Brexit – Implications for HR and Employment Law

Jun 08, 2016
The EU referendum will take place on 23 June 2016 and has the potential to impact upon the legal system in the UK, particularly in respect of employment law. This is because much of the legislation affecting employment law has come from or is based on EU law such as restrictions on the length of the working week, anti discrimination laws and TUPE regulations. 

Relationship of the EU and UK employment law 
Our membership of the EU is often blamed for the complex and burdensome legislation employers have to deal with in the UK. Recent decisions made by the European Court of Justice, which are binding on the UK, for example that employees still accrue holiday whilst off sick and the calculation of holiday pay have only added fuel to the fire in this respect and continue to be a source of frustration for employers. 

What would happen to employment law if we left the EU? 
It is unlikely that an exit from the EU would immediately impact on UK employment law. Many rights, such as anti discrimination laws, are so deeply embedded into our society that any significant amendments seem highly unlikely as they would be met with considerable hostility from the general public and voters. It would also cause significant upheaval for businesses to remove many of these long established employment rights altogether as it would be too disruptive to do so.  

Instead what might happen is the gradual amendment of legislation. It is widely anticipated that some of the main targets would be the Working Time Regulations, particularly removing the restraint on the 48 hour maximum working week, and changing the rules by which time spent ‘on call’ would count as working time. It is also thought that there would be amendments to the TUPE Regulations, for example to make it easier for employers to change or harmonise terms and conditions in line with existing employees following a transfer. Another likely target is to impose a cap on compensation for discrimination claims, which is currently unlimited and often of great concern to employers.  

However, in the event that the UK do vote in favour of Brexit, we would still need to trade with the EU and it is likely that any such trade agreements would require us to guarantee minimum employment rights, which may need to be to an EU standard in any event. 

How soon would we see any changes? 
The UK would have to give two years notice of their intention to leave the EU and even though David Cameron has declared that he would give notice the day after the referendum vote, the lengthy notice period involved would mean that there would not be any immediate changes. 

Indeed, negotiating a new relationship with the EU may take longer than the two year notice period. Any changes are likely to be gradual and of course shaped by the political party in power at the time. 

What about EU workers currently working in the UK? 
At present because the UK is part of the EU, employers are free to engage any EU nationals to work for them as there is no restriction on the free movement of EU citizens. UK nationals are equally free to work anywhere in the EU. 

It is anticipated that following a vote to leave, any trade deal with the EU would include a relaxed approach to the movement of workers, rather than the current free movement regime. However, there would also need to be transitional arrangements for those EU workers already in the UK. 

In time it may be that EU nationals would prefer to stay working in the EU rather than the UK because of the advantages afforded to them as a result of free movement and therefore this could have an impact on recruitment and resourcing in the UK in the future. 

Given that there are currently strict checks required for businesses employing overseas workers, following a vote to leave the EU there could be additional compliance requirements for those businesses who employ a lot of EU nationals or who are part of a group of EU companies, to ensure that they are employing workers in accordance with immigration legislation. 

An exit from the EU is likely to create uncertainty which could extend for years as successive governments grapple with firstly negotiating a new relationship with the EU and then deciding how and when to extract long established EU laws from our legal system. 

It is anticipated that businesses will be affected in different ways which could either lead to potential redundancies or restructures or alternatively an increase in recruitment. For the time being there is little that organisations can do to prepare for the outcome of the referendum one way or the other. 

Whether we stay or we go there is no doubt that the changes to employment law that ensue will continue to keep businesses and HR teams busy! 

For more information please contact Joanna Sutton by email or call 020 7294 7330.

Joanna Sutton

About the author

Joanna Sutton

Joanna qualified as a solicitor in 2010 and joined Nockolds as a Senior Associate in March 2016 having previously worked and trained at another firm ...

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