Where are we now?
The UK left the European Union on 31 January 2020 by passing the European Union (Withdrawal) Act 2018 (the Withdrawal Act). There was a transition (or implementation) period which ended on 31 December 2020. The EU-UK Trade and Cooperation Agreement (the Trade Agreement) has applied provisionally from 1 January 2021, which means that the parties are applying its terms but it has not yet formally come into force. In terms of employment law and rights, so far, very little has changed.
The Withdrawal Act:
- retained all EU-derived domestic laws;
- transposed most directly applicable EU laws (such as regulations) into domestic legislation; and
- converted most EU rights into UK law, such as directly effective rights included in EU treaties, as they applied at the point in time immediately before the end of the transition period (Retained EU Law).
Retained EU Law must generally continue to be interpreted in line with EU case law. However, if Parliament or the Northern Ireland Assembly amends or modifies any Retained EU Law then this will no longer be the case, save that the UK courts must continue to follow EU law where that would be consistent with the purpose of the modification.
The Court of Appeal and Supreme Court are able to depart from precedents set by the European Court of Justice ‘when it appears right to do so’. This is in line with their ordinary powers to depart from their own previous decisions.
Under the Trade Agreement the UK can now, in principle, set its own employment laws, whether this is in Westminster (in respect of Great Britain) or the Northern Ireland Assembly. However, the UK and EU have committed to maintain a ‘level playing field for open and fair competition’ in relation to their labour markets. As part of what is described as the ‘non-regression’ principle, the UK has agreed not to weaken standards from levels applicable at the end of the transition period in relation to the following:
- fundamental rights at work;
- health and safety standards;
- fair working conditions;
- employment standards;
- information and consultation rights; and
- the restructuring of undertakings,
(Transition Period Standards).
Both the EU and UK have agreed to strive to increase such Transition Period Standards. This means that a failure to keep pace with employment rights granted in the EU could mean that the UK will breach the non-regression principle.
What happens if the UK doesn’t uphold its commitments?
The Trade Agreement contains many complex dispute resolution mechanisms, two of which are relevant to employment law disputes.
The first mechanism applies if the UK (or EU) weakens its labour and social protections below the Transition Period Standards ‘in a manner affecting trade or investment’. Either party can trigger a lengthy resolution process in the event of a divergence of this kind. The process will involve a panel of experts, drawn from both the EU and UK, determining whether any temporary measures are appropriate; the panel’s final report may be delivered up to 195 days from the panel’s establishment.
For more ‘significant divergences’ that have ‘material impacts on trade or investment’ either party may take ‘appropriate re-balancing measures’. This second dispute resolution mechanism is much more robust and could allow the EU to implement unilateral measures (such as tariffs) after a short notification period and 30-day consideration by an arbitration panel. The EU could inflict serious economic pain on the UK through these measures, but how this mechanism will be used in practice and any influence this will have on the government’s policy decisions is yet unknown. The EU could seek to utilise this mechanism to take action against the UK if it fails to keep pace with future changes that the EU makes to workers’ rights to the extent that it views this as a ‘significant divergence’.
What could change?
On 19 January 2021, Business Secretary Kwasi Kwarteng confirmed, after some speculation, that the government would be carrying out a review of the UK’s employment laws. Following extensive criticism from the press, trade unions and the Labour Party, on 27 January 2021, Kwarteng, speaking on ITV, stated that the review would no longer be taking place; the Financial Times also reported this U-turn on 28 January 2021.
Depending on the future political landscape, there are several areas of employment law in which the government may consider making changes, but clearly these will be controversial given its public commitment to protect workers’ rights post-Brexit:
- The Working Time Regulations 1998 (WTR)
The Business Secretary originally confirmed that aspects of the WTR would be included in his department’s review. Removal of the 48-hour work week limit contained in the WTR would have been an easy opportunity for the government to prove that it is cutting EU-imposed ‘red tape’ given the low level of litigation around the 48-hour work week and the availability of opt-outs.
Revising how holiday pay is calculated under the WTR would likely be a move welcome by employers. The current rules require that workers’ holiday pay reflects their previously earned commission and overtime payments, but this can often be difficult to calculate and many employers struggle to comply. Another aspect of the WTR that the government may look to change is a worker’s right to continue to accrue holiday while on sick leave.
Removal of the administrative burden on employers to record how many hours employees work per week and changing the rules around rest breaks are further options that the government is rumoured to be considering.
These proposals now seem unlikely at any time in the near-future given the negative press coverage that they provoked. As well as being damaging to the government’s domestic political reputation, such changes may also have prompted a backlash from the EU along with accusations that the UK is not acting in accordance with the level playing field principle.
- The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
Any significant changes to TUPE seem unlikely at this stage. However, it has been suggested that the government may seek to make it easier for employers to harmonise the terms and conditions of employees who transfer under TUPE with those of existing employees.
The government may consider implementing a cap on the value of awards made for successful discrimination claims. It would also be open to consider whether to permit positive discrimination in the workplace, which is currently unlawful.
- Agency workers
It seems unlikely that the government will attempt to weaken agency worker rights given that it only last year strengthened such rights by opting to remove the ‘Swedish Derogation’ (a loophole that allowed employers to pay agency staff less than permanent employees) from the Agency Workers Regulations 2010.
New harmonised protections for ‘whistle blowers’ will be implemented across the EU by December 2021 as a consequence of the Whistleblower Protection Directive. While the UK will not be directly obliged to implement the new directive, because the rights conferred under it will go further than those currently applicable in the UK there is an argument that failure to amend domestic law will be a breach of the principle of non-regression.
- Tribunal fees
Finally, there have been some rumours that the government may re-open the debate around tribunal fees that were, in 2017, deemed unlawful and abolished.
There is clearly a tension between the potential policy changes set out above and the UK’s non-regression commitments. The EU will undoubtedly be monitoring the UK’s approach to its employment laws carefully and considering how robustly it will respond to any perceived threat to the level playing field. Nonetheless, in the future we may see greater turbulence in the UK’s employment policy in line with the political ideals of the governing party as politicians make use of their newfound freedoms.
What else is there to look out for?
Publication of an Employment Bill, originally mentioned in the 2019 Queen’s Speech, is expected in 2021. Among other things, it is likely to introduce a single labour market enforcement body, which will facilitate the UK’s compliance with its commitment to maintaining effective domestic enforcement of employment law under the Trade Agreement.