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What would Brexit mean for UK employment law?

With the referendum on whether the UK should remain a member of the European Union looming, we consider the potential implications that a decision to exit the EU would have on UK employment law.

Current status of UK employment law

Many of our existing UK employment laws have their basis in EU laws that the UK has been required to implement into our domestic legislation. At EU level, these usually take the form of directives. Familiar ones will be the Working Time Directive, which was implemented into UK law by the Working Time Regulations 1998, and the Acquired Rights Directive, which was implemented into UK law by the TUPE Regulations 2006.

Regulations such as the Working Time Regulations 1998, are known as secondary legislation; in addition we also have primary legislation. An example is the Equality Act 2010, which has its basis in various anti-discrimination EU directives. However, whilst this Act does implement elements of EU discrimination law, it is important to note that we already had certain discrimination protection in place prior to the relevant EU directives coming into play. Protecting employees against discrimination was therefore not a new concept to UK employment law; not one imposed on the UK by Europe.  

Some of our domestic laws that have their founding in EU law have faced criticism, such as the inability to harmonise terms and conditions following a TUPE transfer or the 48 hour limit on a working week. However, it should be remembered that some of our own laws go further than the minimum required by EU directives. For example, the UK annual leave entitlement of 5.6 weeks goes beyond the minimum 4 weeks required by EU law.

Finally, EU court decisions have an impact upon our own domestic litigation. Our domestic courts are currently required to follow judgments of the Court of Justice of the European Union (the ECJ). This means that EU law is built into our own courts’ interpretation of domestic legislation, sometimes leading to amendments to our own legislation to ensure compliance with EU law.

As can be seen, EU law has a wide-ranging impact on UK employment law. Given this current impact, what, then, would happen to UK employment law in the event of a Brexit?

Maintaining a relationship with the EU after a Brexit

If the outcome of the referendum is a Brexit, it will not take place overnight. A "yes" vote would trigger the serving of a notice for the UK to exit the EU, a process which will take at least two years.

Having been an EU member for over 40 years, the form of relationship that will be maintained with the EU after a Brexit is a complete unknown. However, the expectation is that, at a minimum, some form of trade relationship would be maintained. As such, various options for a post-Brexit UK have been put forward:

  • The Norwegian model, with the UK being a member of the European Economic Area/European Free Trade Area.
  • The Swiss model, with the UK being a member of the European Free Trade Area with additional bilateral agreements in place with the EU.
  • The UK being a member of the World Trade Organisation and forging an on-going relationship with the EU through that mechanism.
  • A separately negotiated relationship with the EU unique to the UK.

Each of these scenarios would take time to negotiate. One of the main considerations is that any state outside of the EU has no say in EU legislation, yet we may find that the UK remains bound by elements of EU law depending on the extent of the resulting trade agreement with the EU. This would mean that the UK would remain bound by certain EU laws with no say in the legislative process.  

If, for example, the Norwegian or Swiss models are followed, many of the existing EU directives, such as on working time and TUPE transfers, would have to be followed. In addition, the decisions of the ECJ would likely still have to be followed or would at least be persuasive on our domestic courts. In these situations, the scope for significant amendment to UK employment law will be limited.

As a result, the decided mechanism for the UK's on-going relationship with the EU will be the key factor determining the extent that UK employment law can be amended following a Brexit.

Knock-on effect on UK employment law

Due to the long lead in period for a Brexit, the current state of employment law in the UK is likely to remain static, at least for the initial two year period after notice to leave is served. It is expected that the status quo will be maintained - even for secondary legislation enacted under the European Communities Act 1972 (the legislation providing for the incorporation of EU law into UK law by way of regulations) due to the uncertain situation that would otherwise occur.

After the two year notice period has passed, changes to legislation will depend on the negotiated relationship that the UK maintains with the EU and any restrictions on UK employment law that may result.

Other considerations will also apply. Many parts of existing UK employment law which have their basis in EU law have become expected employee rights: paid holiday, protection from discrimination and various family friendly rights to name but a few. Making significant changes to them is unlikely to go down well amongst employees or Trade Unions, and will do no favours for the UK labour market.  

It is more likely that partial changes would be made to those elements of UK employment law that originate in the EU and which have caused major headaches for UK employers. An obvious example is the current line of EU holiday pay case law maintaining accrual of holiday entitlement for workers on long term sick leave. Another is the EU case law on the inclusion of elements such as overtime and commission in the calculation of holiday pay. The inability to harmonise terms and conditions following a TUPE transfer is another area where change may be implemented. As are the collective consultation obligations in redundancy situations involving 20 or more employees. However, whilst these areas may be ripe for amendment from an employer perspective, employees and trade unions would no doubt resist such change.  

As we are looking at least two years into the future, we simply cannot predict what parts of our existing law will be changed without further insight from both the political party in power at the time and the trade deal that is struck with the EU.  

The extent to which our courts will have to take account of decisions of the ECJ will also depend on the negotiated relationship with the EU that a Brexit brings. As mentioned above, if the Norwegian or Swiss model is the chosen way forward, decisions of the ECJ would still be followed. In any event, the way our court system works means that previous decisions of the UK's higher courts have to be taken into account and followed. This means that decisions of our higher courts where the outcome has been determined by decisions of the ECJ will still have to be followed. As a result, the impact of EU case law on the decisions of our UK courts looks likely to remain, at least for the short to medium term.

The future

We will have to await the outcome of the vote on 23 June, but rest assured that the current state of play is expected to remain for at least the next few years if not longer, and so plans for change need not be made in haste.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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