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Employment Law & Brexit: Assessing the Lay of the Land

Employment Law & Brexit: Assessing the Lay of the Land

Top of the agenda at the moment, is the possibility that the UK public may vote in favour of the UK’s exit from the EU. What has been a distant spot on the political horizon for years is now sharply coming into focus with the announcement that the EU Referendum will take place on 23 June 2016 – just over three months away. 

Much of the commentary surrounding the issue concerns the uncertainty as to exactly what a withdrawal from Europe would mean. It is no surprise that one of businesses’ main concerns is gauging exactly what impact Brexit could have on its obligations as an employer. The answer, perhaps more surprisingly, is not as much as you might think.

In theory the changes could be considerable. After all, a lot of what we understand UK employment law to be has been shaped by Europe: discrimination legislation, family rights, limits on working time, protection of agency workers, collective consultation obligations in redundancy. If the UK was to exit the EU, some of these rights would simply fall away, and the government would technically be free to repeal the rest – in which case, the field of employment law would be unrecognisable.

However, there are a number of reasons why this is unlikely to happen in practice.

From an ideological point of view, many of the EU employment laws are entrenched within our society. Some – for example, equal pay, race discrimination – were existing UK rights that were simply subsumed by subsequent European legislation. Others – such as holiday entitlement and TUPE – have been adopted and augmented via UK legislation which has actually enhanced the protection offered. There is therefore unlikely be any political appetite to overhaul these rights dramatically, irrespective of which party is in power. 

From an economic point of view, regardless of what form a Brexit would take, what is clear is that the UK will have to retain a relationship with the EU, given that Europe is its biggest export market. As we discussed in our recent briefing note on financial services (which can be viewed here), even countries such as Norway and Switzerland – who are currently non-EU members – have been required to accept most of EU law as the price they pay for a free trade market with the rest of Europe.

From a practical point of view, any changes that do take place cannot be made over night. The UK is required to give two years’ notice of its intention to leave the EU. Further, given the uncertainty which an overhaul would bring, any changes that are made are more likely to be done in a relatively modest and piecemeal fashion. The changes the government are mostly likely to consider include making it easier to harmonise terms following a TUPE transfer; imposing a cap on compensation in discrimination claims and changing the accrual of annual leave and calculation of holiday pay. However, it could then take time for such changes to filter through in practice. Employers would have to consider to what extent their existing contracts and workplace policies would then have to be amended. 

What is perhaps of most interest, is the potential impact withdrawal from the EU would have on UK case law. Arguably the UK court’s obligation to construe UK legislation in a manner consistent with ECJ decisions – when the two are clearly not aligned – has caused the most upheaval to employment law. The ‘Woolworths’ decision regarding redundancy consultation; the ‘Lock’ decision on calculating holiday pay; and the interplay between sickness absence and holiday entitlement are all cases in point. Unfortunately, however, the impact of Brexit on UK case law is far from clear.

One school of thought is that the UK courts will follow the previous decisions, irrespective of a UK exit, in order to ensure some legal certainty. However, given that a number of these cases have only served to confuse the picture, the higher UK courts may see a UK exit as an opportunity to depart from previous case law. They may be able to justify this approach on the basis that an exit from EU amounts to a materially different circumstance which permits a deviation from previous case law.

Ultimately, it is difficult to gauge the exact implications a withdrawal from EU would have on businesses and the extent to which employment law will be affected is no exception. There is, after all, no comparable situation to draw on - such a move would simply be unprecedented. That being said, employers already deal with a degree of uncertainty and arguably the current influence of Europe does little to stabilise the picture. Employers can therefore take some comfort in the knowledge that the landscape of employment law is unlikely to change vastly, at least not in the short term.

We have examined various facts around the EU referendum process, links to which can be found here.  Over the coming weeks and months, our specialists will be publishing further analysis of how their sectors may be affected if the UK votes to leave the EU, to help you understand the areas of uncertainty and assess the potential risks to your business.

Please do get in touch if you have any queries over how your business could be affected by the UK voting to leave the EU. 

Kerry Norval
Senior Solicitor