James Davies Michael Burd February 8 2017 What does Brexit mean for UK employment law? Lewis Silkin LLP | Employment & Immigration - United Kingdom James Davies, Michael Burd Employment & Immigration Is employment law likely to change?Process and timescale for BrexitUntangling the webLegal precedentCommentIt is now several months since the United Kingdom voted to leave the European Union. What are the short and long-term implications of this momentous decision for workplace rights in the United Kingdom?Is employment law likely to change? On January 17 2017 Prime Minister Theresa May gave a major speech on the government's objectives for exiting the European Union. However, it is still far from clear what new relationship the United Kingdom will eventually have with the European Union and how this will affect employment regulation in the United Kingdom.A significant proportion of the United Kingdom's current employment law comes from Brussels. Once out of the European Union, the government could repeal discrimination laws, collective consultation obligations, transfer of undertakings regulations, family leave, working time rules and duties to agency workers, among other laws. But would this really happen?Many EU employment protections ‒ such as equal pay, race and disability discrimination laws and the right to return from maternity leave ‒ existed in some form in the United Kingdom before being imposed by the European Union. It seems unlikely that a UK government would rescind rights that predate EU laws.Another reason that the government may be reluctant to repeal employment law protection is that much of it is regarded positively by employers, employees and even by politicians. Employment rights such as family leave, discrimination law and the right to paid holiday are now widely accepted; indeed, family leave rights in the United Kingdom go further than required by EU directives.David Davis, the minister for exiting the European Union, has made it clear that he is not in favour of cutting back on employment rights. Further, in her speech on January 17 2017, the prime minister promised not only that workers' rights would be "fully protected and maintained" through the Brexit process, but also that "we will build on them" to "make sure legal protection for workers keeps pace with the changing labour market".Process and timescale for BrexitIt will inevitably take some time for the United Kingdom to extricate itself from the European Union. The prime minister has indicated that the government will give the European Union formal notification of the United Kingdom's withdrawal by March 2017.Once notice has been given, there will be a two-year period during which the parties will negotiate the terms of departure and possibly put in place new trading arrangements. Some commentators believe it will take considerably longer to agree exit terms, but unless both the United Kingdom and the European Council agree to extend negotiations, the United Kingdom will simply cease to be a member of the European Union at this point (ie, circa March 2019).The government's aim will be to agree a new future trading relationship with the European Union. It seems unlikely that full agreement on a permanent, long-term trade deal could be achieved within the two-year negotiating period, but it is possible that a transitional arrangement could be put in place. The prime minister has said that she envisages a "phased process of implementation" for any new trading partnership with the European Union.It is possible that a new trade agreement between the United Kingdom and the European Union – whether temporary or permanent – could require adherence to a certain amount of EU employment law. This is the case for the arrangements that Switzerland and countries in the European Economic Area, such as Norway, have with the European Union. While the prime minister has made clear that she envisages the United Kingdom leaving the European Union in such a way that it is no longer a member of the single market, this would not seem to rule out a Norwegian or Swiss-style arrangement on a transitional basis.Untangling the webEven after the exit process has ultimately been completed and the United Kingdom has left the European Union (and assuming no other restrictions imposed by another free trade agreement), European law will continue to apply in one way or another as the process of disentangling it from UK law will take some time. Some EU-derived laws are contained in secondary legislation made under powers given by the European Communities Act 1972 – the law that implements EU law in the United Kingdom. Other EU laws are implemented through primary legislation, such as the Equality Act 2010.The European Communities Act will have to be repealed in order for the United Kingdom to remove the influence of EU law, but if it is repealed without replacement, the relevant secondary legislation would fall away, leaving unwanted gaps in the law. To get around this problem, the prime minister has said she will implement "The Great Repeal Bill", which will both repeal the European Communities Act and at the same time preserve all EU law that has not been fully implemented into UK law and would otherwise disappear.This will enable a gradual approach, with legislation being repealed – or merely modified – over time. Despite the prime minister's promise to preserve and protect workers' rights it is likely that the government, freed from European constraints, would be tempted to tinker with certain aspects of current employment regulation. Which areas would the government be most likely to change?Agency workersThe most likely contender for complete revocation is the Agency Workers Regulations 2010. These are unwieldy, unpopular with business and not noticeably popular with workers either.Discrimination and family leaveFor reasons already mentioned, any wholesale repeal of equality protection or family leave seems improbable. Although the government could repeal the Equality Act after exiting the European Union, it would be a controversial move. It is difficult to imagine many employers arguing that they should be free to discriminate, and any change to the existing regime of direct discrimination, indirect discrimination and harassment seems unlikely. However, there may be some small modifications. Following Brexit, a cap could be imposed on compensation for unlawful discrimination. Another possibility is that the government could change the law to allow positive discrimination in favour of under-represented groups in a way that is currently impermissible under EU law.Rights to parental and family leave in the United Kingdom are a mixture of rights deriving from the European Union and rights originating in the United Kingdom. UK maternity leave and pay preceded the EU rights and are more generous in some respects. The new right to shared parental leave and the right to request flexible working are both purely domestic in origin. Accordingly, although some critics consider these rights to be a burden on business, there seems little political appetite for their repeal or dilution.Transfer of undertakingsThe Transfer of Undertakings (Protection of Employment) Regulations (TUPE) attract a bad press, but the principle that employees should transfer when a business changes hands or is contracted out is often useful for business and is incorporated and priced into many commercial outsourcing agreements. For this reason, although some businesses might like to get rid of TUPE, it seems more likely that the government would make some small changes to make it more business friendly, such as permitting the harmonisation of terms following a TUPE transfer.Holidays and working timeThe right to statutory paid holiday under the Working Time Regulations 1998 is also now broadly accepted. However, there are aspects of this right, and of other rights under the Working Time Regulations, that the government may want to amend if not prevented from doing so by membership of the European Union. Various European Court of Justice (ECJ) decisions on holiday pay are unpopular with UK businesses – for example, the right to keep accruing holiday while on sick leave and the fact that holiday pay should be based on all aspects of remuneration, not just basic pay. The government might choose to tweak these laws to make them more commercially acceptable, such as by retaining a right to paid holiday based on basic pay while limiting rights to accrue and carry over holiday pay. The United Kingdom may also wish to remove the cap on weekly working hours under the Working Time Regulations. It is less clear whether there is a demand to limit the rights under the Working Time Regulations to other rest breaks or the protections for night workers.Collective redundancy consultationCollective redundancy consultation obligations were reduced by the previous government. The requirement is now not particularly onerous and it is not clear what might happen to it following Brexit. Trade unions are likely to fight against any proposal to remove it altogether, but employees arguably do not feel strongly about this right (and many do not know about it). On the other hand, it is not obvious that businesses regard it as a burden which should be removed. Similarly, other collective consultation rights such as national and transnational works councils are possible candidates for repeal, but the obligations imposed by them on UK businesses are relatively light.Legal precedentIf the United Kingdom retains some EU law following Brexit, UK courts are likely to continue to regard judgments of the ECJ on those laws as persuasive, even if not binding. In any event, pre-Brexit UK court decisions incorporating the ECJ's reasoning would remain binding on lower courts and tribunals. It is not clear how far UK courts would be able to treat exit from the European Union as a material circumstance that would allow them to depart from precedent. They might do so, but could feel obliged to follow precedent in order to preserve legal certainty.CommentIt seems unlikely that UK employment law will be transformed in significant ways as a result of Brexit, at least in the short term. In the medium term, the government may start to tweak it to make it more business friendly and one or two laws may be repealed altogether. However, it is difficult to envisage a wholesale 'bonfire of regulations', at least without a radical cultural and political shift. In the longer term, however, if the United Kingdom is outside the single market, there will inevitably be a growing divergence between UK and EU employment law.For further information on this topic please contact James Davies or Michael Burd at Lewis Silkin by telephone (+44 20 7074 8000) or email ([email protected] or [email protected]). The Lewis Silkin website can be accessed at www.lewissilkin.com.