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 "Great Repeal Bill" that will be put before Parliament next year. 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 Great Repeal 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:
- the Bill will convert EU law which is directly applicable in the UK into UK law;
- it will preserve all UK laws that implement the UK's EU obligations (ie. EU law which is given effect through national law);
- 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
- 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 Great Repeal 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 recently 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.
- 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
- Despite speculation, there has been no indication that 29 March 2017 (the date that Article 50 was triggered) will operate as a "cut-off date" when EU citizens who move to the UK will no longer enjoy the same rights as before. It seems that this will now be determined during the negotiation period.
- 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. This is likely to affect current and future workers from the EU who are working in the UK and UK nationals working within other EU countries, who may be subjected to similar and reciprocal restrictions on working rights. We are likely to see greater control of EU immigration but this will need to be balanced against maintaining trade links with Europe, either as part of the single market or otherwise 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.
- The White Paper is clear that it is not the purpose of the Great Repeal 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?
This article is part of our Brexit series
- 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. Although no immediate changes have been announced, immigration policy will 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 permanent residency and/or dual citizenship which would be likely to preserve working rights and, potentially, freedom of movement following Brexit. It is also possible that those employees who do not yet qualify for permanent residency/citizenship would be able to apply for a residence card as evidence of their right to live/work in that country. This could prove to be a useful way of demonstrating when an employee first began exercising his EU Treaty rights in a country, particularly if the protection of an employee's legal status (when based on EU principles) has a cut-off point in a post-Brexit immigration regime. 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.