This article was authored by Marc André Gimmy.
EU labor law: What employers can do next
The UK voted for Brexit some three months ago, but nothing has happened since. There are constitutional issues to be resolved, such as whether the EU Parliament needs to be consulted, for example. A September 2016 survey by Willis Towers Watson reports that 50% of employers see Brexit as a threat and only 15% as an opportunity. The HR departments of these employers believe that 66% of UK businesses will be significantly affected. It is reported that 55% of businesses elsewhere in Europe will be affected.
In this article, Taylor Wessing lawyers from around the EU analyze the important issues related to this topic. Starting with the UK perspective, they then try to identify how HR departments may want to handle the various steps that might need to be implemented.
How big is the problem?
We’ll leave assessment of the trade impact to others; we need to focus on people. The most obvious and immediate impact of the UK’s vote is on EU citizens who are currently living and working in the UK. The data varies, but generally it ranges between 2.2 million and over 3.0 million workers, which would
constitute 7% to 9% of the workforce. The UK uses a points-based system for overseas workers outside the EU to obtain visas. The more points you have (according to criteria such as language, salary and skills), the greater the chances of living and working in the UK.
The University of Oxford’s Migration Observatory has reported that some 75% of EU citizens would not satisfy visa requirements. Some 94% of workers in retail and the hospitality trades would be negatively affected. Even some 66% of banking and financial-sector staff could fail to meet the criteria.
The dangers of overreacting
Some may be tempted to reduce workforce diversity. Employers must remember that for as long as the UK is bound by EU laws, they have an obligation to treat applicants and colleagues from the EU on an equal basis with UK workers. A strong crackdown on unlawful employment is currently being carried out in the UK. Employers need to ensure their recruitment and screening staff is trained to know its rights and obligations in this area, including the fair handling of “right to work” checks.
Mobility – and standing still
Professional services firms and manufacturers may consider themselves most affected by the vote. At Taylor Wessing, we established a team and a method to help reassure and inform employees about their position within a week of the vote. A regular Brexit briefing was established to monitor and report on practical and theoretical developments. This method can be used not only to fight fires but also to establish a flexible mindset over the medium term.
Auditing your current workforce, assuring employee loyalty
We found that nearly one-fifth of the London workforce originated from the EU or outside the UK.
The UK does issue permanent resident cards that can be used to validate status, but only some 27,000 of these were issued in 2015. Employers may wish to make their workers aware of their right to obtain permanent residence once they have achieved five years in the UK exercising their rights. Those with permanent residence status should not be affected by any future departure from the EU by the UK. Family members can also apply. The fee is £65 per person.
Obtaining permanent residence entails no further obligation in terms of taxation and the like and there is no requirement to progress to British citizenship. It does, however, serve as a stepping stone and can provide reassurance, especially given the uncertainty about how and when the UK and EU will bring down the guillotine on the right to be and remain in the UK. Moreover, it is a good idea to see to it that data about non-EU visa holders is updated.
UK immigration policy and increased enforcement
A major example of new legislation is the Immigration Act of 2016. Sanctions include potential imprisonment for individuals personally involved in illegal employment and the power to close the premises of companies if officials are reasonably satisfied that illegal working offenses have been committed: that means high-profile raids on hotels, restaurants and upmarket retail stores.
Penalties for working illegally include a fine of £15,000 per worker, an amount that can increase, and details about employers who have been subject to civil penalties are published by the UK Home Office, the enforcement agency responsible.
In prioritizing their plans, HR teams will need to be aware of international developments around Brexit. The UK has laws on modern slavery and gender-pay reporting that need work in the next 12 months.
Anything could happen, but major reform to UK laws is unlikely. It is, however, possible that the UK could take advantage of having an offshore status and amend some laws, for example those pertaining to temporary workers, agency workers, and working time. An attitude test will be the approach taken toward the Business Transfers Directive and the UK’s domestic TUPE provisions.
It’s not quite possible to predict in detail the potential implications of Brexit in Austria. Generally speaking, UK citizens will become third-country nationals after Brexit. Austrian and CEE law provides for strict provisions with regard to the employment of non-EU citizens. Specific permits (relatively hard to obtain) are required in this regard.
Moreover, strict regulations concerning temporary agency work apply. Whereas agency work is possible within the EU (observing authority notification obligations and local labor law regulations), such work from a third country to Austria is only possible if specific prior authorized approval has been obtained, which is very hard to do.
Also, UK trade licenses will not be considered equal to Austrian trade licenses, with the result that temporary and occasional business activities in Austria will also most likely become more difficult for UK companies.
Of course all labor-law issues related to Brexit, in particular those concerning (European) works-council issues and data protection, will have to be assessed one a case-by-case basis.
The consequences of Brexit are important for employees moving between France and the UK. The situation of seconded employees will have to be reviewed to determine the applicable law and social security system, as EU regulations may no longer apply. In addition, new contractual documents will have to be introduced. Moreover, rights relating to the unemployment, health and retirement of employees moving to or from the UK will have to be checked as the rules on social security coordination within the EU may no longer apply (including the principle of equal treatment, payment of the contributions in only one country and taking into consideration of the insurance periods in other EU countries). HR departments of international companies have to follow these developments in order to handle the social security protection of their expatriates.
In addition, employee representation in France will be challenged. French business groups will have to anticipate the exit of UK employee representatives of their European works councils and even the possible disappearance of their European works councils if the parent company is British. Furthermore, the procedure to follow in cases of collective economic redundancy will be affected, as some measures depend on the number of employees in the group.
HR managers in Germany do not have to fear seeing major changes in national legislation, however there are some practical issues that require their attention. In particular, the European works council structure needs to be amended to reflect the results of Brexit agreements with the EU. The employer’s policies on employment mobility and expats require a forward-looking review to determine their conformity with new UK laws. Relocations may have to be managed, and workplaces for employees returning to Germany need to be created again. Collective data-protection agreements require adaptation to reflect the UK status after Brexit negotiations are concluded. Matrix organizations may have to reconsider whether their EMEA headquarters in the UK need to be transferred back to the EU.
After Brexit, UK citizens will become third-country nationals in the Netherlands. Compared with a lot of other EU countries, the Dutch immigration system contains more incentives that encourage immigration of foreign employees and stimulate foreign investments in the Netherlands. Although specific permits need to be obtained by third-country nationals in order for them to work in the Netherlands, these permits can be obtained relatively easily compared with other EU countries. In the long run, the Netherlands might turn out to be an attractive working country for UK citizens and other third-country nationals located in the UK.
In a first step, however, Dutch companies with businesses operating in the UK (and vice versa) need to amend their expat policies. Also, other EU-regulated policies (for instance, those pertaining to data protection, working hours, vacation pay, discrimination and parental leave) would most likely require modification, although it is hard to imagine that the post-Brexit UK will let go of all European directives on these matters.
When moving a business between the UK and the Netherlands or when amending international HR policies, HR managers also need to consider the Dutch works councils’ right of consultation.