This article was updated on 4 July 2016.
The UK currently remains in the EU and it will take some time to negotiate the terms of its withdrawal, so employment laws will not change in the short term. However, in the longer term a Brexit could enable the UK government to significantly alter the employment law landscape, because much of UK employment law derives from the EU. However, wholesale changes are unlikely in practice. That's because:
- Although numerous employment laws, such as anti-discrimination measures, are currently derived from EU legislation, the underlying principles and protections often pre-date EU law-making. For instance, the UK already had equal pay, race, sex, marital status and disability discrimination laws.
- In a lot of areas employment law has become embedded in our business culture – as well as in employment contracts and policies – and is often regarded by employers and/or employees as good industrial practice. Examples include rights relating to family leave, discrimination protection and the right to paid holiday. Significant reform in these areas is unlikely to be welcome by many, not least due to the disruption, cost and uncertainty it could cause.
- Many aspects of UK employment law are of UK-origin, with rules that often "gold-plate" or standalone from any requirements imposed by the EU. For example, UK law requires more generous paid holiday entitlements than the EU. Also rights such as flexible working and shared parental leave come solely from UK policy-making, as does the unfair dismissal regime.
- Although the referendum is over, nobody yet knows precisely what form the on-going relationship between the UK and the EU will take. However, in order to secure a trading platform with the EU, the UK may have to commit to a minimum level of employment regulation in any event.
That said, there are aspects of EU employment regulation which, it is often argued, are overly-burdensome for UK businesses and which may be ripe for amendment following Brexit. We consider some of the most likely candidates below.
TUPE
The issue:
TUPE is an area of law which owes its existence to EU law-makers, but was "gold-plated" in the UK with the introduction of the service provision change concept in 2006. A recent government review found that most organisations were broadly in favour of retaining the service provision change concept - many businesses actually prefer the relative certainty provided by TUPE and are accustomed to dealing with TUPE as part of their business models. As a result, TUPE will most likely survive a Brexit vote.
However, that recent government review was precluded from considering certain aspects of TUPE which are required by EU law – Brexit would change this. Some of these EU rules are often cited as placing undue constraints on organisations involved in acquisitions and disposals or outsourcing scenarios. These include rules which prevent employers from harmonising terms and conditions after a transfer and which make it difficult for employers to dismiss employees, particularly pre-transfer. There might, therefore, be some fine tuning.
The possible outcome:
We could see the rules on changes to terms and conditions relaxed and more flexibility allowed in relation to the timing and procedure for dismissals.
Discrimination
The issue:
As noted above, we are unlikely to see major changes to discrimination laws. However, one area of discrimination law which might be changed is compensation. Unlike unfair dismissal claims, compensation for discrimination is currently uncapped as a result of EU laws. Arguably, the potential for uncapped awards can contribute to claimants' having unrealistic expectations about what they might receive. This can make early settlement difficult which in turn increases the burden on the court system.
The possible outcome:
A cap on the compensatory award could be introduced for discrimination claims. However, this would not necessarily be the same as the cap for unfair dismissal claims.
Holidays and working time
The issue:
The Working Time Regulations 1998 were introduced in order to implement the EU Working Time Directive. In recent years, the interpretation of the Working Time Directive has become a source of much vexation for UK employers. In particular, the right to accrue holiday while on sick leave and the fact that holiday pay should include certain overtime and/or commission payments, are likely to be ripe for review. Any such review might also include a consideration of rolled-up holiday – currently not allowed under EU law – as an option for casual workers.
The possible outcome:
A review of the Working Time Regulations has been in the government's "in-tray" for a number of years. Brexit could provide strong impetus for scaling back some of the more costly and impractical aspects of the Regulations, especially those rules relating to holiday while on sick leave and the calculation of holiday pay. The government could also consider the repeal of the maximum 48-hour working week, changes to workers' rights to rest breaks, and changes to what counts as working time.
Agency workers
The issue:
The Agency Workers Regulations 2010 introduced, amongst other things, a requirement that agency workers must receive the same basic working and employment conditions (including pay) as permanent staff after they've been doing the job for 12 weeks. This made the use of agency staff more costly, more burdensome and, ultimately, less attractive for many businesses. Unlike many other employment rights, these rules have not become entrenched in the employment landscape.
The possible outcome:
We could see alterations to, or the complete repeal of, the Agency Workers Regulations 2010.
Collective redundancy consultation
The issue:
The obligation to collectively inform and consult if 20 or more redundancies are proposed in a 90-day period is derived from EU law. While some organisations view it as an onerous obligation, it is unlikely to be removed altogether – not least because trade unions are likely to strongly oppose any such change. The rules were relaxed relatively recently in any event, with the minimum period of consultation being reduced from 90 days to 45 days where 100 or more redundancies are proposed.
One issue which has been confused by European caselaw is when consultation is "proposed" for the purposes of triggering collective consultation obligations. Clarification of this point would be welcome.
Certain other collective consultation obligations which derive from EU law, such as works councils, could be removed altogether but, given they are scarcely used in the UK in any event, the impact of this would be minimal for most organisations.
The possible outcome:
Tweaks to the trigger points for collective consultation are possible, including the threshold number of redundancies and clarification of when redundancies are "proposed". The government could also remove lesser-used collective consultation forums, such as works councils.
Immigration
The issue:
At present, EU nationals have an automatic and unrestricted right to work in the UK. Following Brexit it is possible, but unlikely, that those already in the UK would be forced to leave - a likely trade-off is that EU nationals would be allowed to remain in the UK in return for UK nationals already working in the EU being allowed to remain where they are. For new immigrants the UK may seek to introduce an immigration system similar to that currently in place for non-EU workers.
The possible outcome:
The UK government may seek to restrict future immigration by EU citizens into the UK, perhaps with a system designed to restrict immigration to skilled workers in areas where the UK has a skills shortage. However, whether restrictions on the movement of labour would be compatible with whatever trade arrangement the UK negotiates with the EU is currently unclear – much will depend on whether the terms of exit include retaining freedom of movement between the UK and the EU.
For more information, please contact Adrian Martin in our employment team.