Brexit: the employment law implications

As a result of Brexit, the UK Government may amend or repeal some EU-based employment legislation. However wholesale repeal of legislation is unlikely, since much of it would be regarded as fair and reasonable by the main political parties and the public at large, and in view of the uncertainty and disruption it would cause. The likely contenders for amendment are set out below and will require adjustments to clients’ policies and practice. Many of the changes would bring a slightly greater degree of flexibility to workforce management, but few would have a significant impact.

Agency Workers Regulations 2010

  • Under current regulations, after a 12 week qualifying period, agency workers have the right to the same pay and basic working conditions as equivalent permanent staff. The regulations also give agency workers wider rights such as access to collective facilities and to information about employment vacancies.
  • Revoking this legislation would mean that there would no longer be the requirement to pay agency staff the same amount as permanent workers or provide the same annual leave.
  • Clients are likely to benefit from a reduction of costs in using agency staff; potentially making the use of agency staff a more attractive option. This could bring a greater degree of flexibility to the client’s workforce in industries where the use of agency staff is appropriate.

CRD IV

  • CRD IV (Capital Requirements Directive) introduced changes to corporate governance including remuneration. It imposes a 1:1 ratio of salary to variable pay for certain bankers (which can rise to 1:2 with shareholder approval).
  • The UK Government has expressed concerns that the impact of the “bonus cap” has led to affected financial institutions offering higher fixed remuneration which cannot be clawed back. Revoking the rules implementing this Directive (or part of them) would allow those institutions greater freedom to determine how much to pay in bonuses. However, the focus on controlling bankers’ pay is likely to remain and strong regulation of the sector seems likely to continue.

Working Time Directive

  • At present, the Working Time Directive restricts the maximum amount of working hours to 48 hours per week. Many clients already make extensive use of the opt-out for senior employees. The Working Time Directive also determines paid holiday, as well as the appropriate rest breaks and periods. Recent case law on carrying forward holiday whilst off sick and the need to include overtime and commission payments in holiday pay have made this area of law complex.
  • It is likely that the rules on holiday pay would be relaxed, simplifying employer practice and leaving a wider discretion to individual organisations on what to include as holiday pay, and how (or whether) to arrange carryover of leave to the next leave year.

Equality Act 2010 - Discrimination Compensation Cap

  • The Equality Act 2010 provides fundamental employment protection from discrimination for any employee with a protected characteristic and implements the UK’s obligations under the Equal Treatment Directives. It is unlikely that any government would repeal the Act in its entirety. A more likely consequence of a Brexit would be the introduction of a cap on the amount of compensation that can be awarded. The Directive requires that compensation for discrimination must be "effective, proportionate and dissuasive". At present, the Equality Act provides that the measure of compensation for discrimination is that which applies in tort claims and this has led to uncapped compensation awards for successful claims at Tribunal.
  • The introduction of a cap on discrimination awards would decrease any potential financial liability that clients may face. Discrimination claims often accompany the already capped claim for unfair dismissal and clients face financial and reputational risk when defending such claims. Introducing a cap may increase the likelihood of early settlement of unfair dismissal claims.

Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and amendments 2014

  • The TUPE regulations implement the Acquired Rights Directive and protect the rights of employees on a business transfer. The UK Government extended the scope of TUPE application - beyond what the EU required - to include a “service provision change” in 2006. Although the rules preventing employers harmonising terms and conditions are frustrating for employers, a recent government consultation did not result in the removal of the “gold plating” but it did introduce some amendments to allow agreed contractual variations.
  • Brexit may lead to further amendments simplifying the process for employers, including the relaxation of information and consultation requirements before a TUPE transfer. Clients may also benefit from any loosening of the restrictions on changing terms and conditions.

For a high level employment law overview to compare the flexibility of employment law in Europe, please see here.

For further information, please refer to Brexit: the legal implications.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.