Quirky Question #282: UK Employment Law and the Brexit Vote

Question: How will the UK’s “Brexit” vote on withdrawing from the EU affect the way we employ people in our UK subsidiary?

Answer: By Juliet Carp

Juliet Carp

Juliet Carp

A vote to “Leave” is unlikely to bring significant change to UK employment law in the short term, and perhaps not for years to come.

UK voters will shortly decide whether to “Remain” or “Leave” the European Union, through a referendum vote to be held on 23 June 2016.   Press commentary on the impact of “Brexit” has been confusing for locals, let alone overseas employers.  Sound bites designed to highlight the personal impact of leaving the EU on local voters play to a common misconception that UK employment law depends heavily on Europe.

Voters have been subjected to a relentless stream of conflicting propaganda, for example highlighting that “Brexit would be a disaster for employment rights” (so vote Remain) or that “British businesses see Brexit as a cure for red tape” (so vote Leave).  Neither argument takes account of the reality of UK employment law.

Nobody knows how voting will go, but if the vote were to “Leave” one thing is sure: UK employment law    will not change quickly. A “Leave” vote would not immediately take the UK out of the EU.  The exit process would take time and exit terms would depend heavily on subsequent political negotiation.  In the meantime, EU employment laws would continue to apply to the UK.

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The outcome of political negotiation is not easily predictable, but we can at least put some parameters on the potential scope for change to specific employment laws:

  • Because of the way European Treaties work, and piecemeal way in which European law has developed, some UK employment laws are not underpinned by EU law at all.   For example, UK “unfair dismissal”, laws are currently a domestic matter. Given those laws were introduced in the 1970s, there seems to be some consensus that they should stay.
  • Although discrimination laws are currently underpinned by EU law, the UK has led the way in promoting equality. UK equal pay laws pre-date Britain’s 1972 entry to the EU.   There is strong UK popular support for the principle of equal treatment and it seems unlikely that any domestic political party would seek to dilute the core objectives.
  • Industrial relations practices vary widely across the EU. UK collective bargaining and strike laws have developed independently from those of other European countries.
  • Some employment laws introduced by the EU, e.g., limits on weekly working time, have, in reality, very little impact on ordinary office workers.
  • It seems unlikely that a Government that is voluntarily introducing family leave for grandparents will seek to remove the limited maternity and other family rights required by EU law.
  • Holiday expectations are so entrenched, politically and in individual contracts, that removing minimum holiday laws does not seem a likely vote winner.
  • Despite the controversy that is often associated with transfer of undertakings regulations (offering protection to European employees, e.g., when business assets are sold) European businesses have worked with them for over 30 years. And it is not so long ago that UK business supported a local extension to the minimum EU requirements.   A post-Brexit change even in this more controversial area is not a foregone conclusion.

So, a close look the detail of current domestic and EU employment laws does not support arguments that “red tape will fall away” or that employees will be left “out in the cold”.   What’s more, the wider political context doesn’t support the conclusion that UK employment protection will fall away either. The process of negotiating exit from the EU (i.e., treaty changes) will almost certainly include agreement on some aspects of employment law.   Britain would not be the only, or the first, European trading partner in this position. Swiss and Norwegian experiences indicate that Britain is likely to be obliged to accept some (if not most) EU employment regulation if it wants to retain favourable intra-Europe trading status.

UK employment law cannot change much immediately, and, in the longer term, the consequences of Brexit for employment law are unlikely to be radical either.

For US-led business potential changes to domestic UK employment law are likely to be of far less significance than the post-Brexit economic context, for example the potential impact on currency, trading tariffs, tax or the availability of skilled workers.   Again there is a range of views:

  • The message from our members is resounding – most want the UK to stay in the EU because it is better for their business, jobs and prosperity.” CBI Director-General
  • When the Remain campaign tells us no one will trade with us if we leave the EU, sorry, it’s absolute cobblers.” James Dyson, the vacuum cleaner inventor and entrepreneur.

shutterstock_155833889The potential economic and social consequences of Brexit are difficult to predict and likely to be far reaching. Potential impact on employment law is, in reality, not the most important issue for UK voters – or for US-led UK business either.

Juliet Carp, 16 June 2016

Juliet Carp

About Juliet Carp

Special Counsel in the Labor & Employment Group, Juliet is author of the leading textbook, Drafting Employment Documents for Expatriates, and is a regular speaker and commentator on employment law.......

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