Brexit - what will it mean for employment rights?

EU membership has had a significant impact on employment rights. Matt Bradbury examines the potential impact of Brexit on workers’ rights

Background

In June 2016 the United Kingdom voted in a referendum to leave the European Union. While there are still many political unknowns about when and how that will be achieved, there are some certainties about how the framework of the law will need to change depending on the form our future relationship with Europe takes.

Like all members of the European Union (EU) the UK must currently abide by EU law.

EU treaties and Regulations have direct effect in member states, meaning no domestic legislation is required in order for them to apply. However, EU Directives which set out the majority of European measures relating to workers’ rights do not have direct effect, and so member states are required to enact domestic law to give effect to them; this is sometimes described as ‘horizontal’ effect.

EU-derived law may be introduced via primary or secondary legislation. The European Communities Act 1972 (ECA) allows the government to introduce secondary legislation without full Parliamentary approval.

The ECA 1972 also makes decisions of the European Court of Justice (ECJ) binding on UK Courts and tribunals when they are called upon to interpret domestic law derived from EU Directives.

As an example of this in practice, the EU Working Time Directive (2003/88/EC) is a health and safety Directive implemented in order to ensure adequate work/life balance for EU workers. It requires member states to legislate for limits on the working week, the right to daily and weekly rest, the provision of at least four weeks paid annual leave and additional protections for night workers. It was given effect in the UK by the Working Time Regulations 1998 and decisions in the ECJ that relate to the Directive must be followed by the UK courts and tribunals when interpreting the Regulations.

With regard to the right to paid holiday under the Working Time Regulations 1998 as enacted, the Regulations used a formula for calculating a ‘week’s pay’ which was based on the bare minimum weekly hours guaranteed under a worker’s contract. These hours did not include typical working weeks that were longer than the contract stipulated, overtime, bonuses or commission. A series of decisions of the ECJ has forced the UK courts to depart from the language of the Regulations so that holiday pay must be calculated according to a worker’s ‘real’ income. The ECJ’s reasoning is that the purpose of paid holiday is to ensure that workers take it, in order to achieve a healthy work/life balance. They will be dissuaded from doing so if their holiday pay is less than their typical pay, therefore all payments should be included in the calculation.

The principle that compensation for discrimination cannot be capped also derives from EU case law as a result of which UK Equality legislation was amended to that effect. If ECJ decisions are this is no longer binding then, while rights around discrimination would not change until the Equality Act 2010 was amended, the UK government would be free to do so in order to cap what an employee can be awarded as compensation.

There are a number of rights and areas of employment law that could possibly be affected if we leave the EU

UK employment rights with links to EU Directives include:

• Discrimination rights including equal pay rights and the protection of pregnant workers under the Equality Act 2010, and rights to maternity and parental leave
• Protections for part-time workers
• Protections for agency workers
• Working time rights; limits on the working week, rest breaks, annual leave and protections for night workers
• Rights to consultation about collective redundancies, TUPE and health and safety
• Legal rights in respect of TUPE transfers themselves
• Health and safety legislation
• Rights on the insolvency of an employer

It is also a European requirement that member states provide sufficient mechanisms for workers to enforce their rights by way of reasonably affordable and appropriate access to justice.

The shape of employment rights after we leave the EU will be partly decided by the future relationship we agree with the rest of Europe. What could happen?

The process for leaving the EU will begin with the triggering of Article 50, expected to take place in early 2017, followed by negotiations on the withdrawal of the UK from the EU which will be no more than two years later, unless an extension can be agreed. The UK will continue to be an EU member until the end of this period.

After Brexit is concluded, further negotiations will commence to determine the UK’s future relationship with the EU which, it has been estimated, could take up to a decade to complete. It is possible that until the negotiations are completed, interim arrangements might be agreed, which could mean that EU law continues to have effect for that further period.

The government has already stated that the invoking of Article 50 will lead to the annulment of the ECA, to be replaced by a Great Repeal Act. This will be introduced in the Queen’s Speech in May 2017 and will come into force when the Article 50 negotiations are completed.

The annulment of the ECA will remove the obligation for UK courts to interpret domestic law in line with EU law.

Although existing EU derived law will not be scrapped wholesale, the government of the day will be free to review existing rights and protections. To what extent they do so will depend on what form the UK’s new relationship with Europe will take. That is, membership of the European Free Trade Association (EFTA) and/or the European Economic Area (EEA) would require some rights to be maintained, whereas a complete break would give the UK a free hand to make purely domestic decisions about employment rights. Freedom of movement would likely be non-negotiable if so-called ‘soft Brexit’ was the outcome, for continued access to the single market.

Joining EFTA and/or remaining part of the EEA

This is the so-called ‘soft Brexit’ option. EU and EFTA states are collectively referred to as the EEA. EFTA states are not EU members and currently consist of Iceland, Liechtenstein, Norway, and Switzerland. All four have access to the single market — which includes the free movement of goods, capital, services and people. However they have each negotiated different arrangements with the EU in order to participate.

For example, Norway operates under the EEA model, which makes it subject to around one in five EU laws. The EEA Agreement requires that participating members be bound by EU law in relevant areas. They cannot opt out of the four freedoms of the single market, the free movement of goods, service, capital and people, and must adopt EU law as it applies to employment rights. Switzerland, on the other hand, rejected EEA membership in a referendum. It has therefore negotiated a series of bilateral agreements with the EU which mean it must accept EU law in certain areas, including the free movement of people, security and asylum arrangements, agriculture and trade policy, amongst others.

If the UK eventually negotiated an arrangement similar to Norway or Switzerland where we stayed within the EEA or EFTA, we would need to agree to be bound by EU employment law to some degree. However, we may have opt-outs in certain areas.

Leaving EFTA and the EEA completely

This would involve the UK leaving the EU and rather than negotiating terms for EFTA/EEA membership and access to the single market, going it alone as a member of the World Trade Organisation (WTO).

Trading with Europe would take on a wholly different dimension where we would either have to negotiate separate deals with individual EEA members or negotiate some kind of free trade deal with the whole of the EEA. Both approaches could be very difficult.

We would not be required to participate in freedom of movement and would not be bound by any constraints of EU law. Workers would not necessarily face immediate removal of employment rights. A government that was minded to do so would still need to reorganise, repeal and amend UK legislation.

Conclusion

It is unclear exactly what will happen to the laws of the United Kingdom post Brexit, or indeed when Brexit will happen. There is considerable uncertainty but there is no doubt that this is a period of considerable change which has the capacity to change the face of the legal, political and economic landscape for many years to come.

Matt Bradbury is an employment expert at Citizens Advice and employment subject editor on the Adviser editorial board.