Although much of the UK’s employment law derives from the EU, Brexit will have limited implications for it in the immediate term under the terms of the agreement on the future UK-EU relationship concluded on 24 December 2020. However, there is some scope for the UK to amend its laws under the terms of the agreement, and ongoing uncertainty about the future status of key employment decisions of the European Court of Justice (ECJ).
Key point – trade agreement limits UK’s ability to amend employment law
In return for a tariff and quota-free trade deal, the UK agreed that it would not reduce employment law rights below the standards that exist on 31 December 2020 - but only if this affects trade or investment.
This means there is not a complete ban on the UK reducing employment law protections, but any change which affects trade or investment would breach the agreement. Major changes, such as removing working time or agency worker laws altogether, are very likely to affect trade as this would give UK employers a clear competitive advantage. It is arguable that more minor changes would not affect trade or investment in the same way. It remains to be seen how willing the EU will be to enforce this commitment, and how willing the UK will be to rock the boat (at least in the short term).
In order to protect the Good Friday Agreement, the arrangements for Northern Ireland in the UK-EU Withdrawal Treaty commit it to continuing to abide by various EU Equal Treatment Directives (and to interpret them in conformity with post-Brexit ECJ decisions). This commitment does not, however, extend to the rest of the UK.
Key point - EU citizens’ rights are protected
The original withdrawal deal between the EU and the UK contained provisions on the rights of EU citizens living in the UK which include protection against discrimination at work. Existing anti-discrimination laws will be largely adequate to reflect these rights.
The trade agreement in addition requires the UK to maintain its existing employment law standards. Although this is limited to where a change would affect trade or investment, it seems unlikely that the UK will reduce any discrimination rights after 1 January 2021. As noted above, Northern Ireland is separately committed to continuing to follow EU discrimination law.
In the context of recruitment, if employers adopt a blanket policy of not considering applications from European Economic Area nationals after 1 January 2021, they will be vulnerable to claims of indirect discrimination on grounds of nationality. To minimise this risk, employers should consider candidates’ right to work in the UK on a case-by case-basis, and normally not until they have completed their selection process.
Key point – UK is not required to follow future EU developments
The EU had originally proposed that the UK would be required to follow new EU employment rights, but the trade agreement does not require this. Instead, if the UK diverges significantly from the EU in relation to employment rights in a way that materially impacts trade or investment, the EU can take “rebalancing” measures. This could include imposing tariffs. The aim is to prevent the UK from obtaining a competitive advantage by lagging behind on employment rights.
This means that the UK is not required to align its future employment law with EU Directives or ECJ decisions in order to continue with tariff-free trade. Significant divergence could ultimately result in tariffs, but only if it results in competitive advantage and there is actual proof of this. The exception is Northern Ireland because, as noted above, it must continue to abide by various EU Equal Treatment Directives and interpret them in conformity with post-Brexit ECJ decisions.
The UK is not currently planning to transpose the EU Whistleblowing Directive (which has an implementation deadline of December 2021) or the Work-Life Balance and Transparent and Predictable Working Conditions Directives (both due to be implemented by August 2022). If the UK’s decision not to adopt these Directives in full results in a significant divergence on employment rights in a way that materially impacts trade or investment, the EU will be able to trigger the rebalancing provisions if it has actual proof of that impact. This currently seems unlikely as UK law already either covers or is proposing to cover many of the requirements under these Directives. There are also proposals for future Directives on minimum wage and pay transparency, but again the UK already has its own laws in those areas.
Key point - European Works Councils arrangements have changed
With effect from 1 January 2021, European Works Councils (EWCs) are not able to operate as they did previously.
- All multinationals need to decide what to do about the ongoing involvement of the UK representatives in their EWC.
- Multinationals that are headquartered in the UK, or that have appointed a UK representative agent for their EWC, need to proactively designate or assign a new representative agent based in an EU member state.
Key point – legislation allows more flexibility to depart from ECJ decisions
When the Brexit transition period came to an end on 31 December 2020, all existing EU employment legislation as it stood at that date was converted into UK law, with a few small adjustments intended to make sure that the legislation is still comprehensible.
New ECJ decisions after the end of the transition period are not binding on UK courts or tribunals, although account may be taken of them if relevant. However, decisions of the ECJ during the transition period are adopted into and retained in UK law, which means that they remain binding unless and until they are overturned.
The Supreme Court is able to depart from retained ECJ decisions on the same basis as it can depart from its own decisions – that is, if it seems “right to do so”. In addition, the EU (Withdrawal Agreement) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020 extend the power to depart from retained EU case law to the Court of Appeal and other specified appellate courts. They will apply same test as the Supreme Court. The Employment Appeal Tribunal is not listed as an appellate court which is able to depart from retained EU case law, which is likely to result in less volatility and uncertainty in employment law than if it had been decided otherwise.
As explained above, there are limits in the trade agreement on the UK’s ability to amend employment law. Overturning a single existing ECJ decision seems unlikely to be in breach of this commitment not to reduce employment rights, however, as it would be difficult to show that this affected trade or investment.
Employers do not need to take any action at present but can expect future uncertainty about the status of key ECJ decisions, many of which have had a significant impact on UK employment law.
Key point – coordination on social security rights for employees working in other EU countries
The trade agreement provides for continued coordination between the UK and the EU on individuals’ social security rights from 1 January 2021. There had been fears that absence of a deal on this issue would create major uncertainty and difficulties for UK employers needing to send their employees to work in other EU countries.
Unfortunately, however, the new position under the detailed “Protocol on Social Security Coordination” is complex, depending primarily on the country in which the employee is working and whether it has decided to apply the “detached worker” rules contained in the Protocol.
The new rules on detached workers are not a concern for UK employees temporarily seconded to Ireland (and vice versa) since the UK and Ireland have made a separate, reciprocal social security agreement which preserves the existing position. In addition, the new rules do not apply to secondments or assignments which began before 1 January 2021 provided there is no change in the employee's circumstances.
Important points to note under the new social security arrangements include the following:
- Employers should check the HMRC’s guidance on the new rules if proposing to send an employee to work in an EU member state. Note, however, that this will need to be updated as the approach taken by the individual EU countries becomes clear.
- In terms of practicalities in such situations, the employer and employee will still need to apply to HMRC for an A1 or E101 certificate as appropriate.
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