Life after Brexit: An update on employment law implications

As part of the Withdrawal Agreement, EU law will continue to apply to the UK until the end of the transition period. However, the transitional arrangements will end on 31 December 2020, and as we seem to be approaching a no deal Brexit, the position regarding employment law going forward remains unclear.

The UK legislation implementing the Withdrawal Agreement, the European Union (Withdrawal) Act 2018 (the Withdrawal Act) provides for existing EU law to be converted into UK law and referred to as “retained EU law”. EU derived employment legislation will accordingly remain applicable in the UK unless or until changed by any subsequent domestic legislation. In the absence of any protection of existing worker rights being enshrined in UK law, however, from 1 January 2021 existing EU derived rights could be changed by domestic legislation, (although in practice this seems unlikely in at least the short term).

We have set out below a broad summary of the current position.

Employment Law Updates

Departure from retained EU case law by UK Courts and Tribunals

Under the Withdrawal Act UK Courts will not be bound by new decisions of the Court of Justice of the EU (CJEU) made after the transition period ends but will still be bound to interpret retained EU law in line with existing decisions of the CJEU (retained EU case law). The Withdrawal Act, however, confers the power on the UK Supreme Court and the High Court of Justiciary in Scotland to depart from retained EU case law if they consider it “right to do so.” Following consultation, the Government has now confirmed that, among others, that power will be extended to the Court of Appeal and Inner House of Court of Session, but not to the High Court or the Employment Appeal Tribunal (EAT).

UK courts will still be bound by the normal doctrine of precedent. However, in respect of decisions of more senior UK courts relating to retained EU case law this development gives greater scope for divergence from retained EU case law and may cause uncertainty leading to re-litigation of established legal principles. We anticipate that, in particular, case law under TUPE (for example on changing terms and conditions) and under the Working Time Regulations (for example, holiday pay) may be vulnerable to challenge.

European Works Councils

One employment law issue which will change on 1 January 2021 is the position regarding European Works Councils (“EWCs”). An EWC is a forum set up by employers for the purposes of informing and consulting with employees at a European level, about the operation of its business. To form an EWC, an employer must have 1,000 employees across the member states and at least 150 employees in each of two or more of those member states.

From 1 January 2021:

• Employers will be unable to make new requests to set up an EWC in the UK.
• Where central management of an EWC is in the UK, it will need to be transferred to another member state.
• This also applies to European public limited companies registered in the UK.

If a UK company has an existing EWC it is likely they will need to review the way they operate after 31 December 2020, because there will no longer be reciprocal EWC arrangements between the UK and the EU post-Brexit. Companies should consider what to do about ongoing involvement of UK representatives in their EWC after the end of the transition period, and a new representative agent based in an EU member state should be designated or assigned.

Data Protection and cross-border transfer of employee data

At the end of the implementation period the EU GDPR regulations will be incorporated into UK domestic law as ‘UK GDPR’ regulations. UK GDPR will preserve the core EU standards such as data protection principles, rights of data subjects and obligations for controllers and processors. Employers in the UK who transfer employee data across borders to the EEA, should therefore generally continue to implement the EU GDPR compliance standards and follow the ICO’s guidance, which will be updated in due course to reflect necessary changes.

However, EU GDPR transfer rules apply to data entering ‘third countries’ outside the EEA. The UK will become such a third country on 1 January 2021. Under these circumstances the transfer of personal data may lawfully occur to a third country where:

• a valid adequacy decision is in place (i.e. an adequate level of protection);
• one of a number of safeguards are in place; or
• certain derogations under the relevant GDPR regime apply.

The European Commission is aiming to agree an adequacy decision with the UK by the end of the transition period. If this is achieved, personal data can be sent from the EEA to the UK without any further safeguarding being necessary. However, given the uncertainty, it is not safe to assume that the UK will benefit from an adequacy decision and companies which transfer data from EEA countries to the UK should consider what GDPR safeguards can be put in place to ensure that data can continue to flow into the UK. It would also be prudent for companies to consider reviewing personal data that it holds so it can be easily distinguished between data acquired before the end of the transition period, and after.

Potential future changes

Employment Bill

The Queen’s Speech last year set out proposals for a new Employment Bill, which will include the following measures to protect workers’ rights:

• Creation of a new, single enforcement body, offering greater protections for workers and to support business compliance, ensuring vulnerable workers are aware of and can exercise their rights;
• Ensuring that tips left for workers go to workers in full;
• Introducing a new right for all workers to request a more predictable contract after 26 weeks service;
• Extending redundancy protections to prevent pregnancy and maternity discrimination;
• Allowing parents to take extended leave for neonatal care; and
• Introducing an entitlement to one week’s leave for unpaid carers.

The precise wording of these will not be clear until the Employment Bill is published and this is still awaited with no timescales known at this stage.

Amendments to current legislation?

There is the possibility that we may see de-regulation in other areas post-Brexit, although currently this is purely speculative. We consider the most likely legislation targets for amendment could be:

• The Working Time Regulations 1998 (and rules around calculation of holiday pay);
• The Agency Workers Regulations 2010, which have faced criticism for imposing unnecessary burdens on businesses;
• TUPE, possibly to make it easier for employers to harmonise terms and conditions following a transfer of a business; and
• Imposing a cap on discrimination compensation.

Article co-authored by Flo Marulli de Barletta.