With less than a month before the referendum the country is consumed with the rhetoric of the leave and stay campaigns. But what would a leave vote mean for UK employment law?
We think it's very unlikely that there will be an immediate repeal of huge swathes of employment law – more likely is a tinkering around the edges, over some time. Even in the long term it is probable that EU law will continue to exercise significant influence even after a Brexit.
- It is a common misconception that employment rights in the UK derive wholly or mainly from the EU. The reality is that significant aspects of our employment legislation are purely domestic, such as unfair dismissal, statutory redundancy pay, union related legislation, national minimum and living wage. In addition, some EU employment laws merely subsumed protections that were already provided by UK employment law. For example, UK equal pay, race and disability discrimination laws preceded EU anti-discrimination obligations.
- Although a common complaint is that EU law is overly burdensome some aspects of UK laws in fact go beyond what we are required to do by the EU, such as family friendly provisions (maternity, paternity etc), statutory holiday and the change of service providers provisions under TUPE, so these are also unlikely to change.
- Certain aspects of EU derived law are now so entrenched in our society, such as those which deal with equality, that it is unlikely the government would repeal such laws. This is particularly so in areas where there is material political consensus.
- In the event of a vote for Brexit the UK and the EU would also have to agree the terms of exit and any trade agreement. Those terms could well include a requirement that the UK adhere to some or all EU employment and social policy – as is, for example, the case with Norway's trade agreement with the EU.
Despite the above there are some areas where a Brexit may have more impact
- Instead of sweeping away EU derived employment legislation, the government may modify some legislation to make them more palatable to UK businesses. In our view, prime candidates for such changes are:
- Discrimination – introducing a cap on maximum compensation, removal of associative discrimination claims.
- Repeal of the unpopular Agency Workers Regulations.
- Working time – limiting the calculation of holiday pay to basic pay, limiting the right to accrue holiday pay whilst on sick leave.
- TUPE – making it easier to harmonise terms following a TUPE transfer, reducing compensation for failure to consult.
- Immigration continues to be a central topic of the debate. There are of course many nationals of other EU member states living and working in the UK as well as large numbers of UK nationals living and working in other EU countries. Following a Brexit, these individuals would no longer have the automatic right to do this. This may well cause significant problems for employers in some industries – there may be fewer available skilled workers leading to increased wages and delays to projects. In addition, UK staff may not be able to move so freely to work on projects in Europe. Having said that much will depend on what the UK could negotiate as part of any trade agreement.
Legal uncertainty is likely around case law that has been decided by the European Court of Justice (ECJ) and this is likely to be problematic for employers who are defending claims. Technically, should the UK leave the EU, the ECJ would no longer have jurisdiction over the UK courts and its future decisions would not be binding. However, some areas of employment law have been defined by the ECJ's decisions and these existing decisions would remain binding. Equally the UK courts may still look to future non-binding ECJ decisions for guidance.
What does this mean for employers?
Speculation as to the impact of the UK leaving the EU is just that – speculation. What is certain is that nothing is going to happen overnight and if the vote is to leave, the process of leaving will be extremely complicated. The UK is required to give two years' notice of an intention to leave the EU therefore disentangling the UK from its commitments is likely to be a lengthy process. This is likely to be the most difficult time for business, should it occur, as there will be considerable uncertainty during any transition period.