Employment and Immigration Law Implications of Brexit

in detail, inside: Introduction 1 Employment Regime with UK following Brexit 1 Business should not assume a common set of Employment Laws 3 Potential Post-Brexit Landscape: Possible Options and Implications for Employment 4 Conclusion 6 Key Contacts 6 Employment and Immigration Law Implications of Brexit a legal view brexit Introduction Employment Regime with UK following Brexit The “four freedoms” – free movement of people, goods, services and capital, are at the core of EU principles. A significant factor in the vote by the UK to leave the EU, was a fundamental difficulty the UK has with the free movement of people. This is likely to be central to any possible alternative arrangements that may ultimately be agreed with the EU. For employment law and employers we consider the possible options and implications for employment law, based on a scenario where the UK will ultimately, sooner rather than later, be a non-EU country and summarise the current regime relating to work permits and citizenship for nonEEA nationals. An employment permit is issued by the Minister for Jobs, Enterprise and Innovation following an application by the employing company or the non-EEA national, in prescribed circumstances. The three principal categories of employment permit are outlined as follows: a.Critical Skills Employment Permit: The Critical Skills Employment Permit is designed to attract highly skilled individuals to Ireland to address critical shortages of skills in the labour market. The Critical Skills Employment Permit is available for occupations with an annual salary of €60,000 or more and for certain specified occupations on the Highly Skilled Eligible Occupations List with an annual salary of between €30,000 and €59,999. The applicant must have also received a job offer of a minimum of two years’ duration to qualify for a Critical Skills Employment Permit; b.General Employment Permit: Unlike the Critical Skills Employment Permit which specifies certain eligible Free Movement of Workers Without a bilateral arrangement, a Brexit would lead to restrictions on the freedom of movement of workers. An Irish firm with any personnel who work in the UK may be subject to greater restrictions as would UK employees in Ireland, while staff seconded to the UK from EU countries (and viceversa) may also face greater controls. In either event, a business’s ability to allocate resources with flexibility within the organisation in the respective jurisdictions will be affected. In such circumstances, UK nationals may be subject to the same requirements as non-EEA nationals seeking to enter into employment in Ireland. If this situation arises, the first practical step would be to assess the eligibility of a UK national to apply for Irish citizenship and long term residency in Ireland. Employment Permits In general, an employment permit is required for non-EEA nationals to enter into employment in Ireland. 1 | mccann fitzgerald · july 2016 2 | mccann fitzgerald · employment and immigration law implications of brexit occupations, the General Employment Permit assumes all occupations with a minimum annual salary of €30,000 to be eligible unless otherwise specified. Therefore, all occupations are eligible unless excluded under the list of Ineligible Categories of Employment for Employment Permits. The main attraction of the General Employment Permit for prospective candidates is that it permits a broader range of occupations than the other classes of employment permit and may be obtained in respect of a 12 month contract of employment; and c. Intra-Company Transfer Employment Permit: Intra-Company Transfer Employment Permits are designed to facilitate the transfer of senior management, key personnel or foreign employees undergoing a training programme of a multinational corporation to its Irish branch. Foreign nationals remain on their foreign employment contract throughout their time in Ireland and must have been employed with the foreign employer for at least six months before the transfer. Entitlement to Irish Citizenship: Irish Passports Individuals born outside the island of Ireland are entitled to Irish citizenship if either of their parents was an Irish citizen born on the island of Ireland. If these criteria are met the individual may apply for an Irish passport under Irish law, irrespective of where they reside. An application for Irish citizenship can also be made if a parent, while not born in the island of Ireland, was an Irish citizen at the time of the applicant’s birth. In most cases applications of this type are made through a grandparent who was born in Ireland. An individual may also qualify for citizenship if one of their parents obtained Irish citizenship through Naturalisation or Foreign Birth Registration before they were born. In these cases, Irish citizenship can be passed on to the next generation as the parent was an Irish citizen at the time of the applicant’s birth. Residency Applications for Long Term Residency in Ireland are currently processed as an administrative scheme. Persons who have been legally resident in the State for a minimum of five years (ie 60 months) on the basis of employment permits conditions may apply for a five year residency extension. Such persons may be exempt from employment permit requirements. In the absence of an entitlement to Irish citizenship or a successful application for long term residency, non-EEA nationals must apply for an employment permit to work in Ireland. Employment Regime with UK following Brexit (continued) Business should not assume a common set of Employment Laws Post-Brexit, businesses in Ireland will no longer be able to assume that a similar employment law regime applies in the UK. This will impact on a number of important areas of employment law, especially for multinational businesses. Brexit will break the connection between UK employment law and EU legislation and increasing divergence seems likely thereafter. This could occur immediately if the UK government chooses, but more likely it will be a gradual shift as new EU legislation emerges which the UK is not required to – and then does not – adopt or follow. Also, the role of the Court of Justice of the EU (“CJEU”) in relation to the UK would cease, which would affect the interpretation and application of those EU-derived UK laws that remain. Mergers and Acquisitions The Transfer of Undertakings Regulations, which afford automatic transfer rights to employees transferring with business and business assets, are a highly significant factor in certain mergers and acquisitions, as well as in outsourcing arrangements. Other EU legislation gives employees similar representation rights in, for example, cross-border mergers. There will be a material impact on business transfers if these regulations and laws no longer apply (or are varied significantly) in the UK, so that a different regime applies in the UK compared with Ireland. Such changes might include reduced employment rights on a transfer and reduced information and consultation requirements. Information and Consultation EU legislation in relation to works councils, as well as EU collective redundancy legislation, provides for extensive information and consultation with employees in particular circumstances. Any post-Brexit disapplication, amendment of, or reduction in, these requirements will impact on organisations having businesses in both jurisdictions. It may very well be that such organisations (and, indeed, in other European countries) will choose to apply current information and consultation processes post-Brexit, but nonetheless the legal requirements may well change therefore will require some consideration and attention. Remuneration In recent years the EU has introduced significant regulation of remuneration in the financial services sector (including under MiFID, AIFMD, UCITS V and Solvency II). The Capital Requirements Directives (III and IV in particular) have been controversial in the UK, especially arising from the ‘bonus cap’ under CRD IV. What seems likely to be the disapplication of these directives in the UK post-Brexit would allow UK institutions both greater freedom to determine how much to pay 3 | mccann fitzgerald · july 2016 4 | mccann fitzgerald · employment and immigration law implications of brexit Potential PostBrexit Landscape: Possible Options and Implications for Employment The UK’s withdrawal from the EU represents unchartered waters for the EU as well as its member states. Ultimately the precise implications of the UK’s withdrawal from the EU will depend on any ultimate agreed arrangements that replaces it. Discrimination EU law has driven a huge extension of the law in relation to discrimination between categories of workers, not only for traditional equality matters such as gender and race, but also fixed-term workers, parttime workers and agency workers. This law has also been extensively developed at EU level. In the event of a Brexit, UK law may well move in a different direction, narrowing the more expansive EU level approach. in bonuses, and greater flexibility in how these are paid, albeit subject to whatever domestic UK regulation might replace these EU-derived constraints. This may have an impact for financial services employees in Ireland where more stringent EU regulation will continue to apply. Working Time Over the years the UK has challenged and sought derogations from some of the requirements of the Working Time Directive in terms of maximum working hours, and has provided for the “contracting out” of certain working time provisions. Working time law has also been extended significantly by the CJEU, including in relation to the rights and entitlements of employees to holiday pay during sick leave, as well as over-time in reckoning annual leave. The arrangements could follow a variety of existing models or come to a unique bespoke agreement. The existing possible options include: a. joining the European Economic Area (“EEA”); b.joining the European Free Trade Association (“EFTA”); c. establishing a Customs Union with the EU; d.negotiating an EU/UK Bilateral Trade Agreement; or e. in the absence of an alternative arrangement being negotiated the default position would be for trade to be conducted via World Trade Organisation (“WTO”) rules. These options all impact the employer/ employee relationship in different ways. EEA Membership of the EEA facilitates full access to the single market subject to compliance with single market rules and a significant financial contribution. EEA members accept most EU legislation but Business should not assume a common set of Employment Laws (continued) 5 | mccann fitzgerald · july 2016 enjoy no voting rights at EU level. Certain areas such as laws regulating agriculture and fisheries are excluded from the EEA. Crucially EEA members agree to respect the “four freedoms” so acceptance of the free movement of people, goods, services and capital would be a precondition for admission. Employment Impact This option would have little impact on employment and the free movement of people. EFTA/”Swiss Model” The UK could also adopt the “Swiss model” ie join EFTA and gain access to the single market through a series of bilateral agreements with the EU. EFTA is an intergovernmental organisation established to promote free trade and economic cooperation and its membership entails less onerous obligations than membership of the EEA. Its members are under no general obligation to apply EU laws. However members have little formal power in making EU single market rules and in addition must pay for access to the single market. Employment Impact Switzerland has a bilateral agreement on the free movement of persons with the EU. Both employed and self-employed people have the right to enter, reside and take up work in any state which has signed the agreement (Switzerland, EU or EFTA member states). Customs Union Another option would be to establish a customs union which would create a form of free trade area with a common external tariff. In this scenario the UK would be obliged to apply the same import quotas, customs duties, etc agreed with the customs union. Employment Impact The UK would also be obliged to negotiate entry/exit and employment permit requirements with individual EU member states. WTO In the absence of a mutually acceptable trade relationship being reached between the UK and the EU the default position would be for their relationship to be governed by WTO rules. In this scenario the UK would not be bound by single market rules and UK exports to the EU would be subject to the EU’s common external tariff. The UK would not be bound or benefit from EU/third country free trade agreements and would need to negotiate its own free trade agreement with third countries. This represents the most onerous option for the UK and would be seen as largely unattractive due to the lack of market access. Employment Impact The WTO has no provisions for free movement of labour so under this scenario free labour mobility between the UK and the EU would cease and again entry/exit and employment permit requirements would need to be negotiated with individual EU member states. Bilateral Trade Agreement Finally, the UK could negotiate a bilateral trade agreement with the EU. However in this scenario EU negotiated agreements with non-EU trade partners would cease to apply and the UK would then need to also negotiate its own bilateral agreements with non-EU countries. Employment Impact The implications of a bilateral trade agreement on employment would depend on the negotiated terms of the agreement. Potential PostBrexit Landscape: Possible Options and Implications for Employment (continued) 6 | mccann fitzgerald · employment and immigration law implications of brexit Conclusion Key Contacts Employers with operations in the UK and/or doing business with the UK do need a contingency plan based on the UK being a non-EU country. Some form of special arrangements relating to the four freedoms are likely but, given the issues in the UK referendum, certain restrictions on free movement of people which will directly impact employment are likely. Employers need to familiarise themselves with current immigration law in Ireland. Terence McCrann Partner ddi +353-1-607 1336 email [email protected] mccannfitzgerald.com Mary Kelleher Senior Associate ddi +353-1-607 1493 email [email protected] mccannfitzgerald.com Stephen Holst Senior Associate ddi +353-1-511 1517 email [email protected] mccannfitzgerald.com Mary Brassil Partner ddi +353-1-607 1279 email [email protected] mccannfitzgerald.com Natasha Canniffe Senior Associate ddi +353-1-611 9138 email [email protected] mccannfitzgerald.com Ellen Nolan Associate ddi +353-1-607 1385 email [email protected] mccannfitzgerald.com © McCann FitzGerald, July 2016 Email [email protected] www.mccannfitzgerald.com Principal Office Riverside One Sir John Rogerson’s Quay Dublin 2 D02 X576 Tel: +353-1-829 0000 New York Tower 45 120 West 45th Street 19th Floor New York, NY 10036 Tel: +1-646-952 6001 London Tower 42 Level 38C 25 Old Broad Street London EC2N 1HQ Tel: +44-20-7621 1000 Brussels 40 Square de Meeûs 1000 Brussels Tel: +32-2-740 0370