After Brexit: the employment law outlook

The UK left the EU on 31 January 2020 with a withdrawal agreement in place, a transition period and a framework for negotiations on the future relationship between the EU and the UK. Until 31 December the UK was in the transition period during which, for all practical intents and purposes, it remained an EU member. On that date, most EU laws were converted into UK law indefinitely, unless and until they are adapted. This ensures that the UK has a functioning statutory framework post-Brexit.

The Brexit trade deal between the EU and the UK commits both sides to a level playing field in relation to employment law rights. Both sides have some flexibility to reduce or weaken the level of rights in place on 31 December 2020, provided the change does not affect trade or investment between the EU and the UK. The deal contains a commitment that both parties will continue to strive to increase employment law rights.

The trade deal prohibits either the UK or the EU reducing or weakening the level of rights in place on 31 December 2020, but only in a manner that affects trade or investment between the UK and the EU. This means that the UK Government cannot significantly overhaul UK employment law (where it stems from retained EU law). This note outlines the key day-to-day areas where employment lawyers have speculated there could be change in the post-Brexit era.

Working Time Regulations: holiday pay and working time

There are several aspects of the Working Time Regulations 1998 (“WTR”), which implemented an EU directive, that the Government may decide to amend post-Brexit. Some UK employers may be frustrated with case law developments in this area, particularly those that allow employees to accrue holiday whilst on sick leave and, in certain circumstances, carry over any unused holiday into the next year. If the Government of the day decides to take an employer-friendly stance, this may change.

Holiday pay is another area where employers would welcome change. The current calculation for holiday pay is not simply based on basic pay; the European Court of Justice has held it must correspond to “normal pay”. This has led to a series of domestic judgments on what holiday pay should or should not include. Employers must include elements such as commission and overtime. A UK Government could decide to change this so that basic pay alone would become the benchmark again. This is unlikely to affect trade or investment.

A further potential change under the WTR is in relation to the 48-hour weekly limit. As employers may be aware, a worker's average weekly hours calculated over their reference period (usually 17 weeks) must not exceed 48 hours, unless the worker has opted out. It may no longer be necessary to obtain this opt-out from workers if the Government removes this requirement. However, removal of the 48-hour weekly limit might be more likely to have an impact on trade or investment.

TUPE

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) are not universally popular amongst employers. The Government will have to keep the provisions for the most part to protect maintain the level playing field, but it may amend certain aspects to make it more employer-friendly. For example, it may allow transferee employers to harmonise terms and conditions following a transfer more easily. At present employees' terms are protected on transfer and TUPE does not permit changes, other than in certain limited circumstances. This has the potential to impact on trade and investment, but under the procedures agreed to resolve any disputes, the party concerned about an impact on trade or investment must base its assessment on reliable evidence, not “conjecture or remote possibility”.

Agency workers

The Agency Workers Regulations 2010 (“AWR”) have never been popular amongst employers. They also have not become so fixed in employment law that they are now unmovable. Therefore, at first glance, the AWR are a prime candidate to be completely revoked. However, following the recent employment law updates that took effect in April 2020, it would appear that the Government does not intend to make any changes to these regulations. The changes made in April have afforded greater rights and protections to agency workers (for example, removing a significant exemption to the right to equality of pay).

Discrimination

We are not likely to see significant change in discrimination law, and not just because of the level playing field commitment. The UK had legislated to protect against certain types of discrimination (such as sex, equal pay and race) before the EU introduced similar legislation. In some areas EU law has improved and extended rights and it has also introduced protection for other characteristics, including age and sexual orientation. The principle of protecting employees from discrimination is now very much entrenched in employers' practices and it is almost unthinkable that a Government would seek to roll these protections back. 

There have been suggestions that the Government might bring in a cap on compensation in discrimination claims (as there is for unfair dismissal claims). This might breach a requirement in the EU/UK trade deal for both sides to maintain a system for effective enforcement of rights, including effective remedies. It is also possible that the Government would legislate to permit positive discrimination in a wider range of circumstances than EU law allows.

Family-related leave and pay

The legislation covering family-related leave and pay derives from a combination of UK law (for example, maternity leave and pay) and EU law. In some respects, UK law is more generous than the minimum requirements set by the EU. It is therefore unlikely that the Government will make changes in this area simply because of Brexit.

Redundancy consultation periods

Some commentators believe the minimum duration of collective redundancy consultations could be reduced. However, trade unions would likely oppose any plan, and employees and employers may not feel particularly strongly about making any change to the process, which is now well established in the UK and in itself is not overly onerous.

Areas of imminent change

European Works Councils

This is one area that has already seen change. From 1 January 2021, no new requests to set up European works councils in the UK are permitted. The Government has committed to preserving the rights and protections for employees in the councils. However, co-operation from other member states will be required. Where central management of an EWC is in the UK, the employer will need to transfer this to another member state or it will default to the member state with the most employees.

Immigration law

The new immigration system came into force on 1 December 2020 and, from 1 January 2021, EU and non-EU nationals are treated equally. Employers recruiting EU nationals to arrive and start in the UK from 1 January 2021 will need to ensure that the correct visas are in place.

Conclusion

It is unlikely that there will be any significant and immediate change to UK employment legislation post-Brexit, although, if change does occur, it is most likely to be in the areas highlighted above. Future Government policy, as well as the terms of the EU/UK trade deal, will dictate whether any changes are made, and those changes will depend on whether that Government is more employer or employee-friendly. Changes will also be dependent on parliamentary time. Other, more pressing matters may take precedence given that the employment legislation framework does not require any immediate attention.