How will the Brexit endgame play out?
10 December 2018
This week is a crucial one for the Brexit process, with Parliament due to vote on the draft Withdrawal Agreement negotiated between Theresa May’s government and the EU. Even so close to the projected date for the UK’s departure on 29 March 2019, there are many imponderables and it is impossible to predict how Brexit will unfold. This article provides an employment law perspective on the current situation.
The political landscape
At the time of writing, the terms of the Withdrawal Agreement between the UK and the EU and the Political Declaration on their future relationship have been negotiated, but there is a huge question mark over whether it will be approved by the UK Parliament (and subsequently by the European Parliament). Our Brexit flowchart illustrates the complexity of the situation in which the UK now finds itself and sets out how things might (or might not) develop from here.
If the Withdrawal Agreement is approved, we will be into the relatively straightforward territory of a “transition” or “implementation” period until 31 December 2020, or possibly later – the Agreement expressly provides for the period to be extended if the UK and the EU agree. During the transition period, the status quo would broadly be maintained, allowing businesses some time to adapt to a post-Brexit world. It is also envisaged that the UK’s longer-term relationship with the EU would also be negotiated during this time.
What seems more likely is that Parliament will reject the deal, in which case there are various possible short-term scenarios: the Government collapses and there is a general election; a way is found towards a second referendum or “People’s Vote”; the UK goes back to Brussels and renegotiates the withdrawal terms (although the EU appears adamant that will not happen); or the UK leaves on 29 March 2019 in a “no deal” Brexit.
EU Withdrawal Act
The last of those possibilities is, in fact, the current default position by virtue of the European Union (Withdrawal) Act 2018, which received Royal Assent in June 2018. It is the law of the land that the UK will leave the EU at 11pm on 29 March 2019, at which point the European Communities Act 1972 will be repealed – this is defined as “exit day”, even though strictly speaking it is just a moment in time. Only fresh legislation could delay or overturn the UK’s departure.
The EU Withdrawal Act essentially provides the legal basis for a “hard Brexit”. Its main purpose is to ensure that UK legislation which derives from EU law (e.g. TUPE and the Working Time Regulations) continues to have effect in domestic law after exit day. The Act then goes on to set out a series of complex provisions on matters such as the extent to which the “principle of supremacy of EU law” will continue to apply to existing EU-derived legislation, and how far UK courts and tribunals should continue to have regard to decisions of the European Court of Justice (“ECJ”).
If – and it is a very big if – the Withdrawal Agreement is approved by Parliament and successfully concluded with the EU, the intention is that the EU Withdrawal Act will be amended to allow for the transition/implementation period, i.e. effectively pausing the clock until 31 December 2020 (or possibly later). The EU Withdrawal Act includes provision for consequential amendments to be made to the Act to cater for this.
In passing, it is worth noting that there are said to be around 900 statutory instruments that need to be drafted and passed by Parliament before the end of March to complete the job of converting EU law into domestic law.
The best way to think of the Withdrawal Agreement – all 585 pages of it - is that it leaves the UK as a country with all the obligations of EU membership but with none of the rights to have a say over future direction until the end of 2020 (at least). Various provisions of the Agreement explicitly state that EU law will continue to apply to the UK throughout the transition period, and the UK will be obliged to ensure it complies (including through new legislation if necessary). The Agreement creates directly effective legal rights which individuals can sue on if they need to.
There are certain specific provisions on discrimination and workers in the Withdrawal Agreement. For example, it prohibits any discrimination on grounds of nationality against EU citizens who move to the UK before the end of the transition period and, vice versa, any UK citizens in an EU member state before this point. There are also express references to data protection in the Agreement, providing for EU law to continue to apply to data processed before the end of the transition period (and afterwards in certain circumstances).
Controversially for Brexiteers, the Withdrawal Agreement provides that ECJ judgments in any proceedings started before the end of the transition period will be binding on the UK (even if they are handed down after the end of that period). It will also be possible for UK courts and tribunals to refer cases to the ECJ for a preliminary ruling right up to the end of the transition period.
The Political Declaration - a relatively modest 26 pages - serves as a kind of “heads of terms” for negotiation of the permanent future relationship between the UK and the EU during the transition period. There are a huge number of contentious issues to resolve, from fisheries to Gibraltar, and no certainty that - even if there is a transition period – we will not still end up with a hard Brexit at its conclusion if no deal can be done.
The Political Declaration does not have much to say about employment rights, but there are a couple notable pointers – including a commitment to work together to safeguard a “high standard” of workers’ rights, and an agreement that prosperity and security are enhanced by protecting workers.
Even more significant is a section of the Declaration stating that the future relationship must ensure a “level playing field for open and fair competition”, which should specifically cover social and employment standards and include “adequate enforcement mechanisms”. This is essentially a political trade-off, with the UK saying it will be prepared to accept concessions on maintaining EU employment rights and protections in return for an enhanced level of EU market access.
Also noteworthy in the Political Declaration is the allegiance sworn to human rights and fundamental freedoms and the UK’s commitment to the European Convention on Human Rights being incorporated within the future relationship framework. This suggests that a UK withdrawal from the European Convention following Brexit is unlikely.
We have not so far mentioned the question of Ireland which has bedeviled the Brexit negotiations – specifically, the vexed problem of how to avoid the re-emergence of a “hard border” between the Republic and Northern Ireland. The mechanism for this in the Withdrawal Agreement is the Irish Backstop Protocol, which complicates the picture described above further. The Protocol makes clear that it is only intended to be temporary, with the aim being for it to be superseded by the end of the transition period.
Notwithstanding this, the Protocol provides that “until the future relationship becomes applicable”, a single customs territory comprising the EU and the UK will apply. As a condition of the EU signing up to this, so-called “level playing field” conditions will apply. This would basically mean that the whole of the UK in some cases, or just Northern Ireland in others, would remain subject to swathes of EU law until the permanent longer-term relationship is agreed.
How would the UK get out of the backstop? This is the measure in the Protocol that has caused so much controversy. If at any time after the end of the transition period either the EU or the UK considers the Protocol is no longer needed to achieve the objective of maintaining peace in Northern Ireland – such as the “technical solution” for the border having finally been found – it could notify the other side, setting out reasons, and within six months there would be a joint ministerial meeting to decide whether that was so. Only if the EU and the UK agreed would the UK and Northern Ireland be allowed out of the backstop (or, possibly, it could be resolved by binding arbitration).
For present purposes, the important thing about the Backstop Protocol is that it contains broad and strong commitments from the UK on employment law matters. After the end of the transition period, the UK would be obliged to ensure non-regression of labour and social standards – i.e. no reduction in the level of protection “and as regards fundamental rights at work, occupational health and safety, fair working conditions and employment standards, information and consultation rights at company level, and restructuring”. In essence, until the backstop is dissolved, the UK would be prevented from introducing changes to any EU-derived employment laws.
The analysis above seeks to explain the current state of play and where we might be heading. In a situation of such complexity and serious uncertainty, it will come as no surprise that some businesses operating in the UK have Brexit contingency plans in place that involve relocating all or some part of their operations outside the country. In many cases, certainty that there is going to be a hard Brexit – with no transition period - is being viewed as a “trigger” for those plans. So let’s finish with a couple of practical points for employers contemplating such action.
The first is a reminder about collective redundancy consultation. When an employer is planning 20 or more redundancies at one establishment within a period of 90 days or less, it is under a duty to inform and consult with appropriate representatives of affected employees in good time. This must be at least 30 days before the first dismissal takes effect if there are 20-99 redundancies, and at least 45 days before the first dismissal takes effect if there are 100 or more redundancies. To avoid exposure to a 90-day protective award, it is vital not to start consultation too late.
The key point here is that if a business has decided that a hard Brexit will trigger contingency plans involving a collective redundancy, it is strongly arguable that it should start to consult straight away rather than waiting to see how the politics play out. In a 2007 case about closure of a mine (UK Coal Mining Ltd v NUM  IRLR 4), the Employment Appeal Tribunal ruled that if a decision to close an operation will inevitably lead to a collective redundancy, the employer ought to consult on the business case for closure before the decision is taken.
While a cleverly worded management statement will always say that any decision is “subject to consultation”, “subject to legal requirements” and so on, some businesses will have overseas parents involved in the decision-making who might not be familiar with such nuances. In Brexit-related redundancy situations, it is important to avoid slipping up and finding you are consulting too late - and employees themselves may welcome transparency from management about its intentions.
The second point concerns alternative employment and whether employees should be given the opportunity to relocate abroad if their role is moving to an overseas location. The safest answer is that they should. There may be circumstances in which this is not necessary because, for example, the role is changing and there will henceforth be a language requirement or a requirement for a regulatory qualification that the individual does not meet. But in the ordinary course where it is simply the role that is relocating, it is prudent to offer the opportunity. The employee does not have to accept, of course, and in many cases will not do so - in which event, they will be entitled to leave with a redundancy package.
With Brexit scheduled for 31 October 2019, there will be both long and short term legal implications for UK and international businesses.