22 March 2016

Working after Brexit: How would employment change?

As the debate on Brexit heats up and divergent views on its consequences proliferate, employment law issues have taken centre stage. Those in favour of staying in Europe cite worker rights as one of the important ways in which EU membership has improved life for Brits and hint at a return to workhouse-style exploitation if we leave. Conversely, the pro-Brexit camp mutter darkly about the cost and time wasted complying with EU red tape and the competitive advantage that more legal flexibility would offer an independent Britain. 

So, who’s right? Well, as ever, the truth is somewhere in the middle.

EU membership has clearly had an important impact on the development of UK employment legislation. However, let’s not forget that the UK had employment law long before it was part of the EU. Many of our key day to day rights like unfair dismissal protection, minimum wage thresholds and protection from pay deductions do not derive from Europe and would be unaffected by any Brexit.  In addition, where EU law does have an impact, it has been thoroughly embedded into our domestic legislation, so no dramatic changes are likely to happen overnight.  It’s more likely that policy areas would be reviewed piecemeal in the years following any Brexit. So, short-term, the most likely scenario is business as usual.

In the mid-term, things could get more interesting. A lot will depend on how we choose to manage our future relationship with Europe. If we elect as a country to join the EEA or become part of EFTA in order to continue to trade freely with the single market then, like Norway and Switzerland, we would probably still have to follow the EU’s main employment policies. Likewise, if our banks want to continue operating in Europe then the price they may have to pay for that will probably be complying with the controversial EU policies on bankers pay, bonus clawback and so on, however unappealing that may be. So, Brexit might not deliver a blank page for employment law, after all.

But, even assuming that we somehow were left with a free hand for reform, the scale of likely change has probably been overstated. In our view, it's simply unrealistic to imagine that in key areas where Europe has legislated, like discrimination, family friendly entitlements and TUPE, long-established rights would be removed at one sweep. Discrimination law is a good example of this. While the Framework Directive on Discrimination in 2000 significantly changed UK law, introducing new protected categories based on age, sexual orientation and religion, these have now become part of the UK's political and cultural landscape. In fact, our efforts to outlaw discrimination did not originate with Europe at all. For example, the UK first introduced laws outlawing race discrimination in 1965 before we were part of the EC and expanded these into the employment arena through the Race Relations Act 1976 (“RRA”), almost 25 years before the EU turned its attention to the issue. We were early adopters, who helped drive EU equality policy and it is frankly unthinkable that we would strip away these protections, which are borne not only of a sense of fair play but also through enlightened self-interest. Equality legislation is part of the policy framework aimed maximising employment and economic participation, with a corresponding reduction of demands on the welfare state. 

The same argument also holds true of many family friendly rights, some of which are backed up by EU law but which also support broader objectives.  In any event, since the UK has voluntarily “gold-plated” some of these rights by requiring more from UK employers than EU law mandates, it is not EU policy that is driving that particular legal agenda.

However, that is not to say that there are no employment rights that would change, if the Government had the option to do so. Areas ripe for amendment in the case of Brexit could include:

  • Working Time: this has proved to be the single biggest area of conflict between the EU and UK. The recent developments over calculation of holiday pay are only the latest in a long line of skirmishes which have also included rolled up holiday pay, holiday pay during long term absence and the thorny issue of the opt out on the maximum working week.  These four aspects of working time laws (at least) would likely be changed if the UK Government had the option. Complete repeal is less likely but not totally implausible.
  • Discrimination law: although a wholescale repeal is unlikely, there would likely be tinkering around the margins of equality laws.  Particular changes could include the removal of “associative” discrimination rights, a statutory hierarchy of the conflicted interface between sexual orientation and religious discrimination or changes to compensation, such as the introduction of a cap or removal of injury to feelings awards.
  • TUPE: While this has been a notoriously unpopular and complex law for business, it is unlikely that it would be totally repealed given that the Government declined to scale it back to minimum EU requirements on its last review.  Instead, relaxation on rules about changes to employment terms, consultation obligations and the application of TUPE in insolvency situations would be likely.
  • CRD IV: Rules on bankers' bonuses are another area of notorious conflict between the UK and EU with the UK going as far as legally challenging the validity of the EU's legislation in this area.  If given the chance, it is very likely that the UK would significantly scale back restrictions in this area but not if it comes at the cost of excluding UK banks from operating in Europe.

So, in short, our prediction is evolution rather than revolution. But we’ll have to wait and see.

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