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What Implications Will Brexit Have on Employment Contract Law?

11 February 2021
Written by

In 2016 the UK voted to leave the EU and after four long years of negotiations, a deal was finally struck on Christmas eve last year. The UK officially left its largest trading bloc on 31st December, and many employers are now wondering what implications this will have on employment contract law. 

The short answer is that not a lot is expected to change. While Brexit does provide the UK with a certain amount of freedom to deviate from the former EU employment laws, it’s unlikely we will see any drastic changes to employment laws or rights. This is due to a set of common rules, dubbed ‘the level playing field’, which aim to do just that - maintain a level playing field between the UK and EU. These standards aim to prevent businesses in one country, from gaining a competitive advantage over businesses in other countries. 

So, any changes that the UK does make to its employment laws will only be permitted insofar as they do not affect trade or investment between parties. Let’s take a look at how this works in more detail.

The withdrawal agreement

Up until the 31st December, the UK was in a state called the ‘transition period’, which meant that EU derived laws, including employment laws and rights, continued to hold up until this date. Since much of UK employment law is derived from EU regulations, it has been a concern for employers what would happen at the end of the transition period on 1st Jan, i.e what would this mean for the existing EU laws once the UK was no longer part of the EU? 

The simple answer is this: due to the withdrawal agreement, the existing EU laws were allowed to be converted into UK domestic law and so the existing legal framework remained in place. The aim is to protect the fundamental and social rights of employees such as health and safety standards, fair working conditions, employment standards, and more. However, there is a clause. The agreement was that in exchange for a tariff-free trade deal, the UK cannot weaken or reduce employment laws and rights below the standards that existed on 31st Dec, but, only insofar as these adjustments affect trade or investment. This means that the UK is free to make changes to EU employment laws, just under certain constraints. Essentially, any changes may be subject to an arbitration process which would call for rebalancing measures, but only if there is evidence of a substantial impact on trade or investment. 

According to the withdrawal agreement, the UK’s ability to make changes to employment law is restricted, but only to an extent. The idea is that the UK is unable to make major changes, such as completely removing working time or agency worker laws, because these adjustments would likely affect trade by giving UK employers a clear competitive advantage. However, minor changes, say, to a particular aspect of holiday rules, may be permissible as they would not have such an effect on trade. This means that, in the short term, it is predicted there will be very little change to current employment law standards, but what about in the future?

The future of employment laws

As EU employment laws change in the future, the Brexit agreement does not require that the UK carries on in alignment with the EU. As discussed, any changes made by the UK may be subject to scrutiny if substantial evidence is found that these changes have an unfair impact on trade. An unfair advantage may result in tariffs, which would be classed as an appropriate rebalancing measure - however, such measures can only be carried out if there is actual proof of competitive advantage. Any alleged impact on trade or investment “shall be based on reliable evidence and not merely on conjecture or remote possibility”. 

Likely to see the greatest change are those who employ EU nationals, this is due to the restricted movement of people according to new immigration laws. The current rules regarding EEA nationals will be replaced by a new EU Settlement Scheme which will establish the rights of EU, non-EU EEA, and Swiss citizens living in the UK. Here’s what employers should be aware of:

  • Under current guidelines, employers may rely on an employee’s EEA passport or ID card as proof of their right to work in the UK up until 30 June 2021. 
  • If employees haven’t obtained settled or pre-settled status by 30 June 2021 they will be classed as illegal immigrants in the UK.
  • Employers are not responsible for making sure their employees have applied for residency under the scheme, but it is advised they inform their employees of when the deadlines are.

So far, the government has not suggested any intention to carry out any serious changes to UK employment law in light of Brexit. In fact, the UK is known for having a strong track record of high employment standards and has often exceeded the minimum standards required by the EU and the Employment Bill. Taking the UK’s past as an indication of its future, it is unlikely that we will see any adjustments made that conflict with its commitments to strengthening worker’s rights. However, that is not to say we cannot expect to see changes to some aspects of EU employment law, though these changes are unlikely to be imminent and will depend on the political landscape at the time - and we can expect that trade unions and worker organisations will certainly challenge any potential amendments to employment law that are detrimental to worker’s rights. 

Now that the transition period is over, many employers have certainly been wondering what changes they can expect to see following the last four years of intense negotiations - and how these changes will affect their businesses. The simple answer is this - we can expect to see little change in the foreseeable future since the current EU employment law is unaffected by the deal. Due to the EU Withdrawal Act 2018, EU-derived domestic legislation in effect before 31 December 2020 will continue to hold within the UK for the foreseeable future. The UK is not starting from a blank slate, but has won the freedom to make certain decisions, under the constraint of “the level playing field”. This means that legislation such as The Transfer of Undertakings (Protection of Employment) Regulations 2006 and Working Time Regulations don’t just disappear post-Brexit, but continue in force. And, any changes that are made may be appealed by the EU if there is proof that these changes cause an unfair advantage to the UK due to its effect on trade.

If you're still feeling a little unclear about this, feel free to get in touch with a member of our team here. We'd be happy to chat.

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