On 23 June 2016, the UK will vote on whether to remain a member of the EU. The possibility of the UK leaving the EU raises some fundamental questions, the answers to which could have significant implications on employment law in the UK.

Much of the UK's employment law stems from the EU, including working time regulations, transfer of undertakings regulations, discrimination rights, family leave, collective consultation obligations and duties to agency workers. In theory, departure from the EU would allow the UK to repeal or amend any employment legislation derived from EU law. However, it is unlikely that a so called Brexit would lead to a wholesale overhaul of all such legislation for several reasons, namely:

  • fully repealing existing employment laws implementing EU requirements would be unworkable for employers. It would cause doubt, confusion and potential high costs to comply with a new regime;
  • the UK would remain in a significant trade relationship with the rest of Europe. It may structure the relationship either through bilateral trade agreements or as an EFTA member of the EEA. If it structures the relationship in the former way, the price of the trade agreement may be keeping a certain level of EU employment law. In the latter, the UK would remain subject to most aspects of EU social and employment policy as EEA member states are bound by, for example, the Collective Redundancies, Working Time and Agency Workers Directives;
  • UK law already provided some protections incorporated by EU employment laws. For example, UK equal pay, race and disability discrimination laws preceded EU anti-discrimination obligations. Similarly, the UK right of return from maternity leave existed before the EU implemented the maternity leave right; and
  • particular parts of UK employment law fall outside EU competence (such as unfair dismissal rights), or exceed the minimum EU requirements (for example, family leave rights). These employment rights are therefore not likely to be affected by a Brexit.

Piecemeal reform

Therefore, rather than a sudden move away from the UK's existing employment law regime, a more probable result of a Brexit for UK employment law is piecemeal reform. The government may repeal or amend some of the existing regulations which are unpopular with British employers (for example, the more burdensome aspects of the Working Time Regulations or the inability to harmonise employment terms and conditions after a TUPE transfer).

In the financial services sector, a potential target for change may be the Capital Requirements Directive IV provisions regulating variable remuneration. The UK laws implementing the CRD IV have been characterised as restricting financial institutions' ability to attract and keep top talent. The government may come under pressure to repeal or amend them.

ECJ jurisprudence

The UK's departure from the EU would also have an impact on the standing of ECJ case law. Previous decisions of UK courts which have followed rulings of the ECJ, such as those about collective redundancy consultation and holiday pay, would remain binding on UK courts. However, the ECJ would no longer have jurisdiction over the UK courts and its future decisions would not be binding. Nonetheless, if the UK courts are interpreting EU-derived legislation which is retained, it may view judgments of the ECJ as being persuasive in authority, although not binding.

Departure from the EU

Separating the UK from its EU commitments will be a lengthy process (there is a minimum two-year notice period). There will be complex negotiations of the terms of the withdrawal and new trade arrangements will need to be drawn up. A vote to leave the EU would not result in overnight change to UK employment law; piecemeal change is a much more realistic possibility in the medium and short term.