April 29, 2016

How will Brexit impact Employment Law?

It is pretty much impossible to know what the ramifications will be if the UK population votes to leave the EU on referendum day on June 23rd. Or indeed, if there will be any. Or at least any that HR practitioners should be concerned about on a professional level. There are so many conflicting opinions, statistics and surveys that it is hard to come up with any definitive answers. The only thing that is certain is that there is a lot of uncertainty about what may or may not happen should Brexit happen.

However, there are some areas that L&D and HR need to consider should Brexit be the result and it is definitely worth considering them ahead of June 23rd. Forewarned is forearmed and all that.

What are those areas? HR needs to think about how Brexit could affect the employment and HR landscape in the UK. Will our reliance on EU migrants and international talent be adversely affected? Will the already raging war for talent intensify as it becomes even harder to recruit and retain the right skills? Will employment law change? These are such big and potentially thorny issues that DPG has decided to run a series of blog posts, each focusing on a different area of HR that could be affected by Brexit. This week we are focusing on employment legislation.

As we all know, an awful lot of employment legislation introduced in the UK over the past couple of decades has actually come from EU directives. The Working Time Directive, Agency Workers Directive, TUPE….these have all emanated from Brussels.

If the UK were to exit the EU, then the current and subsequent governments would be able to amend or repeal regulations set in stone by the EU. That said, the UK government might find there is substantial opposition to the overhaul of employment legislation, both from organisations and from employees.

The reality of amending or repealing regulations is that it would be very complex, time consuming and expensive. For example, a lot of employees have clauses in their contracts that are derived from the EU that offer them protection in terms of holiday pay and working hours. Should the government release organisations from this legislation and organisations decide to change their employer-employee contracts, it could result in a largescale overhaul of contracts.

Changing employer-employee contracts, particularly when it comes to areas that really matter to employees, such as the hours that they work, could seriously damage relationships between employers and employees. Organisations could suffer reputational damage if they decide to undo contractual obligations that are left untouched by other organisations.

However, should Brexit happen, the good news for HR teams is that the UK actually has a lot more flexibility over employment law than is commonly understood. The UK has very different regulation on protection from unfair dismissal and collective labour disputes to many other European states. Because of this flexibility, the UK has the third most lightly regulated labour market in the OECD in terms of employment protection legislation.

Some of the most recent employment law changes, such as shared parental leave regulations, adjustments to the unfair dismissal qualification period and the introduction of fees for employment tribunal applications, were introduced by the UK government, not Brussels.

However, should Brexit happen and the UK government decides to introduce new, conflicting employment legislation, it may run into difficulties with EU partners in terms of trading agreements. Trading with the EU may mean falling in line with EU regulations. Switzerland and Norway, for example, are both outside of the EU, but they have trade agreements with the EU that require them to abide by substantial tracts of EU-derived employment law.

The UK could also fall into hot water if it attempted to disentangle EU-derived requirements from non EU-derived requirements. Think of existing case law that has drawn on domestic courts’ interpretation of EU directives and on ECJ rulings, for example.

Employment legislation can be a minefield at the best of times. Should Brexit happen, it could get a whole lot worse.

Next week’s Brexit post will look at the issue of immigration.