Author firm: Lewis Silkin LLP

The UK triggered Article 50 on 29 March 2017 giving two years’ notice to leave the EU. Negotiations will now start on the terms of exit. The EU has made it clear that only when sufficient progress has been made with these negotiations will it be prepared to start negotiations on the UK’s on-going relationship with the EU. It seems highly likely that these exit negotiations will include agreement that EU nationals currently resident in the UK, and UK nationals currently resident in the EU, will maintain the right to live and work in such location.

Agreement as to on-going relationship in two years?

Almost all informed commentators agree that the two year timeframe does not allow sufficient time for the detailed terms of an on-going relationship to be agreed and that, at best, a framework will be agreed with transitional provisions applying until a detailed agreement can be reached.

As things stand, there is probably an equal chance of:

  1. Negotiations failing and, in the current language, the UK “falling off a cliff edge” and both sides having to implement mandatory WTO trading rules which will place companies trading between the UK and other EU states in an uncertain and damaging position with tariffs and trade barriers suddenly applying. Most commentators accept that this will be damaging for the EU states and even worse for the UK economy. There is a real chance of this happening.
  2. A framework agreement being reached within two years which will involve substantially tariff and barrier free trade; continued UK contributions to the EU budget; an agreed forum for resolving disputes (which in the long term would not be the ECJ); the continued application of EU-equivalent employment, environmental etc standards; and some restrictions on the free movement of persons from the EU to the UK (and presumably vice versa).

The challenge in the UK with the second option is that it will be fiercely resisted by the vocal Brexit wing of the Conservative party and the powerful tabloid Brexit press, which will see any compromise as reneging on the referendum vote. This would necessarily involve the Prime Minister, Theresa May, standing up to this group, which she has shown little sign of doing to date.

Impact on employment law

The impact on employment law is likely to be small. The UK Government has published the “Great Repeal Bill” which, despite its name, will come into force when the UK leaves the EU and legislate to keep in force all EU law unless or until it is specifically changed. It will also enshrine all ECJ case law up to the date of Brexit (but not after) into UK law.

Theresa May and her Government have also repeatedly said that they commit to maintaining EU labour protection rights post-Brexit.

There are, however, some unpopular detailed aspects of EU-derived employment law which are likely to change in time, e.g.:

  • some details relating to TUPE e.g. the difficulty in the UK in harmonising employment terms following a business transfer
  • some aspects of the working time regulation, particularly relating to holiday rights e.g. how holiday pay must be calculated
  • making it easier than permitted under EU law to advantage disadvantaged groups without infringing equality laws (so-called ‘positive discrimination’), and
  • placing a cap on discrimination awards

One immediate impact affects companies which have until now based their European Works Council in the UK. That base will have to move to an EU country, and many are already looking to shift their EWC base, often to Ireland.

Immigration

The most significant change is likely to be around immigration issues, as no long-term deal will be possible politically without restrictions on the free movement of EU nationals to the UK.

This will mean that companies in the UK wishing to hire EU nationals, and multinationals wishing to relocate employees to the UK, will need to apply for permission to do so. It will also presumably mean that companies in the EU wishing to hire or relocate UK nationals will need to apply for permission to do so. There are many possible ways this could be implemented, and it is not at all clear yet how the UK Government will propose to proceed.

If a framework agreement with a transitional period can be agreed, Theresa May has already signalled that she recognises that free movement rights may need to be preserved until a final agreement can be reached.