January 21, 2021

The effect of Brexit on employment law: what is likely to change?

The effect of Brexit on employment law

What is meant by a level playing field?

According to the trade agreement, neither the UK nor the EU may weaken or reduce the level of employment rights in place as at 31 December 2020, in a manner affecting trade or investment. This commitment extends to fundamental rights at work, health and safety standards, fair working conditions and employment standards, information and consultation rights at company level, and rights arising from a transfer or restructuring of undertakings.

In practice, this is likely to make it difficult for the Government to abolish whole swathes of employment law. Such significant changes would be likely to have a huge impact upon trade and investment, and therefore would be challenged under the new arrangements. For example, we are unlikely to see the repeal of the Agency Worker Regulations 2010.

Are there any limits to the level playing field commitment?

However, some changes to employment law might have little or no overall effect on trade or investment, for example minor changes to the law around the calculation of holiday pay.

Ultimately, the level playing field commitment is to be enforced not by requiring the UK to adopt the same employment laws as the EU, but rather by allowing the EU to introduce trade tariffs where it considers that trade and investment have been affected. Therefore, if the UK Government is determined to make changes to employment law and is willing to accept the tariffs which might be imposed as a result of doing so, it is free to take this step.

Are there any areas in which the UK might be required to strengthen employment law?

The agreement commits both the UK and the EU to maintain systems of effective domestic enforcement. This is interesting because the UK currently has no effective system of labour inspections. However, it has recently consulted on the possibility of setting up a single enforcement body and it is possible that this will go ahead as a result of this agreement.

What will happen to existing EU-derived laws and court decisions?

As set out in the European Union (Withdrawal) Act 2018, all domestic legislation derived from EU law will continue unchanged for now, and must be interpreted in conformity with the relevant EU laws. However, the Court of Appeal and the Supreme Court may depart from earlier ECJ decisions if it seems "right to do so". If a domestic court departs from EU law in a way which undermines the level playing field, it is possible for enforcement action to be taken, but this is unlikely if the impact of the decision on the law is relatively minor.

How about new ECJ decisions?

In theory, the UK courts are not required to follow new ECJ decisions, but need only have regard to them. In practice, it is likely that Employment Tribunals will continue to follow ECJ decisions and any departures from them are only likely to be made by the higher courts.

How about new EU directives?

The UK is free not to implement new EU directives such as the forthcoming Whistleblowing Directive. Once again, failure to do so could result in a breach of the level playing field commitment, but only if the EU is able to show that it impacts upon trade and investment.

How about social security co-operation?

Before Brexit, there were some concerns that social security (i.e. National Insurance) co-operation could end, causing problems for employers who want to place UK nationals overseas for short periods of time, but to continue to make deductions for UK National Insurance rather than making local social security payments. A complex agreement has been reached on this point and it will be for individual countries to decide whether they want to apply the new rules or not. It will be necessary to wait for more news on this point.

The Better Regulation Committee – what is it?

The Chancellor of the Exchequer has been asked to chair a new Better Regulation Committee that has been asked to look at reducing EU red tape for businesses in the UK. Whilst the scope of the Committee is broad, it is likely that it will cover employment law and regulation. The Chancellor has said: "Now that we have left the European Union, we have an opportunity to do things differently and this Government is committed to making the most of the freedoms that Brexit affords us. This isn't about lowering standards, but about raising our eyes to look to the future - making the most of new sectors, new thinking and new ways of working."

There might well be some changes to UK employment law after Brexit but, in the short term, these are likely to be relatively minor and technical points litigated in the higher courts, rather than dramatic shifts in the overall nature of UK employment law. Having said that, if some of these changes reduce the complexity of areas such as holiday pay, they might well prove to be helpful for some employers.

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