On 24 December 2020, the UK and the EU signed the UK-EU Trade and Cooperation Agreement (the Trade Agreement) which took effect on 1 January 2021.
Whilst the Trade Agreement is wide-reaching and covers many areas, this article specifically addresses the implications of this agreement on UK employment law. Now that the UK is no longer part of the EU, what does this mean in terms of the existing UK employment law which is derived from EU law? And what will the UK be obliged to continue following future legislation introduced by the EU?
Existing UK employment law
A number of current UK employment laws are derived from European legislation and case law including:
- The Working Time Regulations 1998 which govern the number of hours employees may work and the minimum requirements in terms of breaks and annual leave.
- TUPE legislation which protects employees’ terms and conditions where there is a change of service provider and/or business transfer.
- Some aspects of discrimination law. Whilst the UK already had some anti-discrimination legislation in place, changes were made to comply with the EU position including the introduction of the concept of associative discrimination and the introduction of gender reassignment as a protected characteristic.
- Awards of compensation in UK discrimination claims are also currently not subject to any cap (unlike awards of unfair dismissal) as a result of a decision made by the European Court of Justice in 1993.
At present, all employment legislation that was in force pre 1 January 2021 remains in place. However, now that the UK is no longer part of the EU, it can choose to revoke some or all of the legislation it introduced by virtue of its membership of the EU. The Trade Agreement does not prevent the UK from making changes to its domestic employment laws. In fact, it specifically notes each party’s right to determine the labour and social levels of protection it deems appropriate. It may also modify its laws accordingly in a manner consistent with its international commitments. However, there is a non-regression principle within the Trade Agreement which provides that:
Therefore, the UK may choose, and is permitted to, make changes to its domestic employment law provided such changes will not adversely affect trade or investment with the EU.
Concerns about the government’s ability to make changes to UK employment law rights have been flagged by Ed Miliband, Shadow Business Secretary who has claimed that such would amount to “taking a sledgehammer to workers’ rights.”
However, the government has been quick to deny that it intends to use Brexit as an opportunity to water down employment rights with Business Secretary, Kwasi Kwarteng stating on Twitter: “We are not going to lower the standards of workers’ rights. The UK has one of the best workers’ rights records in the world – going further than the EU in many areas. We want to protect and enhance workers’ rights going forward, not row back on them.”
Mr Kwarteng has subsequently confirmed that a planned post-Brexit review of workers’ rights which was feared would lead to a reduction of rights laid out in the Working Time Regulations 1998 in particular, will not go ahead. Instead, he has stated that the government is instead considering Brexit to be an opportunity to introduce “higher standards.”
For now at least, it appears unlikely that there will be any changes to UK employment law arising out of the UK’s exit from the EU. Certainly, we would not expect to see any dramatic changes such as the removal or reduction of any discrimination protection currently afforded by UK law. But looking ahead, it is possible that future legislative changes may be made to clarify more ambiguous areas of law such as holiday pay and how this is calculated. This issue has been the subject of considerable litigation in recent years. It may be that the government now seizes the opportunity to clarify the position once and for all.
Future EU laws
The UK is under no obligation to impose domestic legislation to give effect to European Directives introduced after 1 January 2021 although it may still choose to do so. The Agreement specifically gives the UK the right to determine its own future employment laws irrespective of those introduced by the EU. However, significant divergences in legislation between the UK and the EU may be capable of impacting trade or investment between the parties. In the event of a material impact on trade or investment, both the UK and the EU have the right to take rebalancing measures. Therefore, the UK will still need to be mindful of any new employment measures introduced by the EU.
Whilst case law decisions and principles handed down by the CJEU on or after 31 December 2020 are not binding on any UK tribunals or courts, decision-makers may (and are likely to) have regard to them where relevant.
Whilst it is too early to say for sure, it appears unlikely that Brexit will lead to any significant change in UK employment law rights. Instead, UK employment laws are likely to remain closely aligned to those in place in EU.