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What would a ‘Brexit’ mean for UK employment law?

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On 23 June 2016, the UK will vote on whether to stay in the European Union. The implications for HR could be huge, as a significant proportion of our employment law comes from Brussels.

Once out of the EU, the UK government could in theory repeal discrimination laws, collective consultation obligations, transfer of undertakings regulations, family leave, working time rules and duties to agency workers among other laws.

But would the government really do that? In practice, it is unlikely to take such drastic action and the probability is that many of these laws would continue to regulate the HR landscape even after a ‘Brexit’.  

What would change?

One reason for this is that many EU employment protections, such as equal pay, race and disability discrimination laws, existed in some form in the UK before being imposed by Europe. Similarly, there was a UK right of return from maternity leave before EU parental rights were enacted. It seems unlikely that a UK government would rescind rights that predate European laws. 

Another reason that the government might be reluctant to repeal employment law protection is that much of it is regarded, by employers, employees and even by politicians, as a good thing. Employment rights such as family leave, discrimination law and even the right to paid holiday are now widely accepted; indeed, family leave rights in this country go further than required by EU directives.

Finally, one very pragmatic reason for the UK to continue to follow European employment law is that, it will wish to stay in some sort of trading relationship with the EU, its biggest export partner, albeit not full EU membership. The arrangements that Switzerland and countries in the European Economic Area, such as Norway, have with the EU involve adherence to a significant amount of EU employment law. Any trade agreement between the UK and the EU is likely to require something similar. 

If the UK does vote to leave, it would take some time to extricate itself from the EU. Two years’ notice is required, during which period the parties would negotiate the terms of departure and possibly put in place new trading arrangements. Some commentators believe it will take considerably longer than that to agree exit terms.  

Even after the process was completed and the UK had left the EU, European law might continue to apply in one way or another. Some EU-derived laws are contained in secondary legislation made under powers given by the European Communities Act 1972 (ECA), the law that implements EU law in the UK. If the ECA was repealed, all the secondary legislation made under it - such as the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) - would fall away unless preserved by another piece of legislation. The repeal of the ECA would not, however, affect EU law implemented through primary legislation, such as the Equality Act 2010. Primary legislation would remain in force until repealed piece by piece.

It is therefore unlikely that all EU law would be removed at once. The approach is more likely to be gradual, with legislation being repealed – or merely modified – over time. For the reasons already mentioned, any wholesale repeal of equality protection or family leave seems unlikely. It is possible though that, following a ‘Brexit’, a cap could be imposed on compensation for unlawful discrimination.

The laws most unpopular with business are TUPE, the Working Time Regulations 1998 (WTR) and the Agency Workers Regulations 2010 (AWR). The most likely contender for repeal is the AWR, which is unwieldy and not noticeably popular with workers either. 

TUPE attracts bad press, but the principle that employees should transfer when a business changes hands or is contracted out is well recognised and the basis of many commercial outsourcing agreements. Many aspects of the WTR are also now broadly accepted. The government might just choose to tweak these laws to make them more commercially acceptable – for example, by making it easier to harmonise terms following a TUPE transfer, removing the cap on weekly working hours or limiting rights to accrue and carry over holiday pay. 

If we retain some EU law following a ‘Brexit’, the UK courts are likely to continue to regard judgments of the European Court of Justice (ECJ) on those laws as persuasive, even if not binding. In any event, pre-‘Brexit’ UK court decisions incorporating ECJ reasoning would remain binding on lower courts and tribunals. It is not clear how far UK courts would be able to treat exit from the EU as a material circumstance that would allow them to depart from precedent. They might do so, but could feel obliged to follow precedent in order to preserve legal certainty. 

In short, the EU seems likely to exert a significant continuing influence on UK employment law whatever the outcome of the referendum. 

James Davies

By James Davies

James is a partner in the employment team at Lewis Silkin LLP

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