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Commercial Question

Brexit: the implications for employment law

updated on 17 May 2016

Question

What are the implications of Brexit for employment law in England and Wales?

Answer

While Brexit would allow the government to completely change how employment law works in the United Kingdom, major structural changes are unlikely in the next few years. If the United Kingdom votes to leave the European Union in the referendum on EU membership on 23 June 2016,  this would involve the repeal or substantial reform of the European Communities Act 1972, which sets out the inter-relationship between UK law and EU law. If Brexit happens, the UK government would be free to repeal existing EU directives, which could have a significant impact on UK employment law.

Free movement of people

A key benefit of the United Kingdom's membership of the European Union is that EU nationals have an automatic and unrestricted right to work in the United Kingdom. As immigration is a major part of the pro-Brexit agenda, it is likely that post-Brexit, this right would be modified to give the UK government the right to control the entry and exit of EU nationals. It is also likely that the United Kingdom would need to agree to the free movement of people in some capacity in return for a trade agreement with the European Union. Furthermore in the event of Brexit, there would probably be transitional arrangements to allow EU workers in the United Kingdom to remain in return for a reciprocal arrangement in the European Union for UK workers. Finally, an agreement may be reached regarding 'vested rights' to live and work in EU states, where someone has resided in a particular state for some time pre-Brexit. The details of any such arrangements, such as the length and conditions of stay, are unclear at this point in time.

Discrimination

Although our anti-discrimination laws have their foundations in EU law, they have become ''hard-wired'' into UK primary legislation. In 2010 UK anti-discrimination laws were consolidated into the Equality Act. The recent policy emphasis on improving equality of opportunity for women and other under-represented groups suggests that there would be little political appetite for any wholesale repeal or reform of equality laws as a result of Brexit. It is possible that in the event of Brexit, the UK government could consider imposing a cap on discrimination awards in line with how unfair dismissal is treated. The Confederation of British Industry commented, following an employer survey in 2010, that a cap on such awards would prevent unrealistic expectations from employees in terms of employment tribunal awards. The UK government could also legalise positive discrimination in favour of under-represented groups.

Working time

The EU Working Time Directive will no longer apply automatically if the United Kingdom leaves the European Union. Rights under the UK Working Time Regulations include the right to a 48-hour maximum working week (which UK workers can opt out of) and the right to 20 days' paid holiday per annum (which has been increased in the United Kingdom to 28 days to include public holidays).

It is unlikely that these rights would be taken away, as the United Kingdom already provides rights in excess of the EU minimum. It is possible that there will be reform in areas which are controversial due to European case law developments, such as the inclusion of commission in the calculation of holiday pay and the accrual of holiday during sick leave. It is also possible that the requirements could be reduced for smaller employers.

Transfer of undertakings

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) are derived from the EU Transfers of Undertakings Directive. As TUPE is not primary domestic legislation, it is possible that it could change if the United Kingdom leaves the European Union. However, TUPE has existed in the United Kingdom since 1981 and is conceptually entrenched in many commercial transactions. The amendments to TUPE made in 2014 have increased the protections above and beyond what was required by the directive. It therefore seems unlikely that there will be any significant reforms in the near future.

If the Conservative government is re-elected (and continues to pursue its anti-'red-tape' agenda), it is possible that it may reduce the requirements for informing and consulting under TUPE, and/or make it easier to harmonise terms of employment post-transfer, but it is unlikely that TUPE would be repealed or would change fundamentally.

Conclusion

It is important to note that withdrawal from the European Union would be a gradually negotiated process and any changes to employment law are unlikely to be immediate. Leaving the European Union would create a large legislative deficit and it is unlikely that established employment rights would be at the forefront of the government's agenda after Brexit.

Under the exit mechanism built into Article 50 of the Treaty on the Functioning of the European Union, there is a two-year transitional period for the United Kingdom to leave (unless a longer period of time is agreed between the two parties). It is likely that a minimum of two years will be required – Greenland took three years to leave the European Economic Community (the predecessor to the European Union) over the single issue of EU fishing regulations.

Regardless of the result on 23 June, it is very likely that overall landscape of UK employment law will remain the same, at least in the medium term.

Augustine Fung is a first-year trainee solicitor sitting in the pensions department at Travers Smith.