June 24, 2016

Whichever side of the argument you were on, the outcome of the EU referendum is a landmark moment in the UK’s history.  While the ramifications of the result will obviously take some time to materialise, it will undoubtedly have a number of implications for UK employers in the months and years ahead.

Of course, the immediate issue facing UK employers is not whether UK employment law will change but whether the decision to leave the EU will lead to the economic slowdown predicted by the leaders of the Remain campaign.  If it does, it would be wrong to assume that all employers will face difficult times: many businesses have an enviable ability to grow regardless of the economic conditions.  But it is perhaps inevitable that some HR teams across the country will have a busy few months ahead of them.

In the longer term, the decision to quit the EU will almost certainly lead to some changes to UK employment law.  Whether it’s TUPE, discrimination rights, collective consultation obligations or working time – a significant chunk of the UK’s employment protections is based on EU legislation or case law from the European Court of Justice (ECJ) or the European Court of Human Rights.  Theoretically, the UK’s exit from the EU could mean that all of this law will be up for grabs.

Despite this, widespread change is very unlikely.  Any trade agreement the UK enters into with the EU (assuming it proves possible to negotiate one) will almost certainly be conditional on the UK remaining bound by certain core EU employment laws.  It is difficult to envisage a situation where the EU would agree a deal which would allow the UK to undercut European businesses by employing workers on less onerous or cheaper terms.

It would be ridiculous though to suggest that nothing will change.  We’ve listed below the key changes that we believe will occur in the medium to long term as a result of the decision to leave the EU.

Discrimination

Discrimination law is well rooted within the UK and is unlikely to change significantly once we leave the EU.  However, it would not be surprising if the government decided to introduce a cap on discrimination compensation awards (which is currently prohibited by EU law).  Discrimination awards have the potential to significantly impact businesses, especially small and medium sized employers, so the introduction of a cap would likely be welcomed by many employers.

TUPE

TUPE has become a widely accepted part of acquiring businesses and transferring services and it is very unlikely that a UK government would scrap the protection provided by TUPE altogether.  However, the restriction on harmonising terms and conditions following a TUPE transfer is constantly a frustration for businesses.  ECJ case law prevents this but we would not be surprised if this restriction is relaxed in the future for UK businesses.

Holiday pay

It is probably unrealistic to expect any trade deal with the EU not to require at least some form of guarantees from the UK over its working time laws.  We should therefore not expect wholesale changes here. That said, there are some areas which could see some change.  The most obvious thing which could face the axe is the rule derived from ECJ case law dictating that workers accrue holiday during sick leave.  This is universally unpopular amongst employers and it is unlikely to disappoint many if it was abolished.  The recent series of holiday pay cases relating to the calculation of holiday pay (i.e. the requirement for this to now include overtime and commission) could also be reversed.  This would simply reflect the position the UK has always taken – that holiday pay should be based on basic pay only.

Agency workers

The Agency Worker Regulations requiring agency workers to receive equal treatment after 12 week engagements are widely disliked by UK employers.  We would expect these to be up for the chop in the future.

Immigration

During David Cameron’s resignation speech this morning, he sought to reassure Europeans working in the UK and UK nationals working in Europe that they should not be concerned about their circumstances.  While this was no doubt a well-intentioned and, presumably, a valid statement (at least in the short term), the actual consequences for these individuals is far from clear.

When the UK leaves the EU, it will no longer benefit from the free movement of people and workers that is permitted throughout the union.  At that point, visitor and work permits may be required for EU nationals visiting or working in the UK (or indeed vice versa).  The reality will ultimately depend on the outcome of the trade negotiations with the EU.  Whatever happens, in the long term it is almost certainly going to be more complicated for employers to hire and transfer staff from and to other EU countries.

Data protection

The UK’s exit from the EU will have a number of implications for UK data protection law.  Most obviously, the UK will need to consider whether or not it will implement part (or all) of the General Data Protection Regulation (GDPR) rather than it becoming directly effective in May 2018, as it will do with EU Member States.

However, as with all things Brexit, the situation regarding data protection is not clear cut.  EU law restricts the transfer of personal data to non-EEA countries that the EU does not consider adequately protect such data.  It is expected that the UK (like Switzerland) will aim to have data protection legislation which will be deemed adequate.  However, this will depend on whatever is negotiated between the UK and the EU and any subsequent legislation implemented by the UK.  It is also worth noting that Article 3 of the GDPR gives it extra-territorial effect in relation to non-EU countries that process personal data of EU citizens.  As such, it is advisable that businesses continue to refer to the GDPR as the ‘gold standard’ of data protection law as well as keeping up to date with the Brexit negotiations and future legislation.

Our data protection team will be following developments in this area closely.