For the first time in a generation there is a real possibility of the UK leaving the EU. With this in mind we consider the possible effect on employers in some key areas and a few “what if” scenarios.
The starting point is that if the UK votes to leave the EU, the Government would regain parliamentary sovereignty and so would no longer be bound to have national legislation reflecting the many EU directives covering laws in the workplace. It would therefore be free to abolish or amend existing laws as it saw fit. This transcends many aspects of EU based workplace regulation from working time and discrimination to health and safety, immigration and some aspects of remuneration. Below we set out some thoughts on how this may operate in practice.
A referendum vote to leave the EU would certainly be politically binding on the Government. However an exit could not practically happen overnight and so it would be probable that a referendum vote to leave in, say, late 2017 would not actually take effect for at least 2/3 years to allow a period for businesses and individuals to have time to make necessary transitional arrangements. Of course if the date of an EU exit stretched beyond the term of the current parliament of May 2020 then a future Labour government may be wholly disinclined to retreat on any employment protection legislation, meaning little, if any, change to the current landscape. However it would seem improbable that the current or a future Conservative government would, freed from the shackles of EU law, make no changes if the exit date fell during the current parliamentary term.
So an abolition of all EU based workplace law then?
Almost certainly not. The Government may be quick to repeal certain limited aspects, the Working Time Regulations (being the current bête noir), the Agency Workers Regulations and CRD IV (limits on bankers’ bonuses) are likely to top the hit list, we would expect other changes to be nuanced tweaks rather than involving wholesale abolition or significant changes.
Despite Nigel Farage’s view that discrimination no longer exists and that we could therefore do away altogether with equality legislation, it is inconceivable that we will see a return to the “no Blacks, no Irish, no dogs” mentality of the 1950s. After all the Race Relations Act 1965 pre-dated the UK’s membership of the EU. Societal change over the last 50 years cannot be rowed back and the vast majority of people would think it quite right that those with protected characteristics should retain fundamental protections in the workplace, although with greater debate about how far the protection should extend and how breaches ought to be compensated.
Where the Government may choose to act though is in respect of compensation limits, and following an EU exit it would be free to legislate to introduce caps on compensation in respect of discrimination claims. It would seem improbable that this would be less than the unfair dismissal level (which is purely domestic) so it would be a reasonable presumption that discrimination compensation could be aligned to this figure in future. Likewise the Government could abolish damages for injury to feelings. Other subtle changes could include amending the burden of proof and so place it back on the employee altogether, and reducing the bar on the justification test in respect of indirect discrimination. At a more controversial level, it could also see the Government tackling head-on the tension between religious freedom and same sex rights and in future the Government permitting positive discrimination in limited circumstances, for example, in an attempt to assist greater gender or racial balance in the boardroom.
Bye-bye to TUPE?
Again almost certainly not. While TUPE is derived from an EU Directive, in 2006 the Government introduced the wholly domestic concept of “service provision change” to apply to the contracting out, in and change of service provider. So it is difficult to see that having extended the scope of TUPE domestically through choice rather than compulsion that it would then row back from this. It would, however, be free to amend the information and consultation requirements and it is more probable that there would be a relaxation of the requirements around these aspects. The uncertainty caused to businesses whose operating model relies on outsourcing by a wholesale repeal of TUPE means any fundamental change is unlikely.
Fewer pesky family friendly rights?
Sorry, probably not. The direction of travel has for some time been towards the extension of family friendly rights reflecting social, workplace and technology changes. The right to shared parental leave, for example, is entirely domestic and was supported by both the coalition Government and the Labour opposition so it would be very improbable this would change. The same applies to the extended rights to request flexible working introduced in July last year – again this was a domestic measure only and not introduced because of EU law. Similarly, in relation to maternity leave, the domestic rights already exceed the minimum required under EU law so again this is unlikely to change at all.
Collective redundancy consultation
This is an area where changes could be made, the most probable being either to the threshold numbers of redundancies (currently 20 or greater, and 100 or greater) triggering collective consultation and/or the applicable time frame (currently 90 days over which the redundancies are made). Theoretically it could be abolished altogether but with a renewed emphasis on keeping individuals in work rather than on benefits, it is likely that this will remain in some form, although possibly watered down.
With the exponential increase, collation, storage and use of personal data and growing public concern around the use and misuse of personal data both within and outside of the workplace, it seems highly improbable that there will be any lessening of the current data protection framework. So, no end soon to those time consuming data subject access requests from aggrieved employees.
With banks openly threatening to leave the UK, notably JP Morgan, Deutsche Bank and HSBC, it would be an attractive option for the Government to abolish CRD IV which places limits on bankers’ variable pay in order for UK located banks to have a competitive advantage in attracting talent and not being constrained by the remuneration limits imposed by CRD IV which apply throughout the rest of Europe. However, this would also have to be seen weighed against the almost certain reduction in freedom of movement of employees covered below.
Immigration and freedom of establishment
At present EU nationals have the automatic and unrestricted right to work in the UK. A UK exit from the EU would allow the Government control over immigration and the UK’s borders. With immigration and the increasing population being a hot political topic, it is probable that there would be changes to the work permit system meaning that many employers currently reliant upon well-educated and multi-lingual EU national employees may well find that those candidates would not qualify for work permits meaning that the recruitment talent pool would be reduced.
Likewise, at present many businesses involved in transport and logistics take advantage of the freedom of establishment rules to set up bases anywhere within Europe and to take advantage of lower cost economies where employee wages are lower. An example might be a UK low cost airline which sets up in Latvia and recruits aircrew on local salaries rather than relatively expensive UK based employees. An EU exit by the UK would almost certainly put an end to this basic right. So, possibly fewer low cost flights.
Working time and agency workers
It is almost a racing certainty these would go, being almost universally unpopular with employers both in principle and in practice due to compliance costs. The long running mess around holiday pay while sick and now the overtime and commission cases do nothing to advance the case for retaining these rules. And in both cases a Conservative Government would most probably abolish them and leave it to the market economy to dictate entitlements. More junior doctors all round thank you!
While overall there would inevitably be some changes, the consequences are likely to be refinements and modest rather than wholesale changes to the framework around workplace law and, even then, subject to the political landscape and will at the time of an EU exit. Notably as part of the current negotiations with the EU, the Government appears not to have included any workplace law measures as matters it is seeking to re-negotiate which is telling in itself – plus ça change.