A level playing field
On 24 December 2020, the Trade and Co-operation Agreement (trade agreement) was reached between the UK and the EU, setting out the future relationship with the EU following the end of the transition period on 31 December 2020. The trade agreement was implemented into UK law by the EU (Future Relationship) Act 2020.
The trade agreement requires both the EU and the UK to commit to a "level playing field", designed to prevent either party from weakening or reducing, in a manner affecting trade or investment, its labour and social levels of protection in place on 31 December 2020. The level playing field applies to fundamental rights at work; health and safety standards; fair working conditions; employment standards; information and consultation rights and restructuring of undertakings. The trade agreement also sets out commitments with regard to compliance with the working time rules for drivers transporting goods by road between the UK and the EU.
The current and future application of EU law in the UK
The European Union (Withdrawal) Act 2018 (which formalised the withdrawal of the UK from the EU) effectively converted EU law, including employment laws, as at the exit date of 31 December 2019 (which was extended to the end of the transition period on 31 December 2020), into UK law. Broadly, retained EU law still takes effect in the UK's domestic legal framework from 1 January 2021, with a few minor amendments to ensure the legislation remains workable. Decisions of the Court of Justice of the European Union (CJEU) after 31 December 2020 will not be binding in the UK. However, courts and tribunals should have regard to anything done on or after the end of the transition period by the CJEU. CJEU decisions up to the end of the transition period are binding unless overturned by specified appellate courts (both the Supreme Court and the Court of Appeal can depart from retained CJEU decisions). The trade agreement further limits the UK's ability to amend retained EU employment law, if the changes weaken or reduce existing standards "in a manner affecting trade or investment".
Possible future changes to employment law
In the post-Covid-19 recovery period, when the hard-won trade agreement will be essential to future economic relations with the EU, it is questionable to what extent the UK government will have the time or appetite to amend retained EU employment laws significantly, in a way which might destabilise the level playing field.
However, in the future there will be opportunities to refine retained EU employment laws to make them more workable for UK businesses. Possible areas for change include:
- Discrimination law - employers may push for a cap in discrimination disputes to help prevent spurious and costly claims. Such an amendment would inevitably face extensive resistance from bodies such as the Equality and Human Rights Commission and trade unions.
- TUPE – the government may wish to ease the burden on employers in TUPE transfer situations, for example by facilitating the harmonisation of terms and conditions post-transfer in specific circumstances. There is an argument that the service provision rules in TUPE are not retained EU law (because they "gold-plate" the terms of the Acquired Rights Directive) and so could be changed. However, this change would not necessarily be welcome, given that commercial outsourcing contracts are usually drafted on the basis that TUPE applies.
- Holidays and working time – the government may seek to clarify areas of uncertainty in relation to holidays and working time. EU case law has at times been unpopular with UK employers, for example by allowing holiday to accrue during sick leave and requiring holiday pay to be based on ‘usual’ remuneration which includes items such as overtime and commission. These are areas which the government may wish to focus on, however, any amendments will have to be carried out within the parameters of the trade agreement. There have been some reports that the UK's business department is focusing on this issue sooner than expected, with a review of the Working Time Directive, including the 48 hour working week. We will keep you updated.
- Agency workers – the Agency Workers Regulations 2010 have also faced criticism from employers. However, under the government's Good Work Plan, which implemented the majority of the Taylor Review proposals, and the Employment Bill, current policy is to enhance rather than erode the rights of agency workers.
- Collective redundancies – the retained EU law on consultation over collective redundancies is particularly difficult for UK businesses affected by the COVID-19 pandemic. The recent CJEU case of UQ v Marclean Technologies presented further uncertainty for employers with regard to the 90 day reference period for counting the number of proposed redundancies (the CJEU held the employer must look both forwards and backwards 90 days to assess if the threshold of 20 proposed dismissals is met). This may be an area for reform in order to clarify the rules.
Employers should review employment documentation (especially employment contracts, service agreements and policies and procedures) in the light of Brexit and remove or update any EU references or specific provisions. For example, geographical references in restrictive covenants and jurisdiction clauses will need careful consideration and possible amendments.
From restructuring in response to the pandemic to free movement challenges following Brexit, labour supply and workforce planning will be a top priority for employers. For further information on the new skilled worker visa, please see our Legal Update. It is important for employers to carry out regular auditing of the workforce to ensure supply meets demand and the appropriate checks are in place with regard to right to work. Additionally, as employers consolidate and re-engineer their businesses in a streamlined way, skill sets will need to be matched with the direction of travel of the organisation.
European Works Councils
European Works Councils will not operate as they did before 1 January 2021. Any EWC agreements in place or requests made by those employed in the UK before 1 January 2021 should be reviewed.
Although the immediate impact on employment law is relatively limited, it is important to keep up-to-date with employment law changes post-Brexit.
Please do not hesitate to get in touch if you need any assistance with regard to any of the issues raised in this update, including:
- the ramifications of the trade agreement;
- the operation of EWCs post-Brexit;
- ongoing employment litigation involving a question of retained EU law; and
- labour supply and freedom of movement post-Brexit."