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What would Brexit mean for UK employment law?
30 March 2016

With the referendum to decide the UK’s membership of the European Union (EU) to take place on 23 June 2016, is the country ready for the potential changes to UK employment law? 

It is worth reminding ourselves that many key employment law rights have their roots in the EU. A Brexit situation begs the question of whether the UK would do away with employment law rights that have become the norm of the modern workplace. We consider four key areas that we anticipate will come under scrutiny in the event of Brexit.

Holiday Pay

The right to paid holiday was introduced as a statutory concept by virtue of the Working Time Directive which required EU Member States to ensure employees were paid a minimum of 4 weeks holiday pay. This was introduced by the Working Time Regulations 1998 (“WTR”). Subsequently, the UK extended the regulations to require employees to receive 5.6 weeks’ paid holiday. This additional 1.6 weeks is only required by UK law and not by EU law.

Recent ECJ case law (British Airways v Williams and Lock v British Gas) have confirmed that “all components intrinsically linked to the performance of tasks” required under the contract of employment should be taken into account when calculating holiday pay. This has transformed the holiday pay landscape for many employers who had previously only paid in excess of basic pay when there was contractual and guaranteed overtime.

The issues caused by the ECJ’s re-interpretation of holiday pay are still being worked through by the Employment and Employment Appeal Tribunals in so far as they affect commission and overtime. Brexit would be unlikely to see a repeal of the WTR but it might lead to interesting issues around what elements of pay were to be included in holiday pay. Would we revert to the pre Williams era in its entirety and have holiday pay based essentially on basic pay or would the WTR be re-interpreted as the UK would, presumably, no longer be required to interpret the WTR to comply with the Directive?

Discrimination

The Equality Act 2010 consolidated and revised UK discrimination law and, as primary legislation, would not be affected by Brexit unless it was repealed – which would be highly unlikely and controversial. Many of the UK’s laws on discrimination date from the 70’s and 90’s and were not dependent on EU law. However, past ECJ rulings on discrimination law have in many instances become part of UK case law. For example, the leading Supreme Court decision on the type of factors that can justify age discrimination depends on ECJ reasoning (Seldon v Clarkson Wright and Jakes). One proposed revision is for the government to allow positive discrimination -as opposed to positive action- in favour of under-represented groups. For example, under EU legislation a retail chain is not currently allowed to actively recruit a workforce in which the majority of staff are aged over 60, even if customers have indicated a preference of being served by this age group. Another proposal is to implement a cap on discrimination compensation, similar to that of unfair dismissal. It would remain to be seen whether the government will implement these suggestions, nevertheless we anticipate few changes to fundamental discrimination law in the UK.

Transfer of Undertakings (TUPE)

One of the most frustrating aspects of TUPE for employers is the difficulty for transferees in harmonising terms and conditions of transferred staff with those of existing employees. The UK found in a Supreme Court decision, Wilson v St Helen’s Borough Council [1998], that the purpose of TUPE was to safeguard the rights of employees on a transfer. This case relied on ECJ reasoning in Daddy’s Dance Hall (1988). Following Brexit, the government could impose small changes on TUPE to make it more business friendly by facilitating the harmonisation of terms following TUPE transfers. This would require courts to distinguish between the Supreme Court’s interpretation of the purpose of TUPE in Wilson and that relied on the ECJ’s reasoning in Daddy’s Dance Hall.

Freedom of Movement

Membership of the EU provides EU nationals the ability to move, live and work between member states. Restricting freedom of movement from the rest of Europe to the UK could have vital negative impacts on labour demands. In areas facing labour shortages, further restrictions on travel to and from abroad for work may result in damaging consequences for everyone. Staff seconded to work in Europe would be subject to more restrictions.

The ultimate impact will depend on the negotiations of a trade agreement with the EU. If the UK remained in the single market but outside of the European Economic Area (EEA), like the Norwegians or Swiss, it would need to retain EU rules by agreement. It would be unlikely that the agreement would omit to agree the free movement of persons as it is widely viewed as a fundamental asset to the economy.

Conclusion

The ultimate impact on UK employment law of a vote for Brexit is of course uncertain. Any changes would not be immediate; it would take the UK at least two years, if not longer, to withdraw from the EU and iron out the details of life after the EU. But one thing is certain – Brexit would fundamentally change the UK’s relationship with the rest of the EU and the world.

Currently, EU member states are responsible for ensuring that national legislation is consistent with European law. In the event of inconsistency, existing law must be amended and new law introduced where necessary. If member states do not implement EU law in the timescales provided, the European Commission have the power to bring infraction proceedings, charge the state a lump sum, and/or fine them on an ongoing basis. In the event of Brexit, the UK would no longer have to expend funds and departmental time assessing the impact of Commission proposals in the UK, and would no longer face potentially detrimental consequences in the event of non-compliance with EU law.

However, although the ECJ would no longer have any jurisdiction on future decisions in UK courts it is likely ECJ decisions would still be considered persuasive and retain a heavy influence on UK employment law.

For more information about how brexit may effect your business or to find out more about how the employment team can help you please contact the team on [email protected] or ring 0118 952 7284.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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