With a potential Grexit looming and with Europe on everyone’s minds I thought I would take a few minutes to consider the implications of a Brexit for employers.
Before I do this it is worth bearing in mind that the nature and extent of any changes brought about by a Brexit will depend entirely upon the terms on which the UK negotiates its exit and the new relationship it forms with Europe.
There are a number of viable options here and they are not all mutually exclusive: these include (a) retaining membership of the European Economic Area (EEA); (b) brokering a series of bilateral deals with individual EU member states; (c) entering into a series of sector-specific trade deals or a customs union with the EU; or (d) only entering into light-touch arrangements with the EU and focusing instead on trade relationships outside of the EU.
If the UK pursues option (a) then UK employment law will not change in any material way. As a member of the EEA the UK would still be bound by EU employment laws although it would no longer be able to take part in the development and passing of those laws as it would be outside of the EU. If the UK pursues the less likely option (d) then UK employment law may change quite significantly. If the UK goes for something in between then there is likely to be some change to UK employment law although this change is unlikely to be fundamental.
It also worth bearing in mind that the UK will need to give two years’ notice of its intention to leave the EU. This should give employers time to prepare for any significant regulatory changes and it will enable transitional arrangements to be put in place.
A Post-Brexit World - what will it look like for employers?
Over the course of the last 30 years the EU has been criticised by government and businesses in the UK for introducing burdensome regulations and for restricting employers’ ability to run their businesses and recruit the best people. The following are just a few examples of the areas which have attracted criticism and which may therefore be susceptible to repeal or reform in the event of a Brexit:
- Working Time, Agency Workers and Holiday Pay - Rules regulating the level of pay for agency staff, record keeping requirements for working time regulations and the maximum 48 hour working week could all be repealed in the event of a Brexit. A Brexit would also give the UK more flexibility to determine how holiday pay is calculated.
- Immigration - UK’s immigration system would be fundamentally revised in the event of a Brexit and EU nationals may face the same restrictions as those from outside the EU. This could have a material impact on multi-nationals who operate throughout Europe and it may also have practical implications for UK employers when recruiting EU nationals into the UK.
- Employee Share Schemes - operating international schemes might become more complex and expensive for employers.
- Business Transfers - it may become easier to change the terms and conditions of employees transferor acquired by the transferor following the transfer.
- Discrimination - it is unlikely that the changes introduced by the EU to UK discrimination law would be reversed in the event of a Brexit. However, a Brexit may lead to the introduction of a compensatory cap on discrimination claims.
- Human Rights - It is a common misconception that the UK’s relationship with the EU is responsible for the Human Rights Act. In fact this Act does not derive from EU law but from the European Convention on Human Rights which was passed and is regulated by the Council of Europe, not the EU. A Brexit would not therefore affect the Human Rights Act. However, the Conservative government’s recent proposal to replace the Human Rights Act with a British Bill of Rights may well have significant repercussions to our legal framework in this area.
There will no doubt be a great deal of speculation and commentary about what a post-Brexit UK will look like in the lead up to the in/out referendum. It will be interesting to listen to and contribute to this discussion but for now all eyes will undoubtedly be on a much more immediate concern: Greece.