This article was published prior to the publication of the post-Brexit agreement between the UK and EU which covers the relationship between the UK and EU following the end of the implementation period (commonly referred to as the “transition period”) created by the European Union (Withdrawal Agreement) Act 2020, and should be read in that context. For up-to-date commentary and information on our services, please see our Beyond Brexit page.
Initially there is unlikely to be any immediate change. Although a common complaint of employers is the perception that European-led legal red tape in the hiring and firing of staff has hindered business growth, the reality is that there are significant aspects of our employment legislation that are domestic. Therefore rights such as unfair dismissal, statutory redundancy pay calculations, union related legislation, national minimum wage and the pending living wage requirements will not necessarily change just because of a Brexit vote. Some aspects of our domestic legislation even go beyond what we are required to provide by the EU, such as statutory holiday pay and family policies, and so these are also unlikely to change.
Even in the event of a vote for a Brexit there will be a period negotiation with the EU to agree the terms of exit during which it is anticipated that the status quo on employment law will be maintained. The EU treaty has an exit mechanism with a minimum notice requirement of 2 years, which the UK may not decide to give immediately. It may take longer for the UK and EU to agree the terms of exit and those terms may include a provision that UK employment law will still be required to fall in line with the EU. It could take years to complete the exit process.
Perhaps most interesting is that legislation that is now considered the 'norm' and, in some instances, even considered positive in setting workplace standards emanate from the EU - although they were unpopular on their introduction, particularly around working time and equality. It is difficult to see how those laws would change given that the current government's drive in recent years has been to improve working conditions for the lower paid (demonstrated by increasing minimum wage and culminating in the introduction of the living wage, as well as offering more statutory holiday entitlement than the EU directive dictates). There are also government-led initiatives around improving working conditions for families, part-time workers and addressing the gender pay gap that will likely ensure those aspects of legislation would also remain untouched. Even a change of government would not really see a tide change in this thinking given that any likely alternative government would be Labour, who have historically increased legislation on employment law during periods in office rather than reduced it.
Although legislative change to employment law is likely in the future, legal uncertainty is likely to be created around case law that has been decided by the European Court of Justice (the ECJ) that has defined how UK employment law has been interpreted and applied in the UK courts. There have been some key ECJ decisions that have defined areas such as TUPE, maternity comparators, equal pay (work of equal value) and annual leave entitlement that will become uncertain and problematic for employers who are defending claims. Over time there will inevitably be an increase in litigation to UK appeal courts to deal with the lack of clarity as the ECJ authorities are no longer binding on the UK courts.
Therefore, a Brexit for employers will not mean that there will be any legislative change, nor deregulation; however there will be increased understating on the ECJ authorities that will make the outcome of cases more difficult to predict.