Brexit Update: Effects on Employment

By and on February 6, 2020
Posted In Employment

The United Kingdom is no longer a member of the European Union and has entered into a transition period until December 31 2020, unless an extension of 1 or 2 years is agreed by July 1 2020 (the Brexit Long Stop Date).

During this transition period, the UK will continue to trade with the EU in much the same way as it did before its exit. Negotiations will take place throughout this year to determine the future permanent relationship between the UK and the EU.

The UK’s Prime Minister, Boris Johnson, has repeatedly stated that the transition period will not be extended beyond the end of this year. This is an ambitious deadline to reach a comprehensive agreement with the EU and the possibility of a “no deal” Brexit remains an event for which companies should prepare.

Against this backdrop, this update summarises the current status of the UK’s relationship with the EU and sets out some of the key legal implications associated with a “no deal” scenario for certain areas—one of which being employment, which we examine here.

Employment

In either a deal or “no deal” scenario after the implementation period, there is little if any change expected in relation to UK employment laws in the short term.

The Government’s position has been reasonably consistent during the period since the Brexit vote in June 2016. The Secretary of State with responsibility for employment law told Parliament on 7 November 2016 that the Government would “entrench all existing workers’ rights in British law, whatever future relationship the UK has with the EU”. While Prime Minister, Theresa May reiterated on numerous occasions that the Government “will not only protect workers’ rights, but enhance them”.

Boris Johnson has made similar promises about protecting workers’ current rights but was criticized for the omission from the 2020 Withdrawal Agreement of a section in previous versions of the European Union (Withdrawal Agreement) Bill requiring the Government to report on divergence from new EU rights in the future.

In relation to current employment rights, the Government has issued a series of technical notices which confirm that, in the event of a “no deal” Brexit, workers in the UK will continue to enjoy the rights they are currently entitled to under EU law with one key exception (relating to European Works Councils—discussed further below). To achieve this, the 2020 Withdrawal Act provides for EU law (with necessary technical drafting amendments) to be imported into UK law on Brexit Day.

The Withdrawal Agreement also provides that EU law will continue to apply during the transition period until the Brexit Long Stop Date. Employment law rights derived from EU law (such as anti-discrimination rights, collective consultation obligations, TUPE regulations, family leave and working time rights) will therefore be maintained for this transition period as a minimum.

However, some comfort can be taken from the Political Declaration setting out the Framework for the Future Relationship between the EU and UK (which accompanied the Withdrawal Agreement) which includes a commitment to work together to safeguard “high standards of … workers’ rights” and a statement that the future relationship must ensure open and fair competition, including provisions on social and employment standards.

European Works Council

The only substantive changes relate to European Works Councils (EWCs), which cannot continue to function as they do currently post-Brexit Long Stop Date.

The Withdrawal Agreement provides that no new requests to set up an EWC or information and consultation procedure can be made after the Brexit Long Stop Date.

For existing EWCs, the impact of Brexit will depend on the terms of the EWC. For EWCs which are not governed by UK law, the default position is that UK employees will no longer be entitled to have representatives on the EWCs, and the UK delegates’ seats will need to be reallocated, unless the parties to the EWC agreement agree otherwise.

Those governed by UK law will need to designate another EU country to govern the EWC. The choice of which alternative law will apply should be carefully considered in light of the fact that it will have strategic implications for the composition of the EWC and national legal concepts to which it will be subject.

Changes to Employment Laws in the Future?

In theory, Parliament could make future legislative changes to employment law, but these are likely to be limited given the commitments given by the Government and, in the event of a no deal Brexit, the practicalities of negotiating any future trade arrangements with the EU.

In terms of case law, under the 2020 Withdrawal Act, in theory at least, the Supreme Court could re- examine and potentially overturn doctrines derived from European case law. Much-litigated issues such as holiday pay could, therefore, theoretically at least, be re-opened. However, again, in light of the reassurances given about the continued protection of employment rights, any significant roll-back would be surprising.

Immigration

Immigration is an area that has the ability to have significant impact on some employees and their families.

If the UK leaves the EU with a deal, it has been agreed that there will be a “transition period” from Brexit Day to the Brexit Long Stop Date (being December 31 2020 at the time of writing). During the transition period, free movement will effectively continue between the UK and the EU.

The UK Government has promised that, whether or not there is a Brexit deal, under the “EU Settlement Scheme” all EEA nationals and their families living and working in the UK as at December 31 2020 will have the continued right to reside and work in the UK and to acquire rights of permanent residence in the UK after five years of qualifying residence.

The scheme came into effect on March 29 2019. The Government has stated that applications for Settled or Pre-Settled Status must be made before the end of June 2021 if there is a Brexit deal (or December 31 2020 in the event of a “no deal” Brexit), to protect an individual’s rights to remain in the UK.

The latest information on the “EU Settlement Scheme” is published by the UK government. Please see https://www.gov.uk/settled-status-eu- citizens-families for further information.

Practical Steps for Employers

The key impact will be for employers who recruit or second employees cross-border. Employers with affected employees will wish to ensure that they are familiar with the “Settled Status” procedure and the relevant deadlines.

Employment Taxes: Social Security

EU regulations currently help internationally mobile employees pay social security contributions in only one Member State. In the event of a “no deal” Brexit, these regulations will cease to have effect in the UK post-Brexit Long Stop Date. Although the UK has legislated for the status quo to continue, whether it will do so will depend entirely on reciprocal action by the EU, which has not been agreed. The UK had a limited number of agreements with some, but not all, of the EU Member States before the regulations took effect; however, these are far less comprehensive than the EU regulations, and may be limited in duration and scope.

Employers will therefore need to review the social security status of employees moving into or out of the EU, and will also need to review all international working arrangements to determine whether new social security obligations are triggered.

Katie ClarkKatie Clark
Katie Clark has significant experience advising on all aspects of contentious and non-contentious employment matters. Katie’s client base spans multiple business sectors and includes global corporations, financial institutions, FTSE 100 companies, manufacturing companies, service providers and start-ups. Katie is noted for her commercial approach to assisting clients to deal with employment issues ranging from day-to-day employee relations, to negotiating public limited company (PLC) board director contracts and significant business restructuring. Read Katie Clark's full bio.


Paul McGrathPaul McGrath
Paul McGrath advises clients across a broad range of industry sectors in all areas of contentious and non-contentious UK employment law. His practice covers all aspects of UK employment legislation and day-to-day employment matters, including appointments and terminations, employment status and worker classification issues, employee handbooks and policies, employee data privacy, disciplinary and grievance issues, and restructuring and redundancy exercises. Read Paul McGrath's full bio.

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