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Work It Out: Implications of a Brexit for UK Employment Law

There is a general view held by many employers that Britain’s membership of the European Union (EU) has resulted in the country’s employment laws being drafted in Brussels rather than in Westminster.  Certainly UK legislation must be compatible with European regulations, whilst decisions in the UK courts are also informed by determinations in the European Court of Justice (ECJ).  Key areas of UK employment law such as protection from discrimination, employment rights in a transfer of undertakings (TUPE), working time regulations and family-friendly rights have derived from European legislation.

On 23 June 2016, the UK government will hold a referendum on whether Britain should remain a member of the EU.  If the Out campaign succeeds, then in principle the UK could repeal its employment laws and replace them with new ones that do not have to comply with EU regulations. However, the UK will not leave for at least two years after the referendum whilst the terms of the exit are negotiated with the EU.  There are also a few choices available to the UK which would see them maintain some form of connection with the EU, either by remaining part of the European Economic Area in the same way as Norway, Iceland and Liechtenstein, or negotiating bilateral agreements with the EU as Switzerland currently does. In either case UK law would remain heavily influenced by European laws.

The negotiations and the ultimate exit are unlikely to lead to wholesale changes to employment law in this country even if a different arrangement is agreed with the EU. If the UK is to remain part of the single market, it will be expected to comply with EU rules.  There is always the possibility of a full Brexit, whereby the UK does not remain part of the EU in any shape or form, but this is unlikely given the strong trade connections; a full separation would still see the UK having to agree to comply with certain EU laws as part of trade agreements.

So what changes can realistically be expected in English employment law in the event of a Brexit?

Working Time

The Working Time Regulations 1998 introduced a statutory entitlement to a minimum of 5.6 weeks’ paid holiday each year, inclusive of public holidays. Whilst this is unlikely to be repealed in the event of a Brexit, certain aspects regarding the calculation of holiday pay may be changed. Recent decisions of the ECJ have resulted in employees being able to continue accruing holiday during sick leave and in holiday pay being calculated on the basis of all remuneration (such as overtime and commission) rather than just basic salary. This has created headaches for employers that the UK government will be under pressure to remove. A Brexit could also result in the weekly cap on working hours (currently 48 hours) being removed, although given that most employees opt out of this maximum it is unlikely to be a priority to legislators.

TUPE

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) are a notorious minefield for employment solicitors.  Intended to protect employees affected by the transfer of a business or undertaking (or a discernible part of the same) such that their employment transfers with the business, TUPE has been criticised for being complex and creating a costly burden for employers.

The UK government is unlikely to remove the protections afforded by TUPE, but an exit from the EU would allow the UK government to simplify certain aspects, such as allowing harmonisation of the terms of transferred employees to match those of the existing workforce. Currently, such harmonisation, if refused by an employee, can result in an automatically unfair dismissal.

Parental Leave and Pay

Many people believe that the EU creates a culture of entitlement for employees that the UK would not otherwise have, but in truth many of the rights in place do not derive directly from the EU and/or are more generous than the European requirements. Maternity leave and pay was already in place prior to the UK joining the EU, and the current entitlement of 52 weeks’ leave is far more than the 14 weeks required by the EU. Similarly, the newer rights of shared parental leave and the right to request flexible working are entirely UK government constructs. This area is therefore unlikely to change whilst the political focus remains on helping working families.

Discrimination

Although much of anti-discrimination legislation in the UK derives from the EU, it is unlikely that there would be significant changes to the law following a Brexit. Any material changes would most likely be met with resistance from unions and the general workforce, so it would be difficult to see any government wishing to utilise a Brexit to make wholesale amendments.

However, the interpretation of the law will be kept within the UK’s tribunals and courts rather than needing to be compatible with ECJ decisions.  Additionally, it has been proposed that a cap on compensation in discrimination claims could be introduced. Currently compensation in such claims is uncapped but damages in some claims within the employment tribunal, such as unfair dismissal, are limited to a maximum amount.

 

Matthew Cranton - Employment & Immigration

This article was first published on 6 April 2016 as part of our Employment Law Update series. Register above to receive our updates as soon as they are published, directly to your inbox! 

 

This article is offered for general informational purposes only, and does not constitute legal advice. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views or opinions of Solomon Taylor & Shaw.