What could be the impact of Brexit for UK employers in terms of employment law?

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Like us, you’re probably reaching saturation point on this issue and don’t need reminding that on 23 June 2016 British, Irish and Commonwealth citizens over 18 who are resident in the UK, along with many UK nationals living abroad will be entitled to vote in the referendum on whether the United Kingdom should remain a member of the European Union (EU).

The level of scare mongering coming from both the ‘Leave’ and ‘Remain’ camps has been widely publicised and criticised – with employment rights being one of the areas for debate. What is clear is that neither side of the argument can agree what the effects will be and are poles apart in many areas.

Whilst, like the rest of the world, we can only guess at the ultimate consequences of a ‘Leave’ vote, we can at least throw some light on how the EU affects employment law in the UK and what are, in our view, likely to be the considerations for UK employers.

How does the EU affect UK employment law?

In the UK much of our employment law (particularly around protections for employees and workers introduced over the last 25 years) derives from the EU. This primarily comes from three main sources: primary legislation (treaties), secondary legislation (regulations and directives) and decisions made by the European Commission (EC) or the European Court of Justice (ECJ).

Treaties and regulations are directly applicable to member states which mean that they do not require the member state to implement the legislation in their own country; the law just applies. In contrast directives need to be implemented into national law by each member state. Very broadly, most UK employment laws that have derived from Europe have either:

  1. Been implemented into our national law following UK regulations to give force to an EU directive (such as TUPE, the Working Time Regulations, Part Time Workers Regulations and Agency Workers Regulations to name but a few); or
  1. Have come through European case law which has been subsequently applied and followed in the UK courts (such as the recent holiday pay cases).

Will employment law change if the UK decides to leave the EU?

Ultimately the answer to this question is unknown and dependent on the model that the UK agrees with the EU on exit or through subsequent negotiations. However, what is clear to us is that any change is likely to take a substantial period of time and, in the immediate aftermath of the referendum, employment law changes are likely to be reasonably far down the list of priorities.  Consequently, there is unlikely to be any significant impact on employment law in the short or medium term. This is for a few key reasons.

  1. Exit process – the mechanism for leaving the EU will in itself create delays; it is anticipated to take at least two years to leave and this process is only triggered when our government files a notice of intent to leave. During the two year period a series of negotiations would be likely to ensue with the EU about the UK’s extraction and about ongoing relations.
  1. EU rights entrenched in UK law – as explained above, many of our employment laws may have originated from the EU but have subsequently been enacted in UK law. For example, the Acquired Rights Directive resulted in the implementation of the TUPE legislation in the UK. Whilst the Acquired Rights Directive may no longer be applicable following Brexit, the TUPE Regulations will remain enforceable in the UK.

Also, our courts have a system of precedent which means that lower courts must follow past decisions of the higher courts. Therefore, even if there is an exit from the EU, it will be very difficult for an employment tribunal to depart from existing case law, unless new legislation is implemented.

Finally, it is worth remembering that not all of our employment laws come from Europe – Europe has never governed our rights in relation to unfair dismissal which is by far and away the greatest consideration in most employment matters.

  1. EU rights entrenched in UK working culture – Many of the rights that originally derived from the EU are now entrenched in our working culture. For instance, protection from discrimination, the right to rest breaks and paid holiday.  The ‘Remain’ campaign has raised concerns that leaving the EU could result in a low wage and low employment rights focus in future, but with the clear commitments set out in the Equality Act 2010 and the commitment to introduce the National Living Wage already set, it is likely to require a substantial change of government focus to move away from the rights that we have all become accustomed to.

Given all of the above, whilst we may start to see a gradual divergence from certain of the  employment laws in Europe, this would be likely to take many years. Employment laws have always flexed by reference to the priorities of the government of the day and it does not necessarily follow that even if there is a vote to leave the EU, the UK would lurch to the right or left in terms of its next or future governments.

One area that could be impacted more quickly than others is the free movement of workers. It is unlikely that any UK based employees/workers without UK citizenship would, overnight, be required to leave the UK. However, there may be an agreed timeframe and/or different agreements reached with the EU/different states about movement of workers between countries. Overtime the UK could move towards a points-based immigration system – last week certain parts of the ‘Leave’ campaign called for an Australian-style, points-based immigration system to be applied to all migrant workers. Again though, as the ‘Leave’ campaign is a cross-party campaign there is no certainty that this is what would in fact happen.

Conclusion

As we are not politicians, we can answer the question in a way that politicians from either side cannot – honestly – we can legitimately say that we don’t know the answer or whether it will be positive or negative for UK employees and employers. It is clear that a decision to leave would give rise to a period of substantial uncertainty, but what then happens will depend on a myriad of competing factors.  In terms of employment law, our view is that given the likely slow pace of change, some of us may hopefully have retired (if we can still afford to do so) by the time any exit has any substantial impact on UK employment law!

For more information, help or advice please contact Chris Maddock on 0191 211 7919 or email [email protected].