We reported last month on implications for employers in the immediate aftermath of the Brexit referendum result. Much uncertainty remains over how the referendum vote will be implemented. However, we have been monitoring major developments and announcements closely and in this article we identify some of the key messages that are emerging for employers.
The Big Picture
1. Will the UK remain in the single market (i.e. within the EEA) or take a free trade approach?
- On 14 July, Philip Hammond (Chancellor of the Exchequer) stated that the UK would be leaving the single market at Brexit. i.e. we would NOT be joining the EEA.
- On 14 July David Davis (Minister for Brexit) published an article saying “The ideal outcome, (and in my view the most likely, after a lot of wrangling) is continued tariff-free access [to the single market].” However, it is clear from the article as a whole that he envisages UK being outside the EEA and accessing the market via a trade deal.
- However, there are now press reports circulating of a proposed deal under discussion in Europe whereby the UK would remain in to the single market but with an ”emergency brake” on EU immigration for 7-10 years. See e.g. https://www.theguardian.com/world/2016/jul/24/brexit-deal-free-movement-exemption-seven-years.
- Likewise Boris Johnson (Foreign Minister), on a visit to the United Nations in New York on 22/23 July, suggest he believed a deal could be struck that would allow the UK access to the single market with new limits on free movement rules for European workers and continuing passporting rights for UK banks.
- Attempts to deliver a "Brexit-lite” will be hampered by the fact that the Government's majority of only 12 means that the 30 or so Eurosceptic Tory MPs can effectively block any deal. Press commentary suggests that Theresa May may be considering an early general election since current polling suggests her majority would be sufficiently increased to avoid that problem.
2. What is the status of the various legal challenges to Brexit?
- On 19 July there was a preliminary hearing in the Deir Dos Santos case and other related claims, which allege that the Government does not have the authority to invoke Article 50 without parliament's consent.
- Government lawyers confirmed that the Government does not intend to invoke Article 50 before the end of 2016.
- The various cases would be joined and the case led by Mishcon de Reya (on behalf of undisclosed claimants) would be the lead claim.
- A judicial review claim has also been threatened by a coalition of Northern Ireland politicians and human rights activists unless the province's peace process is protected and various other safeguards granted. The legal basis for this challenge is unclear.
- Boris Johnson claimed on 26 June that EU citizens will have their rights fully protected, and the same goes for British citizens living in the EU’. This is in line with the Home Office’s statement issued on 11 July, which confirmed that the legal status of EU migrants in the UK will be ‘properly protected’.
- However, exactly what ‘properly protected’ will entail is unknown. As Stephen Booth of Open Europe explained on 3 July, the immigration debate must become more nuanced by looking at the practical implications of Brexit, as the compromise between single market access and free movement of people could take a number of different forms.
- EU nationals already in the UK will still be able to apply for permanent residence under the current rules and are advised to keep a strict record of documents to prove that they have exercised their treaty rights.
- A blanket ban on EU free movement is unlikely. David Cameron had suggested that EU free movement could be restricted to those already holding a job offer before entering the UK. It is likely that if the government requires those current EU nationals who will be affected by Brexit to have a job offer before entering the UK their entry is likely to be regulated by a similar Points Based System to the current system in place for sponsored workers in the UK.
- The UK is in a deep state of uncertainty regarding the consequences of Brexit for EU migration. Significantly, as Liam Fox pointed out on the Sunday Politics show aired on 3 July, ‘…we would have to expect that there will be reciprocal moves in the other direction’ and therefore any amendments made to the EU migration system must be very carefully thought through if the rights of UK as well as EU nationals are to be protected.
3. Is there any update on changes to employment law?
- If the single market deal referenced above proceeds then we would remain bound by the majority of EU employment law.
- David Davis has confirmed that he does not envisage reductions in regulation protecting workers. "To be clear, I am not talking here about [reducing] employment regulation. All the empirical studies show that it is not employment regulation that stultifies economic growth, but all the other market-related regulations, many of them wholly unnecessary. Britain has a relatively flexible workforce, and so long as the employment law environment stays reasonably stable it should not be a problem for business."
- In Theresa May’s debut speech, she committed to:
- Making the workplace more equal and:
- Tackling corporate irresponsibility
- Putting workers on the board of companies;
- Curb excesses of executive pay through making shareholder pay votes binding.
Reports indicate that legislation is already being drawn up on some of these points
- The BHS report, which blames executives for the business’s collapse and huge pension deficit, has prompted a stated renewal of the Government’s commitment to tackling these issues.
- Meanwhile, British trade associations are clamouring for the Government to repeal or defer planned increases to the National Living Wage, given the pressures on business.
- Huge uncertainty remains about whether we will get a soft or hard Brexit but the preferred positions of key decision-makers and possible options are becoming clearer. Also:
- The potential for a deal on EU migration opens the door for a soft Brexit, subject to political will;
- The news for EU migrants in the UK is slightly more positive than it has been, with good reason to believe that provision will be made for skilled EU migrants already in the UK to remain confirmation and others with five years’ residence already protected by permanent residence rights;
- There are no current signs of business friendly reforms from government, in fact we may see legislation on some of May’s policy commitments sooner than expected.
This article was written with input by Chetal Patel, an Immigration lawyer at Bates Wells Braithwaite. King & Wood Mallesons’s Employment group is delighted to partner with leading immigration practices such as Bates Wells Braithwaite for employment/immigration crossover matters.