discrimination should we leave the EU. Originally compensation for discrimination was capped at the same level as the compensatory award for unfair dismissal. That changed following the decision of the ECJ on a public sector case brought by a woman who had suffered losses way in excess of the then cap of £6,250 as a result of discriminatory treatment in relation to her pension. The ECJ held that EU law required that she be fully compensated. The government of the day moved quickly to scrap the cap. A recommendation of the Beecroft Report commissioned by the then coalition government some six years ago was that discrimination claims should be capped. Another change could be an extension of circumstances in which affirmative action and positive discrimination can be taken to address inequalities.

TUPE is an example of “gold-plating” – in other words the domestic legislation goes further than required by the underlying Acquired Rights Directive. The case in point is the service change provisions which have served to bring clarity to the application of TUPE on outsourcings (although some difficulties remain). A challenge posed by TUPE is uncertainty over when changes in terms and conditions of employment can be made post-transfer often in the context of harmonising terms and conditions of different parts of the same workforce. The current straightjacket of the Acquired Rights Directive prevents any meaningful change.

The Agency Workers Regulations have proved problematic in their application in a number of respects.  Whether the protection they afford on such workers are necessary is debateable. They could be a prime candidate for simplification or possibly wholesale repeal.

The effect of some controversial decisions of the ECJ could be reversed by legislation. They will otherwise continue to have effect as part of what the Withdrawal Bill describes as retained EU case law. Two decisions in particular which might not stand the test of time are Pereda whereby an employee becomes ill whilst on holiday can retrospectively book the time as sick leave (this may be right in principle but is almost impossible to police) and Gomez whereby a woman on maternity leave accrues holiday and effectively has a double holiday allowance in the first year after her return.

Similarly, the complications over calculation of holiday pay and the need in some cases to include overtime could be unwound. There have been a number of decisions in this area, in part based on the supremacy of EU law and by reference to the working time directive. Any change would be politically controversial especially with some unions.

We might also see the end of European works councils in this country in the longer term although it is fair to say that they have not really caught on and are certainly not an established part of the industrial landscape.

One well-established protection for workers under EU law is the possibility of a Francovich claim. An individual can obtain damages where a member state commits a serious breach of a rule of EU law which was intended to confer rights on individuals, and there was a direct link between the breach and damage sustained by the individual. There have been a number of significant Francovich cases in the employment field. The Withdrawal Bill, perhaps unsurprisingly, provides “the right to claim damages against the State for breaches of EU law (Francovich damages) will not be available after exit”. What is unclear is the status of the claims which arose before exit and whether they could still be pursued. There has been a suggestion that the protection given in the European Convention for Human Rights to accrued rights might come to the rescue. Our courts would seek to interpret the Withdrawal Bill compatibly with the ECHR under Section 3 of the Human Rights Act.

A key issue, of course, for many employers would be freedom of movement of workers. It seems clear that the present government, once it is in a position to do so, will introduce controls on citizens of the 27 EU states. No proposal has yet been tabled. A plan was recently leaked whereby unskilled workers could come here for a maximum of two years and skilled workers for up to five years. But this was only a leak and it may be some considerable time before we know what rules will apply. Again, the extent to which the UK has a free hand will turn on its future relationship with the EU.