Implications of Brexit for UK employment law

By: Colin Leckey (Partner, Lewis Silkin LLP); Gemma Taylor (Managing Practice Development Lawyer, Lewis Silkin LLP)

The United Kingdom left the European Union at midnight (EU time) on 31 January 2020. This followed the approval by the EU Parliament of the terms of the revised withdrawal deal negotiated by prime minister Boris Johnson’s Conservative government, and the enactment of the UK legislation needed to implement it. While the fact that Brexit has finally happened provides more certainty for businesses, the forthcoming trade talks will ultimately decide the shape of the ongoing future relationship between the UK and the EU.

Although much of the UK’s employment law derives from the EU, Brexit will have limited implications for employment law in the immediate term because there is an implementation period during which the status quo will be maintained. Once that comes to an end, however, there are critical questions over the impact of Brexit on workers’ rights, and uncertainty about the future status of key European Court of Justice (ECJ) employment decisions.

Employment law stays the same during implementation period

Under the deal negotiated by the Johnson government, the implementation period lasts from exit day up to 31 December 2020. During this time, EU employment law will continue to apply in the UK and it will need to comply with any new ECJ decisions.

This means, for example, that the UK will need to comply with the revised Posted Workers Directive, which must be implemented throughout the EU by July 2020. This Directive gives additional rights to workers who are posted from one EU member state to another. It remains to be seen whether the UK will introduce any new legislation to transpose this Directive into UK law, or instead decide that posted workers coming to the UK are already sufficiently protected.

The terms of the deal between the UK and the EU allow for the implementation period to be extended to December 2021 or December 2022. The Johnson government has categorically ruled out any such extension, however, and the European Union (Withdrawal Agreement) Act 2020 expressly states that UK ministers cannot agree to one (although this could be overturned in future by fresh legislation). This means that the UK is not currently planning to transpose the Whistleblowing Directive (which has a December 2021 implementation deadline) or the Work-Life Balance and Transparent and Predictable Working Conditions Directives (both due to be implemented by August 2022).

EU citizens’ rights are protected by the deal

The deal between the EU and the UK contains provisions on the rights of EU citizens living in the UK, including protection against discrimination at work. Existing UK anti-discrimination laws will be largely adequate to reflect these rights, which will need to be observed even if no trade deal is reached with the EU.

European Works Councils arrangements will change

European Works Councils (EWCs) can continue to operate as they did before until the end of the implementation period, but arrangements will then need to change:

• All multinationals will have to decide what to do about the ongoing involvement of the UK representatives in their EWC after the end of the implementation period.
• Multinationals that are headquartered in the UK, or that have appointed a UK representative agent for their EWC, will need to have proactively designated or assigned a new representative agent based in an EU member state.

Flexibility to depart from ECJ decisions after implementation period

Once the implementation period comes to an end, all existing EU employment legislation will be converted into UK law as it then stands, with a few very small adjustments intended to make sure that the legislation is still comprehensible.

New ECJ decisions after the end of the implementation period will not be binding on UK courts or tribunals, although they could be taken into account if relevant. However, decisions of the ECJ before 31 January 2020 and during the implementation period will be adopted into and retained in UK law, which means they will remain binding unless and until they are overturned.

The UK’s Supreme Court will be able to depart from retained ECJ decisions on the same basis as it can depart from its own decisions (that is, if it seems right to do so). Intriguingly, a new provision in the EU (Withdrawal Agreement) Act 2020 suggests that other (lower) courts and tribunals could also be given the authority to depart from retained ECJ case law in the future. The basis on which they may do so is unclear and would need to be dealt with in future regulations. It remains to be seen which courts will be given this power - it seems unlikely to be granted to Employment Tribunals but may, for example, include the Employment Appeal Tribunal.

While employers do not need to take any action at the present time, they should expect volatility and uncertainty if the government gives lower courts wide scope to depart from key ECJ decisions, many of which have had a significant impact on UK employment law.

Scope for divergence on employment law in future

As explained above, the current arrangements mean that the UK will not be required to implement three new significant EU employment Directives - the Whistleblowing Directive, the Work-Life Balance Directive and the Transparent and Predictable Working Conditions Directive. The deadlines for implementing these Directives all fall beyond the end of the implementation period.

The deal negotiated by the present government allows more scope for divergence on employment rights once the implementation period comes to an end, as compared to the version of the withdrawal agreement negotiated by the previous prime minister Theresa May:

• The original provisions in the agreement dealing with Northern Ireland included a commitment not to dismantle employment rights throughout the UK. Although this was only in a protocol, not the main text, it would have operated both as the baseline for a future trade deal with the EU. Also, critically, it would have been default arrangement on an indefinite basis in the event of no alternative arrangements for the problem of the Irish border (such as technological solutions).
• The new Northern Ireland protocol in the deal negotiated by Boris Johnson does not contain this level-playing field commitment in respect of the UK as a whole. Instead, to protect the Good Friday Agreement, the new protocol commits Northern Ireland to continuing to abide by various EU Equal Treatment Directives (and interpret them in conformity with post-Brexit ECJ decisions) - but this commitment does not extend to the rest of the UK.

The revised Political Declaration, which is intended to serve as the starting point for the EU/UK trade talks, says that the UK is committed to maintaining a “high standard” of workers’ rights. This does not, however, mean full regulatory alignment with EU rights and the current government has repeatedly emphasised that it does not intend such ongoing alignment.  Equally, the EU has been clear that regulatory alignment is an issue that goes hand in hand with market access. It therefore remains to be seen what trade deal can be negotiated, and how far concessions on either side on the issue of regulatory alignment on workers’ rights are necessary in order to clinch it.

If no trade deal can be negotiated with the EU, the UK will not need to keep pace with any new EU Directives and could potentially start dismantling some EU-derived employment rights. Historically, supporters of leaving the EU have cited scrapping working-time legislation, placing caps on compensation for unlawful discrimination and repealing agency workers regulations as among the liberalising measures that could be taken. None of these featured in the Conservative Party’s manifesto for the December 2019 general election, but they are likely to come into play if no trade deal is ultimately concluded.

In Northern Ireland, in contrast, EU Equality Directives and related case law will remain binding even if no trade deal can be negotiated, under the new Northern Ireland protocol. This has the potential to result in further divergence between Northern Ireland and the rest of the UK, although there are already various differences between Northern Irish employment law and that applicable to England, Scotland and Wales.

Key action points

Brexit still has a long way to go and much uncertainty remains. While employers do not need to take any immediate action in relation to the post-implementation-period employment law landscape, they should certainly watch out for developments as the trade negotiations unfold.

Some companies may be considering relocating the whole or part of their business to an EU member state after the implementation period, depending on the outcome of trade talks. From an employment law perspective, companies should remember that they may need to consult on the business case for closure before any decision to close a UK business is taken, and that employees should be offered the opportunity to move with the business if it is relocating.