12 July 2016

Post-Brexit Employment Law: Brave New World or Business As Usual?

This article was written by Cerys Williams, Counsel

Right now, predicting UK politics could be fairly described as a mug’s game. As we navigate through uncharted waters, our likely destination seems to change by the minute. At the time of writing, we have the Chancellor promising to make the UK the most business-friendly destination in the world, while at the same time our next Prime Minister is promising to deliver a government that represents working people. Can they both be right? Probably not, but it indicates that an interesting time is ahead. 

The extent of future legal change will be partly dictated by the type of relationship the UK negotiates with the EU, with some relationship models giving more scope for change (and different political angles) than others. Below we sketch out our predictions on what the two main options might mean for the future - but don’t hold us to it! 

Brexit creates the potential for significant employment law change and we expect to see some change and policy announcements very quickly. However, in the short- to mid- term we do not expect radical reform of employment law.

Short-term

  • We think that in the short-term (before Brexit takes legal effect), we may see a package of employer-friendly reforms intended to relieve pressure on employers threatened by the implications of Brexit and on maintaining the UK’s status and reputation as a desirable business location. These may be focused on reducing employment costs or simplifying dismissals/transfer of staff. 
  • Conventional wisdom is that the Brexit vote was a cry of dissatisfaction with the status quo from workers left behind by globalisation. This political pressure has already been acknowledged by the announcement of policy measures aimed at supporting improved worker participation in business and curtailing perceived excess in executive pay and we believe these changes will be implemented quickly.

Mid- to long- term

  • If the UK enters the EEA then it will remain bound by the vast majority of EU employment legislation, with the notable exception of discrimination protections (other than in respect of gender), although it is very likely that existing equality protections will be largely retained. Post-referendum government policy statements have already explicitly recognised the need to tackle inequality. Possible specific changes if the EEA model is adopted are outlined below.
  • If the UK formulates a bespoke arrangement with the EEA then there is scope for much more radical change in the long-term. However, we believe that other factors will mean that such changes will be relatively marginal for the foreseeable future. Possible specific changes if this model is adopted are outlined below.

Topic

EEA Membership

Trade Deal/Total Brexit

Unfair Dismissal

Prediction: moderate change

Changes that may be implemented could include:

  • compensated no fault terminations
  • exemption for micro-businesses

Given the additional difficulties posed for business by Brexit and, in this model, a lack of straightforward access to the single market, business lobby groups will almost certainly seek to use the increased competitive pressure on the UK to attract business to seek renegotiation of aspects of employment law. In particular we could see the introduction of compensated no fault terminations per Beecroft recommendations, which the government previously considered introducing in 2012.

Prediction: moderate change

Changes that may be implemented could include:

  • compensated no fault terminations
  • exemption for micro-businesses

Given the additional difficulties posed for business by Brexit and, in this model, a lack of straightforward access to the single market, business lobby groups will almost certainly seek to use the increased competitive pressure on the UK to attract business to seek renegotiation of aspects of employment law. In particular we could see the introduction of compensated no fault terminations per Beecroft recommendations, which the government previously considered introducing in 2012.

Discrimination & Equality

Prediction:  unchanged

In theory discrimination protections (other than in respect of gender) could be reduced, since the EEA has limited obligations under EU equalities law. However, it is unlikely that the UK would want to introduce a two-tier system with gender discrimination subject to different rules than for other protected characteristics

Prediction:  moderate change

Changes that may be implemented could include:

  • A cap on compensation;
  • Abolition of  injury to feelings awards;
  • Abolition of the reversed burden of proof;
  • Reversal of third party harassment protections;
  • Abolition of associative and/or perception discrimination; and
  • simplification of some of the complexities introduced by recent ECJ decisions including Chez.

 

Family Friendly Rights

Prediction:  unchanged

Given the extensive “gold-plating” of EU minimum requirements in domestic law, there is scope for rights to be scaled-back. Shared parental leave and the right to request flexible working, for example, are entirely domestic and were not introduced because of EU law.  However, we do not believe there is significant political appetite for this. These measures are considered to support increased participation in the workforce.

Prediction: unchanged 

We do not believe there is significant political appetite for changes to family friendly rights since these support increased participation in the workforce.

Data Protection

Prediction:  unchanged

The UK would need to continue to comply with EU legislation in this regard.

Prediction: unchanged (in practical terms)

Even outside the EEA, the UK will need to maintain a status of “adequacy” for data protection purposes, to facilitate trade with the EU.

Pay

Prediction:  moderate change

To ease financial pressure on business threatened by Brexit, we may see a reduction/deferral of the introduction of the living wage. In any event, since the living wage is linked to average earnings, rises may not occur as previously anticipated.

On executive pay, Theresa May has promised to give shareholders an annual binding vote on executive pay (at individual level as well as policy level), as compared to the current system giving a binding vote on policy every three years and an advisory vote each year.

Prediction:  moderate change

To ease financial pressure on business threatened by Brexit, we may see reduction/deferral of the introduction of the living wage. In any event, since the living wage is linked to average earnings, rises may not occur as previously anticipated.

On executive pay, Theresa May has promised to give shareholders an annual binding vote on executive pay (at individual level as well as policy level), as compared to the current system giving a binding vote on policy every three years and an advisory vote each year.

Immigration

Prediction:  mild/moderate change

Obviously, one of the key political and populist motivations for Brexit is that it would allow the government to regain control of UK immigration However, if the UK wishes to maintain a relationship with the EU post-Brexit, either as an EFTA EEA member or by following the Swiss model, then a significant reduction in EU immigration may not be achievable given the importance placed on the principle of free movement of persons within the EEA (a principle that Switzerland has also signed up to and about which it is currently in dispute with the EU, following its attempt to limit free movement).

 

Prediction:  significant change

While there are no certainties about what the precise arrangement will look like, the following positions seem likely:

  • The UK would adopt an Australian style points based system.  It already uses such a system for some work permit applications;
  • While the position of UK nationals abroad and EU nationals in the UK will ultimately require complex negotiations addressing not only rights to live and work but access to healthcare, benefits and other state provided services.  However, there are reasons on both sides to be generous and the expectation is of some form of mutual amnesty.

 

Employee Representation

Prediction:  mild-moderate change

The UK would need to continue to comply with EU legislation in this regard.

Theresa May has indicated that if she becomes prime minister, she would advocate putting a worker's representative on the seat of large company boards.

Prediction: moderate change

Theresa May has indicated that if she becomes prime minister, she would advocate putting a worker's representative on the seat of large company boards.

If freed from the requirements of EU law, change in this area is likely as it will be directly relevant for businesses adversely affected by Brexit. The most likely changes would be to the number of redundancies triggering a collective consultation (currently 20 or more, or 100 or more) and/or the relevant timeline (currently 90 days).

 

TUPE

Prediction:  unchanged

 

Prediction: moderate change

Although we think it is unlikely that the government would repeal TUPE entirely, we think that in the mid-long term it is quite likely that it might make changes focused on easing pressure on businesses challenged by Brexit, including:

  • Removing  the prohibition on making changes to terms and conditions following transfer; and
  • Relaxing the information and consultation provisions in this area.

Working Time & Holiday Pay

Prediction:  unchanged

 

Prediction: Significant change

The Working Time Directive and local equivalent have been a constant source of friction between the UK and EU since the domestic legislation was introduced in 1998. It’s likely that the government would act relatively quickly to repeal certain aspects of the working time laws on Brexit including: 

  • Reinstating the previous rules on calculation of  holiday pay;
  • Removing the limit on weekly working time; and
  • Preventing or limiting the ability to carry forward holiday that is not taken in a particular due to illness or family leave.

 

Agency Workers

Prediction: Unchanged

 

Prediction: Significant change

Given the widespread unpopularity of the Agency Workers Regulations 2010, it would not be surprising if the government were to repeal or at least heavily amend the existing UK legislation relatively soon after Brexit

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