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Posted 28 June 2016
by Stephen Jennings

The UK Votes for a Brexit – What Next for Employment Law?



 

The UK has voted to leave the European Union (EU) with the final polls showing 48% in favour of Remain and 52% in favour of Leave. Whether you are happy with the result or not, one thing that can be agreed is that this is undoubtedly the biggest legal change the UK has seen in our lifetimes. But what does this mean for Employment Law?

Will there be any immediate changes?

Probably not. Existing EU-derived laws will continue to apply until the UK has formally left the EU. The transition to leave the EU is a process that will take at least two years from the point when article 50 of the Lisbon Treaty is triggered. Recent headlines have indicated this may not be done until a new Prime Minister is in place. The implications of the Brexit vote could well take several years to play out in full.

Until that two year period has been triggered and has run its course, Britain is still part of the European Union and so remains subject to all EU laws. The government is likely to be fully engaged in the process of trying to restore stability and negotiating our exit terms for some time to come, rather than focussing on non-crucial changes to domestic legislation. It is also worth remembering that the current Parliament is generally considered more pro-European than the electorate and is unlikely to pass any radical changes (especially during sensitive exit negotiations).

What about longer-term legislative changes?

Much will depend on the outcome of negotiations between the UK government and the EU where the UK government will attempt to retain access to the single market without being hit by excessive tariffs and other restrictions.

A large number of UK employment laws come from the EU. The Working Time Regulations, discrimination laws and TUPE all came from EU legislation. At the time of writing, the government has not given an indication as to how it will deal with EU-derived laws but it is very unlikely that there will be a wholesale repeal – this would be a deeply unpopular move and it is hard to imagine any political party arguing that e.g. the country would be better off without any laws against discrimination.

In addition, EU countries would be unlikely to enter into trade agreements with the UK if UK businesses were allowed to employ workers on less onerous terms, as this would mean that the cost to UK businesses would be cheaper and they would be able to undercut the other countries’ businesses. It is quite possible that continued access to the single market may only be achieved by agreeing to retain most EU employment regulations. It is therefore more likely that the government will make small changes to existing EU-derived employment laws in order to make them more appealing to UK businesses.

Predictions

It is always dangerous to make predictions, as those who banked on a Remain vote found out. However we can be reasonably confident that employment law will be scrutinised quite carefully in the forthcoming months and years – here are some of the key areas which may fall under consideration:

  • Discrimination – we think major changes are unlikely, however we could see minor changes such as a cap on compensation
  • Family friendly rights – the UK has in some areas (e.g. shared parental leave) gone beyond EU legislation, so there is unlikely to be an appetite to make major changes
  • TUPE – this is directly derived from European law, so is a likely candidate for modification. While the basic principles are unlikely to change, there may be some changes to appeal to businesses e.g. making it easier to harmonise terms
  • Working time / holiday pay – various ECJ decisions are unpopular, so the UK may seek to use the opportunity to provide some (likely pro-business) clarity in this area
  • Agency workers legislation – complex, unpopular and derived from European law, this may be simplified or even revoked

Freedom of movement

A further complication relates to the automatic freedom of movement which will no longer exist when the UK leaves the EU. EU individuals living and working in the UK and UK individuals doing so in EU Member States may find themselves no longer legally entitled to do so. In practice, some sort of agreed ‘amnesty’ is likely to be negotiated allowing such individuals to remain in their chosen country until they are able to apply for citizenship, so it may be some time before employers see a real difference. However sectors (such as hospitality) which rely on employees from elsewhere in Europe may need to look at how they will adjust their recruitment models. In addition to the cost of visas, low-skilled workers would be unlikely to satisfy the eligibility requirements for UK work visas which could result in staff shortages and the need for employers to raise salaries to attract staff who are entitled to work in the UK. Ultimately, much will depend on the outcome of Brexit negotiations with the EU.

What about the European Court of Justice?

There are more complicated issues beyond legislation. When Britain leaves the EU, the European Court of Justice (ECJ) will no longer have jurisdiction over our courts. Previously, our courts have had to interpret EU-derived law in accordance with ECJ decisions and it is unclear how the Brexit will impact on existing EU-based precedent case law. It is likely that UK courts will want to preserve some sort of legal certainty which could see UK courts continuing to follow established ECJ precedents, although how binding these precedents will be on future decisions remains to be seen – they are likely to be persuasive indicators, if not legally binding.

Summary

Currently, non-EU members of the European Economic Area (EEA), for example Norway, have adopted most of the EU’s employment laws as part of an economic agreement allowing them to trade with the EU. If this is the future of UK/EU relations, then the effect of Brexit could be minimal on our core employment rights. However if the UK government takes a more bullish approach, or if EU negotiations end up being less favourable to the UK than Leave campaigners foresaw, then there could be some very significant changes ahead for both employers and their employees.

The reality is that at this stage we simply do not know what the employment law implications of the Brexit will be. Much will depend on how the government will approach the issue of existing EU legislation in the UK, and on the terms of the Brexit negotiations with other EU countries on the free movement of workers. As an employer you can expect a period of protracted turbulence – however any government is likely to want to avoid introducing major changes without proper consultation and time for businesses to adjust. So, watch this space.

 

For any advice, contact our specialist employment team on 01392 207020 or e-mail employment@tozers.co.uk.

 

 

 

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About the author

Stephen Jennings

Partner

Partner in the litigation department specialising in employment law, he is the relationship manager for many of the firm's employment clients