June 27, 2016

BREXIT: some thoughts on employment law implications

The UK's decision to leave the EU is unlikely to significantly transform the UK employment law landscape, but some changes are likely. The extent of those changes will largely depend on which Government is in power at the relevant time following the EU exit. We have considered here the possible effect of Brexit on employers in some key areas.

The starting point is that when the UK leaves the EU, the UK will regain parliamentary sovereignty. UK legislation will no longer have to follow the many EU directives that cover laws in the workplace.  The Government would therefore be free to abolish or amend existing laws as it saw fit. This transcends many aspects of EU based workplace regulation from working time and discrimination to health and safety, immigration and some aspects of remuneration. Below we set out some thoughts on how this may operate in practice.

Political landscape

Nothing changes immediately: employment, pensions and immigration law is the same today as it was before the referendum – change will come once exit actually occurs.  There are now likely to be at least two years of intense negotiation once the government invokes Article 50 notifying Brussels of its wish to exit. Of course, any future Labour government may be wholly disinclined to retreat on any employment protection legislation, meaning little, if any, change to the current landscape. However, it seems improbable that a Conservative government would, freed from the shackles of EU law, make no changes. A coalition government may produce a different result again.  

So an abolition of all EU based workplace law then?

Almost certainly not.  The Government may be quick to repeal certain limited aspects, the Working Time Regulations (being the current bête noire), the Agency Workers Regulations and CRD IV (limits on bankers' bonuses) are likely to top the hit list, we would expect other changes to be nuanced tweaks rather than involving wholesale abolition or significant changes.

There are unlikely to be many substantial changes to discrimination law. After all the Race Relations Act 1965 pre-dated the UK's membership of the EU.  Societal change over the last 50 years cannot be rowed back and the vast majority of people would think it quite right that those with protected characteristics should retain fundamental protections in the workplace, although with greater debate about how far the protection should extend and how breaches ought to be compensated.

Where the Government may choose to act though is in respect of compensation limits, and following an EU exit it would be free to legislate to introduce caps on compensation in respect of discrimination claims. It would seem improbable that this would be less than the unfair dismissal level (which is purely domestic) so it would be a reasonable presumption that discrimination compensation could be aligned to this figure in future. Likewise the Government could abolish damages for injury to feelings.  Other subtle changes could include amending the burden of proof and so place it back on the employee altogether, and reducing the bar on the justification test in respect of indirect discrimination. At a more controversial level, it could also see the Government tackling head-on the tension between religious freedom and same sex rights and in future the Government permitting positive discrimination in limited circumstances, for example, in an attempt to assist greater gender or racial balance in the boardroom.

Bye-bye to TUPE?

Again almost certainly not. While TUPE is derived from an EU Directive, in 2006 the Government introduced the wholly domestic concept of "service provision change" to apply to the contracting out, in and change of service provider. So it is difficult to see that having extended the scope of TUPE domestically through choice rather than compulsion that it would then row back from this.  It would, however, be free to amend the information and consultation requirements and the current restrictions on harmonising terms and conditions after the transfer. So, it is more probable that there would be a relaxation of the requirements around these aspects. The uncertainty caused to businesses whose operating model relies on outsourcing by a wholesale repeal of TUPE means any fundamental change is unlikely.

Fewer family friendly rights?

Probably not. The direction of travel has for some time been towards the extension of family friendly rights reflecting social, workplace and technology changes. The right to shared parental leave, for example, is entirely domestic and was supported by both the coalition Government and the Labour opposition so it would be very improbable this would change. The same applies to the extended rights to request flexible working introduced in July 2014 – again this was a domestic measure only and not introduced because of EU law. Similarly, in relation to maternity leave, the domestic rights already exceed the minimum required under EU law so again this is unlikely to change at all.

Collective redundancy consultation

This is an area where changes could be made, the most probable being either to the threshold numbers of redundancies (currently 20 or greater, and 100 or greater) triggering collective consultation and/or the applicable time frame (currently 90 days over which the redundancies are made).  Theoretically it could be abolished altogether but with a renewed emphasis on keeping individuals in work rather than on benefits, it is likely that this will remain in some form, although possibly watered down.

Data protection

With the exponential increase, collation, storage and use of personal data and growing public concern around the use and misuse of personal data both within and outside of the workplace, it seems highly improbable that there will be any lessening of the current data protection framework. So, no end soon to those time consuming data subject access requests from aggrieved employees.                     

CRD IV

Given the reaction of a number of banks to these rules, it would be an attractive option for the Government to abolish CRD IV which places limits on bankers' variable pay in order for UK located banks to have a competitive advantage in attracting talent and not being constrained by the remuneration limits imposed by CRD IV which apply throughout the rest of Europe.  However, this would also have to be seen weighed against the almost certain reduction in freedom of movement of employees covered below.

Immigration and freedom of establishment

Click here for our note on the UK immigration implications of Brexit.

Working time and agency workers

It is almost a racing certainty these would go, being almost universally unpopular with employers both in principle and in practice due to compliance costs. The long running mess around holiday pay while sick and now the overtime and commission cases do nothing to advance the case for retaining these rules.  And in both cases a Conservative Government would most probably abolish them and leave it to the market economy to dictate entitlements. 

Summary

While overall there will inevitably be some changes, the consequences are likely to be refinements and modest rather than wholesale changes to the framework around workplace law and, even then, subject to the political landscape and will at the time of the EU exit.