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Brexit. Deregulation of employment law for SMEs? Or no change please?

What will the "leave" vote mean in practice for employment law in the UK? Prior to the Brexit vote the leave campaigners waxed lyrical about de-regulation, simplifying employment regulations etc. Post vote, it’s all gone rather quiet. This article will revisit the key areas of employment law and consider the really likely implications of the vote to leave for UK employers.

In order to understand the legal position post exit from the EU it is necessary to understand how EU laws (Directives) are implemented into the law of member states. EU member states are required to implement Directives into national law by introducing their own national legislation. It is generally this national legislation which individuals rely on in the UK courts. Therefore even if EC Directives no longer apply, the UK legislation passed in order to implement them would still be in place unless we make a decision to repeal them. With several hundred to go through, that isn’t going to happen any time soon and means that in the short term at least, employers are unlikely to notice much difference. Maybe the most significant change initially will be that the UK Supreme Court will replace the European Court of Justice as the highest court of appeal….but then as only a tiny fraction of cases make it that far up the judicial system, that won’t really have any noticeable impact day to day.

In the medium to long term however there may be changes to UK employment legislation, depending on the negotiations for exit and the type of post-exit trade agreements reached. Undoubtedly the UK Government will be seeking trade agreements with Europe and it is likely that as part of any such agreements the EU would require the UK to have in place what it would consider minimum employment protections. If, like Norway, the UK becomes a member of the EEA (European Economic Area) which would allow us to be part of the EU’s single market, then certainly it is likely that we would need to have in place legislation covering all of the key aspects of employment protection…..that we already have in place.

But that is not to say that no changes would be possible. In many areas the protection afforded to employees in the UK exceeds the minimum standards required under EU law. Moreover if, as seems to be the case, the political climate supports changes in order to lighten the legislative "burden" on the business community then some changes are likely. But where might these changes arise and how significant are they likely to be? Let’s consider some of the key areas of EU based legislation where changes might be possible and try to make some predictions.

Discrimination law

The Equality Act 2010 consolidated all of the UK’s anti-discrimination legislation into a single piece of legislation. The Act also added protection against discrimination based on religion and belief. Prior to this however the UK had already legislated against discrimination based on sex, race & disability amongst others, and in the case of sex and race, we did so long before this was required by the EU. The right to protection from discrimination is generally accepted as a fundamental right in the UK and it would be almost inconceivable to consider any politician repealing the protection afforded by the Equality Act. What might change, however, is the discrimination compensation rules. At the moment an employer’s discriminatory treatment of an employee could result in an unlimited award, myHRdept feel it is possible that in the future this may be capped, similar to the cap on unfair dismissal compensation.

National Minimum Wage/Living Wage

With its roots buried in the European model, the UK will no longer be obliged to maintain a NMW, but any attempt to remove this would be hugely unpopular with voters and fiercely opposed by the UK trade unions – to tamper would a potential election loser and for that reason alone we cannot envisage any back peddling in this area. myHRdept prediction? No change.

Family Friendly Rights

These have tended to be a mixture of rights deriving from the EU and those originating in UK law. Maternity leave and pay in the UK preceded the EU requirement for such rights and are in many respects far more favourable than comparable maternity rights in Europe. Some family friendly rights such as the widely disliked (by employers) shared parental leave and the right to request flexible working for all employees are initiatives deriving entirely from the UK. In recent years the impetus has been to extend family friendly rights in the UK rather than to curtail rights, therefore it is unlikely that there would be significant changes following our exit from the EU. myHRdept prediction? No change.

TUPE

TUPE is likely to remain largely unchanged. The original 1981 Regulations implemented the Acquired Rights Directive but since then new Regulations have been introduced in the UK in 2006 extending TUPE to service provision changes (the bit most employers love to hate) and further amendments were also made in 2014. The Regulations are well established in UK law and will probably be retained. That said some amendment to the detail may come about as a result of the UK’s exit from EU in order to make the Regulations a little more business friendly – the inability of employers to quickly harmonise terms of employment post transfer has always been a frustration for employers (as employees may at the moment claim breach of contract) and, if anything changes, myHRdept predict harmonisation of terms with immediate effect will be it.

Redundancy

Whilst the law relating to redundancy as a potentially fair reason for dismissal (and indeed the law relating to unfair dismissal generally) is not based on EU law, the legal requirements for collective consultation when making more than 20 employees redundant do originate from the EU and may be open to review. Employers will claim collective consultation adds an unwelcome burden, but as the collective consultation requirements for 100+ redundancies has already halved to 45 days, and as Trade Unions would oppose any changes, myHRdept predict no, or very limited change here.

Working Time

The Working Time Regulations 1998 implemented the Working Time Directive which required member states to implement legislation ensuring that workers received a minimum of 4 weeks paid holiday a year. In fact the UK Regulations went further than this and gave workers a right to 28 days paid holiday a year i.e. 5.6 weeks. If Working Time regs change at all we feel it would be most likely to be in the area calculating a "week’s pay" for the purposes of holiday pay. A raft of European cases (mainly German) have required the UK to include commission, bonuses and certain overtime in a ‘week’s pay’ and there is opportunity here for the UK to write its own definition, perhaps preferring to include only contractual pay elements. Other unpopular elements stemming from Europe include the accrual of holiday pay during periods of long term sick leave, and there is an opportunity for this to be overruled. Lastly the 48 hour week is in practice ineffective since the UK (and several other member states) have an opt-out already and, as many employees do opt out, the abandonment of the 48 hour week would have little noticeable effect and save a great deal of administration time in monitoring compliance. Working time then, myHRdept predicts will be an area of some change and simplification.

Agency Workers Regulations

The Agency Workers Regulations 2010 implemented the Temporary Agency Work Directive 2008 and provides agency workers with the right to the same basic employment and working conditions as permanent employees once they’ve been working for 12 weeks. The Regulations are very unpopular with employers for whom agency staff have always been a valuable resource providing them with flexibility enabling them to respond quickly to business opportunities. The Regulations are relatively new and thus not particularly well embedded. It is therefore quite possible that BIS and other employer organisations will petition for the Regulations to be repealed. myHRdept prediction? Agency Workers Regs will be scrapped.

So those are our predictions and to emphasise they are just that – predictions. At the present time without even a clear indication of when Article 50 will be invoked beginning the exit process it is not surprising that the practical implications of exit remain a matter of guesswork and conjecture and are likely to continue to be so for some time to come.

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