Brexit Trade Deal – What are the implications for UK employment law?

On 24 December 2020, the government announced that it had finally reached a trade deal with the EU, sealing the terms of the UK’s future relationship with the EU.   Given that such a large part of our employment law is rooted in EU legislation, what does this deal and the UK’s withdrawal from the EU mean for the future of UK employment law and rights?

What happens to EU law existing prior to 1 January 2021?

The first point to make is that all existing EU legislation and EU derived rights that existed prior to 1 January 2021 have been adopted and retained in UK law.   So, employment law as it stood at the end of 2020 has been preserved in a new body of “retained EU law”.  This includes decisions of the European Court of Justice as well as all UK legislation implemented to give effect to EU legislation.  This means that UK courts and tribunals should continue to interpret EU derived legislation in line with relevant EU directives and European Court of Justice decisions made before the end of 2020. 

What changes can the UK make to current employment laws?

The UK agreed in the trade deal that it will not reduce employment law rights below the standards that existed on 31 December 2020 if to do so will affect trade and investment.   The premise behind this is to create a level playing field between the UK and the EU in so far as trade is concerned.  

So, the UK is not banned from reducing employment law protection, but it cannot do so if the changes would affect trade and investment.   This means that it is unlikely the UK will remove laws such as the Working Time Regulations which place limits on working time as to do so would give UK businesses a competitive advantage over European businesses.

What about future EU employment legislation?

The UK is no longer required to implement new EU employment legislation or new decisions of the European Court of Justice.   However, this does not mean that new EU laws can be ignored by the UK.  The UK’s deal with the EU says that the UK must not diverge significantly from the EU in relation to employment rights if to do so would materially impact trade or investment.   If the UK does reduce employment rights and this results in a proven competitive advantage, the EU can take “rebalancing measures” such as imposing tariffs on the UK.  

There are a number of employment law related EU Directives in the pipeline which the UK now will no longer be required to implement.  These include Directives such as the Whistleblowing Directive, the Worklife Balance Directive and the Transparent and Predictable Working Conditions Directive.  However, unlike many EU states, the UK already has protection for workers in the areas covered by these Directives or is planning to cover many of the requirements under the Directives (such as the plan to give workers the right to request a more stable and predictable contract).  Therefore, it will be interesting to see how much divergence there will be between UK and EU law once the Directives are implemented by the EU.     

What about future decisions of the European Court of Justice?

New European Court of Justice decisions made on or after 1 January 2021 will no longer be binding on UK courts and tribunals.   However, UK courts and tribunals may take account of them if they are relevant to the case before them.  The UK courts and tribunals are still bound by European Court of Justice decisions existing prior to 31 December 2020 and will remain bound unless and until they are overturned.  Only the Supreme Court or Court of Appeal will be able to depart from existing European Court of Justice decisions in the future where it is “right to do so”.   The Employment Appeal Tribunal is not able to depart from retained EU case law. 

Will the UK still required to observe the European Convention on Human Rights?

Yes, the UK has agreed to continue to respect the fundamental rights and principles set out in the European Convention on Human Rights.   This means that the rights enshrined in the Convention will continue to be relevant to employment law and UK courts and tribunals will continue to uphold these rights. 

What changes might we expect to see in employment law in the future? 

It is unlikely that any significant change is going to be made to employment law in the short term.   Longer term, it is possible that the UK government may take the opportunity to use its new “freedom” to make changes to controversial EU derived legislation such as the Working Time Regulations, the Agency Workers Regulations and the Transfer of Undertakings (Protection of Employment) Regulations (“TUPE”).   However, wholescale removal of these laws is not going to be on the cards because of the UK’s agreement with the EU to create a level playing field in relation to trade and investment.    Rather, we may see changes to the more controversial aspects of these Regulations.

For example, the UK may legislate to remove some of the restrictions on the ability for employers to change employeesterms and conditions post a TUPE transfer.  Or we may see an overruling of unpopular decisions of the European Court of Justice such as those allowing for the carry-over of holiday for those on long term sick leave or parental leave or the rulings relating to the calculation of holiday pay.    

For the time being, therefore, any legislative change is likely to be slow in the making and it remains to be seen how the UK courts and tribunals are going to react to the new freedom to diverge from EU employment law.  Of course, the change that is going to have the biggest and most imminent impact on employers and workers is not one relating to employment law as such but to immigration law – the ending of the freedom of movement of EU citizens to live, work and study in the UK.

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