Would a Brexit significantly transform UK employment law?

June 2016

By Lucy Bloom of Osborne & Wise

On 23 June 2016, the UK will be voting whether to leave the EU (“Brexit”). If the UK votes in favour of a Brexit, this could significantly transform UK employment law. Since much of our employment law comes from Brussels, once we leave, the UK could theoretically repeal all of these laws. But is such a mass reversal really likely to happen in practice and what, if anything, do businesses need to do to prepare?

1. Simplified version of our employment law
A large proportion of the UK’s employment law derives from the EU, such as discrimination protection, the working time regulations and family leave. In theory, if the UK decided to Brexit, the UK government could repeal all of these laws. This would be unlikely to happen in practice given that several of the UK employment protections already existed prior to EU employment laws being created. For example, disability discrimination laws and the right to return to work following maternity leave. It would be very unpopular if the UK Government decided to remove such fundamental employment protections.

The current position is that the European Court of Justice’s (“ECJ”) decisions are binding on lower courts. The Employment Tribunal and other UK courts must interpret EU-derived laws, in accordance with ECJ decisions. This has made the position uncertain in various aspects of employment law, especially when there are slight differences between the European legislation and UK legislation.

One key example concerns the issue of rescheduling holiday due to sickness absence. The ECJ has held that a worker who is unwell prior to a period of pre-arranged statutory holiday should have the right to reschedule that holiday to a later date. Additionally, if the worker is off sick until the end of the specific leave year in question, the European Working Time Directive allows them to reschedule their holiday in the next leave year. However, on the face of it, the UK Working Time Regulations 1998 does not allow workers to reschedule statutory holiday or to carry it over to the next leave year. This conflicting position has created a great deal of uncertainty for employers when dealing with this issue, given that some of the UK courts decisions have followed the ECJ’s decisions, whilst others have not.

A Brexit could potentially create a more simplified version of our employment law, given that UK courts would not be bound by the ECJ’s decisions and European legislation. This may therefore make it simpler for employers when deciding how to deal with issues, such as the rescheduling of holiday due to sickness absence. However, in reality the UK courts would most likely still find the ECJ’s decisions persuasive, even if they are not binding. This would mean that Europe would still continue to influence the UK courts’ decisions and key UK employment law issues in the future.

2. Collective redundancy consultation
The current position is that where an employer proposes to make large scale redundancies of twenty or more employees within a period of ninety days or less, it must consult on its proposal with representatives of the affected employees and notify the Department for Business, Innovation and Skills. The collective consultation process is detailed and derives from the European Collective Redundancies Directive. It is a fairly cumbersome process, which requires an employer to “jump through quite a few hoops” to avoid liability. Failure to comply with the process can be very expensive for an employer, given that the Employment Tribunal has the power to order a maximum protective award of up to 90 days’ gross pay for each dismissed employee.

Following a Brexit, the collective redundancy consultation regime could be watered down or removed altogether. This would potentially be welcome news for employers, as it would enable them to conduct a more streamlined and fast moving redundancy process with affected employees. Employers would still be required to consult with employees on an individual basis in order to comply with UK employment law. Employees would not therefore lose the ability to enter into a meaningful dialogue with their employer concerning any proposed redundancy of their role.

Agency workers
The Agency Workers Regulations 2010 (“Regulations”) give effect to the European Directive on Temporary Agency Work. In summary, the Regulations are intended to give agency workers (a) a number of rights from the first day of their assignment; and (b) the same basic working and employment conditions that they would have been entitled to had they been recruited directly by the hirer, after the completion of a 12-week qualifying period.

In reality, the Regulations are very cumbersome, complex and difficult to navigate. They are also unpopular with businesses. Given the negativity surrounding the Regulations and the fact that they have arguably not yet become too integrated in UK law, a Brexit could potentially lead to the complete revocation of the Regulations. This would be welcome news for both employers and recruitment agencies. However, it may not be such good news for agency workers, who would lose some of the equal treatment rights that the Regulations currently give to them.

Dramatic change on the horizon?
A Brexit is unlikely to dramatically transform UK employment law overnight. However, it may lead to some key changes in the future. It could potentially make UK employment law less uncertain in areas where European law conflicts with UK law.

The UK government will most likely keep its political aims at the forefront of any reform discussions. It will want to ensure that the UK retains an ongoing trade relationship with the EU, which is its biggest export market. In reality, this key consideration could therefore affect the way in which UK employment law develops in the future.