The EU referendum – how would 'Brexit' affect UK Employment laws?

Posted by Max Craft on
This article was originally posted on 3 May 2016, but was updated on 24 June 2016 following the referendum result.

On 23 June voters across the UK decided the UK should leave the European Union (EU). Having been a part of the EU/European Community since 1973, many voters had to educate themselves on (and imagine) what differences would be felt if the UK were not subject to EU laws. We consider what difference the referendum result might make to UK Employment laws.

The changes that could be made are heavily dependent on any trade agreement reached in the event of a vote to leave the EU. Countries like Norway and Switzerland are not in practice free from the constraints of EU Employment laws. If, exceptionally, the UK managed to negotiate a different deal, some of the EU-derived rights (explained further below) that could be in the firing line are:

  • Collective consultation rights
  • Certain Working Time rights
  • Some aspects of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
  • The Agency Workers Regulations 2010
  • Some Health and Safety regulations deemed to be an unnecessary burden.

As many will be aware, the UK is required to give a minimum of 2 years' notice of withdrawal from the EU. With a vote to leave the EU, this is likely to be a period when the UK would seek to put in place new trade agreements, potentially including access to the Single Market via membership of the European Free Trade Association (EFTA) like Switzerland, and/or the European Economic Area (EEA) like Norway.

However, one of the key points made by commentators is that membership of the EFTA or EEA may still require the UK to have in force legislation equivalent to the employment and social laws of the EU, and to recognise the free movement of persons. For example, a case in Norway in 2015 about working time was determined by the EFTA Court, which looked at the requirements of the Working Time Directive, despite Norway not being a member state of the EU.  Such a trade agreement could significantly limit the effect that would be felt on Employment law.

Untangling Employment laws from Europe

Many regulations on Employment law which are derived from EU law are made under the European Communities Act 1972 (ECA 1972). Commentators suggest that the Government is unlikely to repeal the ECA 1972 (whereby the Act would be treated as if it had never been made) without first putting transitional provisions in place, as it would result in legal chaos.

In addition, some EU-derived rights are set out in UK Acts of Parliament (for example the Equality Act 2010 and the Employment Rights Act 1996), or in regulations wholly or partly made under other Acts. These would mostly be unaffected by a repeal of the ECA 1972. However, some Acts of Parliament give the Government a power to reduce the burden of legislation on businesses, subject to certain safeguards, and these could be a means of (relatively quickly) removing or changing certain EU-derived rights made under other Acts.

Separately, consideration would need to be given to the effect on the devolved administrations in Wales, Scotland and Northern Ireland and the areas which fall within their remit rather than that of the UK Parliament.

Which laws might be changed?

If the Government chose to make changes, what are the Employment laws that could be affected?

Assuming any trade agreements would not be a hindrance, the question of which laws might be affected is really a political one. Unfair dismissal, the national minimum wage, equal pay, sex, race, and disability discrimination were all introduced in the UK independently of EU law, even though some have subsequently been developed by it. While many discrimination rights emanated from Europe (such as religion or belief, sexual orientation and age discrimination), the way society has developed would likely make any attempt to repeal such laws hugely unpopular. What is more likely is a tinkering around the edges, such as a cap on compensation for successful discrimination claims, which is currently prohibited by EU law.

Last week, Prime Minister David Cameron and Sir Brendan Barber, former leader of the TUC and current chair of ACAS, published a joint letter in the Guardian seeking to persuade voters to remain in the EU. It is perhaps telling that in it they did not focus on the potential risk to workers' rights, but on the losses to jobs, damage to workers' wages and rising prices. The letter simply referred to certain workers' rights which are "guaranteed by Europe" and stated that "all could be at risk if we left". The truth is that legally they could be at risk – but politically it would be a brave government to scale back all but the most minor of workers' rights and burdens on business.

Suggestions for the type of rights which may come under attack from this or future governments are:

  • Collective consultation rights, for example in redundancies or under the Information and Consultation of Employees Regulations 2004
  • Working Time Rights – particularly in relation to annual leave. Again, while a move away from paid annual leave would be extremely unpopular, changes to clarify problem areas are more likely, such as holiday pay during sick leave or family friendly leave, when holiday may be carried over and for how long, and whether commission and overtime payments should be included in holiday pay.
  • The Transfer of Undertakings (Protection of Employment) Regulations 2006, particularly in relation to harmonising terms and conditions following a transfer.
  • The Agency Workers Regulations 2010 – which are said to cost a substantial amount to businesses whilst not particularly assisting agency workers, many of whom are unfamiliar with their rights. Removing the equality rights of other 'atypical workers', such as those working part-time or fixed-term, is unlikely to be well-received in the current climate, as demonstrated by the bad press surrounding zero-hours contracts.
  • Some health and safety regulations in so far as they are deemed to be an unnecessary burden on businesses.

Despite regular complaints by businesses in relation to family friendly rights, changes to those rights are unlikely, given that they are generally more generous than EU law (such as maternity leave and pay) or introduced independently of it (such as adoption leave and shared parental leave).

Nevertheless there may be areas where a deregulatory-minded government would not change substantive rights but would introduce certain exemptions for micro-businesses.

Whilst the future is uncertain and heavily dependent on any trade agreement reached in the event of a vote to leave the EU, any changes to Employment law are not likely to be that dramatic. There would perhaps be no more than a gradual tinkering of certain areas where, in the Government's opinion, EU law (or the interpretation of it by the European Court of Justice) has just gone a step too far. 

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Max is a Consultant in our employment team.

Max Craft
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