Out-Law / Your Daily Need-To-Know

BREXIT: 'Small tweaks' to EU employment law burdens likely in event of a Brexit vote, says expert

Out-Law Analysis | 04 Apr 2016 | 9:37 am | 5 min. read

FOCUS: The UK government may use a vote to leave the EU to reduce some of the more burdensome requirements of EU employment law, but the upcoming referendum will have little immediate effect on the biggest issues impacting on workforces.

This is part of Out-Law's series of news and insights from Pinsent Masons lawyers and other experts on the impact of the UK's EU referendum. Sign up to receive our Brexit updates by email. 

Employers must continue to tackle the challenges of low productivity, skills shortages, the impact of disruptive technologies on workers and the changing shape of the workforce due to an aging population and people working for longer, regardless of the outcome of June's vote on continued EU membership.

Although many UK employment laws originate from the EU a vote to leave is unlikely to result in the mass unravelling of these provisions. Removing all the worker protection parts of EU employment laws would be politically difficult, while initiatives derived from EU law such as the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations give businesses much-needed certainty around business transfers. However, we may well see tweaks around holiday pay, the position of agency workers, some aspects of TUPE and bankers' bonuses.

Working time and holiday pay

Over the last few years, courts in Europe and employment tribunals in the UK have ruled that an increasing number of payments must be included by organisations when calculating employees' holiday pay. These decisions have placed the Working Time Regulations (WTR), which implement EU laws government employee working hours, holidays and rest breaks, under increasing scrutiny.

While the UK government would not seek to remove the legal right to paid holidays in the event of a 'Brexit' vote, other aspects of the WTR could be amended to reduce perceived administrative burdens on employers in relation to record-keeping, rest periods and breaks. The government might scrap the 48 hour average weekly working time limit, given that it has fought long and hard to retain the ability for workers to opt out. Removing the limit altogether, along with the accompanying requirements to record hours to ensure that the maximum is not exceeded over an average 17-week period, could be popular with employers.

The recent legal furore over the calculation of holiday pay also makes it likely that the UK might opt for a simplified method of calculating holiday pay which, contrary to recent European case law, would not have to include regular payments of non-guaranteed overtime or commission. The UK could also legislate to overturn the decisions on holiday pay while on sick leave which require employers to pay workers on sick leave in lieu of holidays on termination.

Agency workers

The Agency Workers Regulations (AWR), which implement the Temporary Agency Workers Directive into UK law, is another piece of legislation viewed as onerous for business. It is likely that the UK government could repeal, or at least amend. The current requirements for employers to provide agency staff with the same core terms and conditions as directly employed staff after 12 weeks; as well as the provisions requiring employers to notify employee representatives of certain information relating to agency workers in collective redundancy and TUPE transfer situations could change.

TUPE and business transfers

The last UK government reviewed TUPE in 2014, with a declared intention of removing the perceived "gold-plating" by previous governments of the minimum requirements under the EU's Acquired Rights Directive. As part of that review, the government made it easier for employers to make changes to terms and conditions in the context of a TUPE transfer after the transfer had taken place.

If it was no longer constrained to follow the Directive, the government could relax these rules even further and seek to remove all restrictions to changing terms and conditions in the context of a TUPE transfer. This would not give employers carte blanche to make changes: they would still be bound by the UK concepts of managing the process fairly, and having a sound business reason for making the change. However, it would remove the additional protections for workers afforded by TUPE.

Human rights implications

There are potential employment law implications of the possible repeal of the Human Rights Act (HRA), particularly in relation to trade union protections and the right to freedom of association. The government has already indicated its intention to water down or remove the HRA, at the same time as proposing laws making it tougher for trade unions to commence strike action. It is conceivable that, without the limitations of EU law, the government may choose to further limit the freedoms and rights of trade unions.

Employee consultation and discrimination

For most modern employers, it is important to show that they are engaged with their workforces - therefore, there is unlikely to be much in the way of demand for removal of the Information and Consultation Regulations. Although the mechanics of these can be cumbersome, and may be subject to some change in the event of a 'Brexit' vote, the fundamental position of informing and consulting the workforce is now firmly a part of "the way we do things" in 21st century workplaces.

Similarly, equal pay laws and other protections against discrimination are unlikely to be removed by any UK government. These rules are a fundamental part of modern employment law, and it would be an extreme step to repeal or significantly dilute them.

Financial services and employment law

The position around financial regulation and its intersection with employment laws, particularly around salary and bonuses, could be softened should the UK vote to leave the EU. Although the UK government has indicated that it supports the greater use of 'clawback' and 'malus' provisions as a means of recovering or preventing payment of bonuses in the event of misconduct or mis-management, the last government did initially challenge the bonus cap set by the fourth Capital Requirements Directive (CRD IV).

The bonus cap rules have been in force since the start of 2015 and restrict senior staff bonuses to 100% of fixed remuneration in any given year, or 200% with the agreement of shareholders. The UK's position is that this is counter-productive, because it drives up fixed pay and therefore reduces the amount that can be forfeited in the event of failure. While relaxing or removing the bonus cap would be politically controversial, the regulators' justification for doing so could make this an easier than anticipated sell to the general public in the media.

Data protection

Data protection is another area in which small changes could be implemented to reduce burdens on employers. The UK government would be unlikely to reduce public or consumer protections set out in data protection law, but could be receptive to arguments that the existing rules place too many burdens on employers - especially when subject access requests are often used as 'fishing expeditions' ahead of litigation.

Immigration

Finally, there would be significant immigration issues for employers in the event of a 'Brexit' vote. Free movement of workers within the EU allows UK businesses to send their employees abroad to work at facilities in other member states free of regulatory burdens. Removing this right could mean that UK employers sending staff abroad would have to go back to applying for visas.

These assumptions are based on the UK leaving the EU altogether, but depending on the form that 'Brexit' negotiations take the UK could seek to remain within the European Economic Area (EEA) or European Free Trade Area (EFTA). These negotiations could leave the UK bound by existing EU directives on working time, agency workers and collective consultation without the ability to influence these laws.

James Cran is an employment law expert at Pinsent Masons, the law firm behind Out-Law.com.

Sign up for the Pinsent Masons Brexit guide.