Stuart Chamberlain, Wolters Kluwer Author and Employment Law Specialist, examines some of the possible developments and practical implications for UK employment law in the event of a majority vote for Brexit.
What would be the immediate impact of vote for Brexit?
Apart from considerable shock in certain quarters, there would be no immediate impact, certainly not in employment law. The Government would have to inform the European Council that it intended to leave (see below). A period of negotiation would then follow. Domestic legislation to implement a British exit from the EU would have to go through Parliament.
At this stage, therefore, there are unlikely to be any immediate changes in employment law.
What is the procedure for leaving the EU?
Article 50 of the Treaty on European Union (TEU) provides the legal basis and procedure for an EU Member State to withdraw from the EU. Under these rules the UK would have to give notice to leave, followed by a period of two years’ negotiation to agree the terms of the withdrawal. The negotiations and withdrawal may take longer.
Unfortunately, the Article 50 procedure has never yet been used. The two years of negotiation may be extended but only with the unanimous consent of the Council of the EU — that is, with the agreement of all 28 Member States.
The procedure is, therefore, untried and uncertain. There would be further uncertainty about the status of the current EU-derived employment legislation and case law during the period of negotiation. This again makes it highly unlikely that the Government would immediately reverse all European legislation and rewrite it. It is more likely to be a gradual and piecemeal process. The Government’s priority after a vote in favour of Brexit will surely be to minimize uncertainty and to focus on the exit negotiations with the EU and potential trade deals with partners outside the Union.
What would be the impact of Brexit on employment law?
It is worth pointing out that not all UK statutory employment rights derive from Europe. For example, pay and deduction of wages, the right not to be unfairly dismissed and the right to a redundancy payment are all products of UK national law. This legislation can be amended at any time.
Those European laws that have been incorporated into UK law by primary legislation — that is, by Act of Parliament, such as the Equality Act 2010 — would remain in force unless and until they were expressly repealed by Parliament. Other European law that has been brought into UK law by secondary legislation by ministers under the European Communities Act (ECA) 1972, such as the Working Time Regulations, could fall away once this legislative framework (the ECA) was removed.
Thus, the courts and tribunals would no longer be bound by the Working Time Regulations but would be by the Data Protection Act and the Equality Act, unless they were repealed by Parliament.
A decision in favour of Brexit would also have an impact on the courts and case law. These would no longer have to interpret UK law in accordance with the decisions of the Court of Justice of the European Union (CJEU), formerly known as the European Court of Justice — to give a “purposive” European construction to their decisions. Judges would have more flexibility to interpret domestic legislation.
This is not without its uncertainties: UK case law works on the principle of precedent and it may take some years before new decisions reach the appellate courts and tribunals and have to be followed. In the meantime, the CJEU decisions could continue to have a strong “persuasive” influence.
What areas of employment law would be at risk of change after a Brexit vote?
If the UK does vote to leave the EU, it would mean that it would no longer be bound to incorporate EU Directives into national legislation. It would also be free to abolish current laws — certainly the more controversial EU-derived employment legislation — as it saw fit.
It is suggested (tentatively) that, in the event of a Brexit vote, the following areas of employment law, which stem largely from Europe, are the most likely to be subject to possible change and repeal.
1. Working time
The Working Time Directive governs average working hours, rest periods and annual leave. The 1998 Working Time Regulations, which implemented the Directive into UK law, are unlikely to be scrapped in their entirety but businesses would be particularly keen to see the repeal of the maximum 48-hour working week, a review of the so-called “on-call” time and some coherence in the calculation of holiday pay.
Employers might also wish a change to the situation where workers on long-term sick leave continue to accrue and either take or carry over paid annual leave. A consultation took place in 2011 on some of these issues but nothing came of it.
2. Agency workers
This piece of secondary legislation is the most likely candidate for removal — if any law is to be repealed in its entirety at all. It is regarded as onerous by business. Employers object to agency workers being paid the same rate for the job as permanent staff once they have been in post for 12 weeks.
3. TUPE
These regulations could be seen as a prime target for repeal. The Transfer of Undertakings (Protection of Employment) (TUPE) Regulations derives from the EU’s Acquired Rights Directive but its repeal is unlikely. Its principles are generally well established — if not always totally understood — and provide a degree of certainty, particularly where outsourcing is involved.
It has long been a mantra of this Government that the TUPE Regulations are “gold plated” — that is, their protection goes beyond the minimum required by EU law. In 2011–2014, the Government conducted a full-scale consultation and review on the effectiveness of TUPE. This resulted in some amendments to TUPE, aimed at giving more flexibility but, significantly, employers wished to retain the service provision change (SPC) transfer. The SPC is a product of UK, not EU law.
It is more likely that there would be amendments to TUPE in those areas where EU law previously prevented the Government from making the changes it wanted: in particular, the “harmonising” of terms and conditions of employment following a TUPE transfer, which is presently unlawful under EU law.
4. Discrimination
As already explained, the Equality Act 2010 is a primary UK legislation that incorporates EU law and the more recent anti-discrimination “protected characteristics”. It will remain in force regardless of the outcome of the referendum.
However, there is one area that could be up for change: compensation. There would certainly be strong support for the imposition of a cap on compensation awards for injury to feelings in employment tribunals — similar to that for unfair dismissal.
5. Family friendly measures
Rights such as those provided for new and expectant mothers are criticised by some as examples of business-unfriendly EU legislation. In practice, however, existing rights to maternity, paternity, shared paternity, parental leave and pay are a mixture of rights deriving from the EU and rights originating in the UK.
The Government is probably unwilling, especially in the light of a general election due in 2020, to be seen as responsible for the dismantling of anti-discrimination legislation and “family friendly” rights that offer protection and benefits to some 30 million workers. These protections are widely seen as important and fundamental safeguards in the workplace. Indeed, the Government is presently proposing the extension of parental leave to working grandparents.
6. Collective redundancy consultation
The statutory duty on employers to inform and consult the workforce about proposed redundancies, contained in the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A), was introduced in order to implement the provisions of the EU Collective Redundancies Directive. Employers must consult where they are proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.
The Government took steps in 2013, following a review and consultation on reform of the collective consultation obligations, to address the concerns of businesses. As a result, in April 2013 the previous 90 days minimum period before which the first redundancy can take effect (if there are 100 or more redundancies) was reduced to 45 days. In addition, expiry of fixed-term contracts was taken outside the scope of collective redundancy consultation.
Any proposal to remove the consultation obligations altogether would be fiercely disputed by trade unions and could severely damage industrial relations in the UK. Some tweaking, such as clarification on the exact trigger point as to when an employer is considered to have “proposed” redundancies, is more likely to be considered.
Other collective consultation rights, such as works councils and transnational works councils, which are little used in the UK, are more likely candidates for removal.
In summary, a wholesale abolition or repeal of this legislation is unlikely. In the run up to Prime Minister Cameron’s membership negotiations with the EU in 2015 and 2016, it was widely reported that he would demand a full opt-out from the Working Time and Agency Workers’ Directives. In the event, these demands were not made.
Any changes are more likely, therefore, to be “tweaks” to make them more palatable to British business, rather than root and branch repeal.
Finally, what of the free movement of labour from the EU?
At the moment, citizens of EU Member States have an automatic and unrestricted right to work throughout the EU, including in the UK. A significant number of employers in the UK rely on EU nationals to supplement their workforce — for example, in construction and agriculture. It is estimated that some 2 million EU nationals work in Great Britain. This would be a big issue to resolve in the event of a Brexit vote.
A result in favour of Brexit in June would allow the UK Government to control borders and reduce immigration. Work arrangements would obviously have to be re-negotiated with the EU and its Member States and it is doubtful if the new arrangements would replicate the present freedom of movement. If the policies were to restrict the UK labour supply or the services provided by that labour, this would present problems to a considerable number of employers.
Conclusions
All of this is predicated on the supposition that Great Britain will vote to leave the EU on 23 June 2016. The outcome of the referendum remains uncertain. Despite what the most avid of Brexit supporters may currently wish, it seems a “No” vote is unlikely to result in major immediate changes in employment law in the UK — even in those areas most criticised by employers. The post-Brexit negotiations may last for years. Indeed, in February 2016 the Government suggested that there could be “up to a decade or more of uncertainty” negotiating an exit from the EU.
There is further uncertainty about what model the UK might wish to follow in its future relationship with the EU after a Brexit vote. For example, if it followed the Norwegian model (extolled in some areas of the media but not actually favoured by the Government, whose stated option is to remain in the EU) and became part of European Free Trade Association (EFTA), it would remain subject to much of EU social and employment policy, such as the Acquired Rights (TUPE) and the Working Time Directives. The CJEU would also continue to exert a significant influence on UK courts. Other alternatives appear complex and cumbersome in their arrangements.
Unfortunately, for now, there is very little planning that employers (or employees) can do to seek to mitigate the risks associated with the referendum and a possible Brexit. The only certainty is (probably) uncertainty.
