Brexit: Employment and Immigration Law implications - the latest position

10 October 2017

Elizabeth Lang, Ian Hunter, James Froud

On 29 March 2017, the UK government served formal notice under Article 50 of The Treaty on European Union to terminate the UK's membership of the EU (following the June 2016 UK referendum on EU membership). Based on Article 50, the EU Treaties shall cease to apply to the UK and the UK exit will take effect in March 2019 (subject to the unlikely possibility of the withdrawal agreement being concluded sooner and unless all Member States agree to extend the period).  Negotiation of a new trade agreement with the EU could take several years beyond 2019 although the Prime Minister has declared the objective of achieving such an agreement within the two-year period.

The government also published a White Paper on 30 March 2017 which relates to the European Union (Withdrawal) Bill that passed its second reading in the House of Commons on 11 September 2017. The Bill will repeal the European Communities Act 1972 that currently gives EU law direct effect in the UK and primacy over UK law. A foreword to the White Paper from David Davis, Secretary of State for Exiting the EU, clarifies that "the [European Union (Withdrawal)] Bill will convert EU law as it applies in the UK into domestic law on the day we leave – so that wherever practical and sensible, the same laws and rules will apply immediately before and immediately after our departure". The key features of the Bill that are outlined in the White Paper are as follows:

  1. the Bill will convert EU law which is directly applicable in the UK into UK law;
  2. it will preserve all UK laws that implement the UK's EU obligations (ie. EU law which is given effect through national law);
  3. the rights in the EU treaties that can be relied on directly in court by an individual will continue to be available in UK law (and the UK courts will continue to be able to look to the provisions of EU treaties to interpret the EU laws that are preserved); and
  4. the Bill will provide that historic CJEU case law be given the same binding, or precedent, status in UK courts as decisions of the Supreme Court.

The White Paper also explains that the Bill will allow "corrections" to be made to UK laws through secondary legislation where there are provisions that will not function properly by simply preserving EU-derived law. This may include amending the law prior to Brexit to remove references to EU obligations or institutions where the UK is no longer subject to or party to them.

In relation to conflicts that may arise between preserved EU-derived law and primary legislation passed by Parliament after Brexit, the White Paper confirms that the latter will take precedence so as to end the supremacy of EU law.

Workers' rights are specifically referenced in the White Paper as an area where existing law will be preserved under the European Union (Withdrawal) Act. It remains the case therefore that there is no indication that we should expect drastic changes to entrenched and long-standing employment concepts following Brexit.

What more do we now know about the impact of Brexit on UK employment law?

Many aspects of UK employment law are outside the scope of EU law or in excess of EU requirements, including minimum wage legislation, unfair dismissal rights and certain holiday and parental leave rights. The government has promised to continue to protect and enhance such rights post-Brexit. However, numerous EU concepts have become entrenched in the workplace such as TUPE, many aspects of discrimination law and collective redundancy requirements. So what is likely to happen to these?

As per 4 above, in order to ensure workers and employers have legal certainty, where there are questions relating to the interpretation of preserved EU-derived law, the government has confirmed that these will be determined in UK courts by reference to the case law of the Court of Justice of the European Union (CJEU) as it exists on the day the UK leaves the EU.

Importantly, such case law will be given the same status as the decisions of the Supreme Court so where CJEU judgments have given workers additional protections, these will be preserved after Brexit.

  • Holiday Pay: The White Paper refers specifically to the calculation of holiday pay entitlements as an example of an area where existing CJEU case law will be applicable after Brexit. Recent CJEU decisions have established that workers must accrue holiday during sick leave and that holiday pay should include certain variable elements of pay, beyond an employee's basic pay, notably overtime and commission. The position in respect of the latter was confirmed by the Court of Appeal in the case of Lock v British Gas which upheld earlier decisions of the Employment Appeal Tribunal, that domestic legislation should be interpreted to give effect to EU law such that results-based commission should be included in the calculation of holiday pay. Thousands of cases are going through the Tribunals to determine how the UK courts must approach this matter, with substantial potential liabilities for a large number of employers. It appears that such courts will remain bound by existing CJEU decisions relating to holiday pay even after the UK leaves the EU.

  • Discrimination: In part, the Equality Act 2010 (EA 2010) codifies previous discrimination legislation that has existed in the UK for some time, particularly in relation to sex, race and disability, and most believe that there will not be wholesale change in this area of law. The White Paper confirms that all the protections in the EA 2010 will continue to apply once the UK has left the EU. There is no indication at present therefore that there be any changes to this area of law.

  • TUPE:  TUPE is embedded into UK business practices and the protection it affords to employees in the event of an asset transfer or outsourcing is generally considered to be reasonable and in the interests of businesses and employees. However, significant restrictions on harmonising terms and conditions after a transfer cause employers real difficulty. Again, given the assurances in the White Paper that workers' rights will be preserved, it is unlikely that the government will choose to make any significant changes at present, especially now that it has been confirmed that the vast CJEU case law relating to the Acquired Rights Directive (2001/23/EC) will continue to be binding after the UK leaves the EU.

  • Agency workers: The Agency Workers Regulations 2010 are notoriously unpopular with employers because of the requirement that after a 12 week period agency workers must receive the same working terms and conditions as permanent employees. Before they were implemented into UK law the government resisted them and indeed the 12 week waiting period was a concession made for the UK. It was initially thought that these Regulations may be repealed following Brexit although any immediate changes now seem unlikely as the Department for Exiting the European Union has confirmed that these rights will continue to be available domestic law.

  • Equal Pay: In accordance with point 3 above, the White Paper highlights by way of example that employees will continue to be able to rely on the direct effect of Article 157 of the Treaty on the Functioning of the European Union (TFEU) where it would allow them to pursue a right that is not otherwise allowed under domestic law. In the equal pay arena, Article 157 of the TFEU allows comparisons to be made between workers "in the same establishment or service" such that comparisons are not confined to a single employer or even associated employers.

    It is worth noting that the White Paper does refer to potential additional measures to address "the circumstances in which [a departure from existing CJEU case law] might occur". It is unclear at present what such measures may be and whether the circumstances in which the Supreme Court can depart from established CJEU case law will be prescribed in any level of detail.

Freedom of movement

On 26 June 2017, the Government published a White Paper setting out its proposals for the status and rights of EU citizens in the UK after Brexit in the expectation that the EU will offer reciprocal treatment for UK nationals resident in its member states.  The proposals are made with reference to a 'cut-off date' which will be between the date on which the UK served its Article 50 notice to leave the EU (29 March 2017) and the date on which the UK actually exits the EU. 

Further, on 5 September 2017 the Home Office Post-Brexit Immigration Document (the "Immigration Document") was leaked to the public by the Guardian newspaper. The Immigration Document expands on the White Paper and, whilst it makes it clear that no final decisions have been made, it does provide the clearest indication yet on the Government's policy towards EU nationals and their (EU and non-EU) family members. Specifically, the Immigration Documents sets out what the position will be for those EU nationals and their families who: (1) are in the UK "before exit"; (2) come to the UK during the transitional two year period following our exit (known as the "Implementation Period"); and (3) arrive after the Implementation Period. 

A summary of the main proposals set out in the White Paper and the Immigration Document are as follows:

1. 
Coming to the UK "pre-exit"

  • Settled Status: EU citizens present in the UK before the cut-off date with five years continuous residence in the UK may apply for a new 'settled status' which will be similar to 'indefinite leave to remain' under current UK immigration law as it applies to non-EU nationals. The current proposal is that EU citizens who have obtained permanent residence under existing free movement laws will need to apply for settled status. Obtaining this documentation will demonstrate to employers that they have ongoing rights to live and work in the UK, irrespective of any migration controls the Government may introduce for EU citizens arriving after Brexit.

  • Temporary Status: EU citizens present in the UK before the cut-off date without five years continuous residence in the UK can apply for a 'temporary status' in order to remain in the UK long enough to accumulate the five years continuous residence necessary in order to apply for settled status.  As with settled status, this document will demonstrate to employers that they have permission to continue to live and work here legally.

  • Non-EU family members: Non-EU family members of EU nationals who are lawfully present in the UK before the cut-off date will be granted "deemed leave" and can apply for either settled status or temporary leave. However, in order to work or study, such family members will need to apply for a residence permit.

2. The Implementation Period

Immediately after leaving the EU, the UK will enter a transitional implementation period. During this period, the Free Movement Directive (which currently permits EU nationals to live and work in the UK without restriction) will no longer apply, with the proposal being that a new Immigration Bill will repeal current EU-derived free movement provisions so as to bring EU nationals within the ambit of the UK immigration regime. The proposal is that relatively few changes will be made to the current rules relating to work, study, self-employment and self-sufficiency.

  • Grace Period: The Home Office intends to provide a blanket permission, which will start immediately upon the UK’s exit from the EU and is likely to continue for up to two years. During this interim period, EU citizens living in the UK will be able to apply for the applicable residence documentation. EU citizens who move to the UK after the cut-off date may remain during the grace period; although their continued residency will be dependent upon meeting the conditions in the new rules which have not yet been determined. The Government has indicated that there should be no expectation that people arriving after the cut-off date will be guaranteed settled status.

  • Unrestricted Period: For those EU citizens arriving in the UK during the Implementation Period to undertake a lawful activity such as visiting, working or studying there will be an unrestricted period where individuals will be granted "deemed leave" for a set period – most likely 3 months. If an EU citizen continues working beyond the unrestricted period, without obtaining a residence permit (see below) then the employer will be liable for criminal sanctions if they know or have reasonable cause to believe that an EU citizen is working for them without permission. The Home Office has also proposed that EU citizens will need to demonstrate their right to work from the start of the Implementation Period by showing their passport (rather than a national ID card). It will be for employers to check that individuals have a right to work in the UK, as is currently the case, but as it is not expected that passports will be stamped, it may make it difficult for employers to determine if they are working beyond their unrestricted period. The Home Office will publish further proposals in due course.

  • Lawful activities: During the Implementation Period it is expected that EU citizens coming to the UK to travel as a visitor will not need individual visas and will be able to enter using their EU passport. However, the Home Office has suggested that there may be an electronic pre-registration process for certain travelers similar to the US ESTA program or the proposed EU ETIAS initiative. 

  • Residence Permit: Those EU citizens who wish to remain in the UK longer term would need to apply for a residence permit. The criteria for such may include proof of employment/self-employment and meeting a minimum earning threshold, building on the criteria set out in the EU Free Movement Directive. The Home Office has mooted extending current immigration schemes under the Points-Based System (such as the Tier 2 (Intra-Company Transfer) and Tier 5 (Youth Mobility) schemes) to EU nationals. There will also be arrangements put in place to allow EU students to finish university courses.

  • Family members:

    • EU citizens arriving in the UK during this period will be able to bring their dependents with them, or be joined by them at a later date, provided that they apply for temporary leave to remain alongside their sponsor throughout the Implementation Period.

    • Non-EU family members will need to apply for permission to travel to and remain in the UK if they arrive during the Implementation Period and will not be granted 'deemed leave' at the border like those who arrive pre-exit (see above). It is anticipated that the process will be similar to applying for a Family Permit but it will be mandatory. Non-EU family members will need to meet requirements based on those that currently apply to family members of British citizens. Specifically "family members" will be limited to spouses, durable partners, children under 18 and adult dependent relatives.

3. Post-Implementation Period

When the Implementation Period comes to an end, new permanent rules on immigration will come into force together with a new registration process which will process those arriving by way of temporary or permanent migration after the Implementation Period. The new rules are not yet clear but it seems that decisions will not be taken until advice of the Migration Advisory Committee [an independent body established to look at UK immigration and labour market trends] whose report is to be published at some point before September 2018. However, it has been suggested that after the Implementation Period the UK will become a signatory to the World Trade Organisation's General Agreement on Trade in Services ("GATS"). This will preserve some existing commitments such as intra-company transfer of employees coming to the UK to supply services and business visitors coming to the UK to sell services. Aside from GATS the new rules will potentially consist of: (1) the implementation of a Resident Labour Market Test for EU nationals; (2) a requirement that job offers be made to EU nationals prior to their arrival in the UK; and (3) requiring employers to recruit locally in the UK before considering EU nationals for the role.

The Prime Minister has made it clear that one of her key priorities in the negotiations with the EU will be to control immigration from within the EU and the current proposals will affect future workers from the EU.  UK nationals who are working within other EU countries are also likely to be subjected to similar and reciprocal restrictions on working rights. Following the UK's exit from the UK, we are likely to see greater control of EU immigration but this will need to be balanced against maintaining trade links with Europe and the potential impact on migrants from other important trading partners outside the EU (and EEA) such as the US, China and India. As many UK businesses depend on having a wide pool of labour and talent this is likely to become an acute issue.

There have also been concerns raised that EU migration is currently the only route for "low skilled" migration into the UK, as the Points-Based Immigration System will only enable businesses to sponsor certain roles that are deemed to meet minimum skill thresholds. This has resulted in claims of labour shortages and difficulties recruiting workers in a number of sectors, e.g. agriculture and horticulture.

The White Paper on the European Union (Withdrawal) Bill is clear that it is not the purpose of the Bill to introduce policy changes. Where this is the intention, the government has confirmed that new legislation will be required. As such the Paper refers to a separate immigration bill which will be debated by parliament and outline the position in relation to the rights of EU citizens (whether already resident in the UK or moving from the EU).

What do businesses need to be doing and what can we help you with?

  • You should consider auditing your workforce as soon as possible – in the UK and in Europe – to identify where employees who are working/based outside of their country of origin may be impacted by post-Brexit immigration regimes. Immigration policy has and is likely to continue to be hotly debated during the exit negotiations and businesses will need to be prepared to respond swiftly to any developments. In this regard, ensuring you have up-to-date and accurate intelligence regarding your workforce is important.

  • It is possible that EU nationals who are working in the UK and/or UK nationals who are working in EU member states will be eligible to obtain dual citizenship which would be likely to preserve working rights and, potentially, freedom of movement following Brexit. It may also be possible to obtain permanent residency but, under the current proposals, EU nationals who have acquired permanent residency would need to apply for settled status post-Brexit in any event. Employees who do not yet qualify for permanent residency/citizenship are able to apply for a residence card as evidence of their right to live/work in that country. The Government has indicated that this is not necessary (unless an individual is planning on also applying for British citizenship prior to the cut off date) but this could still prove to be a useful way of demonstrating when an employee first began exercising his EU Treaty rights, particularly if the employee will apply for settled or temporary status. We can assist with undertaking an immigration audit and with any residency (temporary/permanent) and citizenship applications. You should also review any pending expatriate arrangements and we can advise on any immigration applications that could be made now, ahead of Brexit.

  • Brexit has given rise to a number of reported incidents of racial harassment within certain communities and many EU nationals have reported being made to feel unwelcome and vulnerable. It is possible that employers will start receiving grievances and claims based on incidents within the work place. Harassment and anti-bullying policies should be reviewed and diversity training should be considered as measures to mitigate the risk of such claims arising.

  • There are reports of businesses losing contracts as a result of the uncertainty over the future and of redundancies as a result. It has now been reported that many financial institutions are already seeking to relocate their staff from the UK to other EU jurisdictions. You should ensure that any redundancy policies are up to date and check the requirements of any European Works Council arrangements, in preparation for any restructuring proposals which may arise.

This article is part of our Brexit series