Employment rights in a no deal Brexit scenario

The policy of both the EU Commission and the UK government continues to be that the UK should leave the EU via a withdrawal agreement on the scheduled exit date of 29 March 2019. However, the UK parliament has not ratified the withdrawal agreement negotiated between the UK government and the EU Commission. In the absence of an alternative agreement being reached between the Commission and the UK government and legislation by the UK parliament, the UK may leave the EU on 29 March 2019 without a deal.

As this prospect looks increasingly possible, a number of clients have contacted us asking what effect a no deal Brexit would have on their workers' rights.

The position is in fact that, other than in two limited areas, the status quo will remain in terms of employment law even in the event of a no deal Brexit, and we do not anticipate that employers will have to adjust their practices in the short to medium term. We have addressed immigration issues in a separate article.

Adoption of EU Law

Brexit will be achieved legally by the entry into force of the European Union (Withdrawal) Act 2018, which will repeal the European Communities Act 1972 and end the supremacy of EU law. At the same time however, it preserves existing EU law. This includes all EU legislation (and EU-derived legislation), as well as judgments made by the European Court of Justice (the "ECJ") since the UK became a member state.

The effect of this is that, no matter whether a withdrawal agreement is reached between the EU and the UK by 29 March 2019 or not, employment rights derived from EU law will remain in place and nothing will immediately change.

After a no deal Brexit, the UK courts would decide cases concerning EU-originated law in accordance with existing ECJ decisions, though the Supreme Court would be able to depart from these decisions when it considers this to be appropriate. The UK courts would also "have regard" to ECJ decisions made after Brexit. There could therefore be a divergence in the interpretation of EU-originated law in future between the EU and UK courts. However, we do not expect to see any immediate impact.

The only areas relating to workers’ rights where a no deal Brexit will have an immediate effect are employer insolvency and European Works Councils ("EWCs").

Employer insolvency

Currently, UK citizens working in an EU member state (and vice versa) are entitled to certain redundancy-like payments if their employer becomes insolvent.

EU citizens (and indeed UK citizens and non-EU citizens) working for a UK employer in the UK will not lose this protection following Brexit. They will still be covered by existing UK legislation and be able to claim payments in the event of their employer's insolvency in the same way in a no deal scenario.

However, the situation is not certain for UK and EU nationals who work for a UK employer in an EU country. Their protection in the event of an employer insolvency will depend on whether and how the EU country in question has implemented the guarantee required by EU law, and how it applies to employees of non-EU employers.

EWCs

Currently, EU law allows for workers to request that their employer constitutes an EWC in order to inform and consult with employees on issues affecting employees across two or more European Economic Area ("EEA") states. Broadly, the obligation to set up an EWC arises when 100 or more employees working in at least two Member States request such a body is put in place, although employers can also set these up on their own initiative. The UK government has said that it will ensure that the rights and protections for employees in EWCs will continue ‘as far as possible’ after a no deal Brexit, but co-operation from remaining EU member states will be required for them to continue in their current form. UK regulations will be amended so that:

• no new requests to set up EWCs can be made in the UK after the UK’s withdrawal;
• provisions relevant to the ongoing operation of existing EWCs will remain in force; and
• requests for information or to establish EWCs or information and consultation procedures in the UK made before the UK’s exit but not completed by that date will be allowed to complete.

Employers that currently have EWCs should review their agreements in light of there no longer being reciprocal arrangements between the UK and EU. Specifically, we recommend checking whether the employee threshold would still be met if UK employers were not included in the total number of employees, and considering whether the EWC should be moved to another EEA jurisdiction.

Medium and longer-term outlook

The UK government has consistently stated that it is committed to protecting workers' rights after Brexit. There are discussions at Westminster over enshrining this in law. The government has been undertaking a review of UK employment law, which has resulted in its "Good Work Plan" setting out its proposals to improve the quality of work in the UK. As part of this the government has canvassed some potential amendments to EU-originated laws, such as those relating to agency workers and information and consultation procedures. Nevertheless, broadly the government's proposals aim to improve workers' rights or to increase clarity around them, rather than to remove protections introduced by EU law. We await further details on the specifics of implementing the Good Work Plan, but it does not appear that there is any intention to remove or dilute EU-originated rights, or to change EU-originated laws, specifically because of Brexit.

If you would like to discuss any issues relating to the impact of Brexit on your workforce, please do get in touch.