U.K.: ‘Brexit' Fears Over Employment Rules May be Overdone

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By Ali Qassim

June 22—While the macro effects of a possible British exit from the European Union continue to be hotly debated as the vote draws near, the micro economic effects for employers and employees might not be all that drastic.

Employment Minister Priti Patel, one of the leaders of the “Vote Leave, Take Control” campaign, claims that “if we could just halve the burdens of the EU social and employment legislation, we could deliver a 4.3 billion pound [$6.3 billion] boost to our economy and 60,000 new jobs.”

Former Chancellor of the Exchequer Alistair Darling, however, a supporter of the opposing “Britain Stronger in Europe” campaign, has highlighted how “maternity and paternity pay, paid holidays, the right not to be discriminated against at work—all these stemmed from EU law” and warned that these benefits would be “threatened by the ‘Leave' campaigners, who talk euphemistically about wanting to scrap ‘red tape' but actually don't believe workers deserve any rights at all.”

In practical terms, however, while if the U.K. decides to leave the European Union after the June 23 referendum, it has the freedom to repeal employment rules governing the bloc of 28 nations, the likelihood is that little of that existing regulation will change, employment practitioners tell Bloomberg BNA.

U.K. Has Flexibility Over Employment Law

Nina Romain, a spokeswoman for the Chartered Institute of Personnel and Development, told Bloomberg BNA that although “much employment regulation introduced over the last 20 years or so has emanated from EU directives,” the U.K. “already has more flexibility than is sometimes realized over employment law.” The U.K., for example, “has very different regulation on protection from unfair dismissal and on collective labor disputes to that in place in much of Europe, because these aspects are principally left to member states. This degree of flexibility has enabled the U.K. to maintain the third most lightly regulated labor market in [the Organization of Economic Cooperation and Development] in terms of employment protection legislation.”

The CIPD, which speaks for 140,000 HR professionals, is not actively campaigning for either side in the Brexit debate, because “in the current in/out debate there are simply too many uncertainties that will not be clear until after the result of the referendum and potentially some time after then,” Romain said.

The U.K. ‘Led the Way'

Jonathan Chamberlain, employment partner at London-based attorneys firm Gowling WLG (UK) LLP, agreed that the U.K. has had more control over deciding its employment regulations than the “leave” campaign has suggested.

“On the face of it, Brexit could give the U.K. power to repeal or reshape areas of employment legislation that some businesses dislike,” Chamberlain told Bloomberg BNA. “Will it happen? Unlikely. Most of it was not imposed on the U.K.; rather, the U.K. leads the way. We exported our discrimination legislation to Europe: ‘they' didn't impose it on ‘us.'”

“Moreover, some areas of employment law—such as unfair dismissal, whistleblowing and individual redundancy rights—are purely U.K. provisions that will remain unaffected by the outcome of the referendum.”

Romain emphasized that “recent changes to the unfair dismissal qualification period and the introduction of fees for employment tribunal applications emanated from the U.K., not Brussels, as did the introduction of the shared parental leave regulations in April last year.”

There would also be practical difficulties with any attempts to review EU legislation, Alexandra Renison, head of Europe and Trade Policy at the business lobbyist Institute of Directors, told Bloomberg BNA, particularly because case law has drawn on British courts’ interpretation of EU Directives and rulings from the European Court of Justice.

Leaving EU a “Big Risk,” Unions Say

Trade unions, however, are wary of the potential years of uncertainty for employees that Brexit could bring.

“Brexit would mean working people are haunted by years of uncertainty, as rights like paid holiday, parental leave and equal treatment for part-timers and contract workers could be stripped away over time,” said Frances O’Grady, general secretary of the Trade Unions Congress, a group of more than 50 unions representing together 5.8 million workers.

“The biggest cheerleaders for Brexit think that your protections at work are just red tape to be binned,” O'Grady told Bloomberg BNA. “Bad bosses will be rubbing their hands with glee if Brexit gives them the chance to cut workers’ hard-won protections.”

According to the TUC’s recently commissioned legal opinion, Brexit could completely reverse the progress made since the 1960s in social regulation protecting workers.

Uncertain Immigration Policy

Major questions also revolve around employers’ access to migrant workers to address recruitment difficulties and skills shortages in a post-Brexit economy.

Minister Patel said in a speech that ending unrestricted immigration from the EU means that “we can have a strong and robust immigration system that lets the brightest and the best in from around the world.”

According to Romain, however, “a vote to leave the EU would not necessarily prevent employers from accessing the migrant workers they need. A U.K. government outside the EU could choose to retain unregulated or regulated entry of EU migrants, although there would be no guarantee of reciprocity for U.K. citizens.”

Alternatively, the U.K. could choose to adopt a managed system of migration covering both EU and non-EU nationals.

“The impact on employers would depend on choices made about the number of migrants to admit, the criteria used to determine who was admitted and the way such processes are regulated and enforced,” Romain said.

Many Existing Rules Likely to Stay Post Brexit

Of the six areas “that stand to be affected to varying degrees should the U.K. vote to leave the EU,” Chamberlain identified the following as the employment regulations most likely to remain intact:

Discrimination. “Anti-discrimination legislation is here to stay,” Chamberlain said. “Modern social attitudes make any significant roll-back of discrimination protections politically unpalatable. The Equality Act 2010 is primary U.K. legislation that incorporates EU law, and the more recent anti-discrimination ‘protected characteristics’ of age, sexual orientation, religion and belief resulted from the need to meet EU requirements. The only possible tweaks include allowing positive discrimination in favor of underrepresented groups akin to US-style affirmative action.”

Family Measures. Although rights such as those provided for new and expectant mothers are criticized by some as examples of business-unfriendly EU legislation, in practice existing rights to maternity, paternity, shared paternity and parental leave and pay are a mixture of rights deriving from the EU and rights originating in the U.K.

“It seems highly unlikely that a post-Brexit government would be keen to scale back such rights in any meaningful way—or that larger employers would want to abandon their existing family friendly policies anyway, given their significance as a recruitment and retention tool,” Chamberlain said.

Collective Redundancy Consultation. Collective consultation rights are “well embedded in the psyche of U.K. industrial relations,” which means a proposal “to remove the consultation obligations altogether appears unthinkable,” Chamberlain said. “Such a proposal would be hotly fought by trade unions and severely damage industrial relations in the U.K.”

The statutory duty of employers to inform and consult the workforce about proposed redundancies, contained in the Trade Union and Labour Relations (Consolidation) Act 1992, was introduced in order to implement the provisions of the EU Collective Redundancies Directive.

Some Existing Rules Likely to Change Post Brexit

The regulations most likely to change according to Chamberlain are:

Working Time. As the Working Time Directive has been the “poster-child for complaints that EU regulations undermine flexibility, increase costs of hiring staff and cause unnecessary red-tape,” it is “the prime candidate for severe scaling back,” although it is “unlikely to face the chop altogether,” Chamberlain said.

“Businesses would be particularly keen to see the repeal of the maximum 48-hour working week and the removal of working time recordkeeping requirements,” he said. “Also high on the list would be the reclassifying of so-called 'inactive on-call time' as rest time.”

While even the most fervent opponents of the Working Time Regulations 1998 would not suggest the wholesale removal of statutory annual leave rights, greater freedom on the accrual and calculation of holiday pay would most likely be on the “revise” list, Chamberlain said, and a return to holiday pay based on basic contractual pay, rather than the controversial current practice of holiday pay calculations needing to include regular albeit fluctuating voluntary overtime and/or commission payments, would also be highly likely.

Agency Workers. “The most likely candidate for complete revocation” is the Agency Workers Regulations 2010, according to Chamberlain.

“Removing the requirement for agency workers to be paid the same rate for the job as permanent staff once they have been in post 12 weeks could reduce business costs and recordkeeping requirements,” Chamberlain said. “This would no doubt be a tempting ‘quick win' with businesses for the government following a Brexit,” particularly because these rights “do not appear to be embedded in the national psyche for U.K. workers as, say, rights to paid holiday and rest breaks.”

The Transfer of Undertakings (Protection of Employment) Regulations. TUPE could also be a “prime target for attack, freeing up organizations to operate without European constraints in acquisitions and outsourcing scenarios,” Chamberlain said. Although it seems unlikely that there would be a major overhaul of the TUPE principle post-Brexit, “it is more likely that there would be amendments to TUPE to make it more employer-friendly—in particular, a review of those areas where EU law prevented the government from making the changes” necessary to allow businesses to “harmonize” terms and conditions of employment following a TUPE transfer and adjust the timing of dismissals in a collective redundancy, which is still one of the most difficult practical issues an organization may face in a transfer.

To contact the reporter on this story: Ali Qassim at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

For more information on British HR law and regulation, see the U.K. primer.

For more information on European Union HR law and regulation, see the European Union primer.

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