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Factsheets

Brexit – Considerations for employers

29 Mar 2017

The United Kingdom will be leaving the European Union and this will affect UK Employment Law as well as the freedom of movement into the UK and employment opportunities of UK citizens in the European Union. 

Prime Minster Theresa May triggered Article 50 of the Lisbon Treaty in March 2017, meaning the UK will leave the EU by Summer 2019.

There are 3 important points to note in the period leading up to a formal exit date:

  • Current Freedom of Movement rules will continue to apply
  • EU nationals can still work for any employer in any role.
  • UK nationals will be able to continue to work freely in the EU

Osborne Clarke (a leading Employment Law firm) provides a detailed overview in Brexit - what are the key employment issues to deal with now. They advise not to discriminate against EU employees and to monitor social media for any signs of harassment directed against European Union workers both of which could give rise to existing employment law breaches. It is also advised not to make over hasty employment contract changes until any new employment law changes are made.


Employment issues to consider now

Keep up to date with any future Employment law changes

Whether you are recruiting new staff, or thinking about redundancies, it's vital you stay on the right side of the law. Most current UK Employment law legislation has been made by the European Union. 

Check your responsibilities and liabilities as a director

Are you aware of your legal duties and responsibilities as a company director? With uncertain times ahead, it’s good to be clear about the risks and liabilities you face. We recommend that you refresh your knowledge about the role of the Managing Director and the importance of good Corporate Governance. The IoD has produced factsheets on these topics which are available from the IoD website.

Think about developing your board & staff

In an uncertain economic climate, it's vital to know that you can rely on your board and your staff. Employee health & wellbeing and training & development can affect your business performance, especially as the UK exits Europe and workers may worry about losing EU protections. Consider your team and address any weaknesses to allow you to strengthen your business now.

Allen and Overy (a leading law firm) have written a detailed analysis and you may like to consider some of their suggestions:

  • Work with your in-house Brexit team if you have one.
  • Plan your Employee communications strategy
  • Audit your workforce
  • Review EU-based expatriate arrangements
  • Track your EU expatriate workers’ immigration status
  • Anticipate skills and service gaps
  • Identify any minor contract or policy redrafting
  • Check your European Works Council (“EWC”) agreement
  • Consider risks for benefit plans

Brexit Planning for Employers


Potential changes to Employment Law

Working time, discrimination & family friendly policies

It is very difficult to predict exactly which changes to employment law will occur; however some key issues are discussed in How a Brexit could change Employment Law by Elizabeth Slattery a partner in the employment department at Hogan Lovells and written for CIPD.

“Working time: Organisations commonly view the EU working time and the agency workers directives as undermining the flexibility of the UK's labour market and increasing the costs of hiring staff. Businesses would be particularly keen to see the repeal of the maximum 48-hour working week and the removal of working time record keeping requirements and this seems likely under a Conservative government.
Repealing the agency workers directive would remove 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, reducing business costs and record keeping requirements. This seems likely to be regarded as a "quick win" by the government following a Brexit.”

“Discrimination: Protection against discrimination is a cornerstone of EU law. More recent anti-discrimination legislation – such as adding religion and belief, sexual orientation and age to the ‘protected characteristics’ in the Equality Act 2010 – resulted from the need to meet EU requirements, but prohibitions on race, sex and disability discrimination were in force before the UK was required to implement such legislation by EU directives.It is unlikely the Equality Act 2010 would be repealed on a wholesale basis.
However, there would be scope to introduce a cap on the compensation that could be awarded in a discrimination claim, perhaps to reflect the cap applied to unfair dismissal claims. Such a move would currently be incompatible with EU law, but would be possible after the UK’s exit. The CBI in particular has suggested that a cap would curb claimants' unrealistic expectations about the compensation they might receive and make it easier to settle claims at an earlier stage”.

“Family friendly: Rights such as those provided for new and expectant mothers are often criticised as examples of business-unfriendly European legislation. In practice, however, existing rights to maternity, paternity and parental leave and pay go significantly beyond what is required by EU law. Again, it seems unlikely that a post-exit 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. However, it is possible that exemptions around family leave rights could be introduced for micro-employers.
One option following an exit would be for the UK to remain within the EEA, reflecting the relationship that Norway has with the EU. However, if this happened, the UK would still have to comply with EU social and employment laws but would no longer have a right to negotiate the development of those laws.”

Immigration

The CIPD have published a briefing Employers urged to start considering brexit implications immediately written by Grace Lewis quoted below.

“The CIPD considers it likely that EU citizens currently working in the UK will retain their right to stay in the country, potentially through a worker registration scheme, but it is unclear how this will work in practice or whether any rights would be extended to those who enter the UK after this point.

“Jules Quinn, a partner at law firm King & Spalding said “Companies should be undertaking an employment audit of current staffing in the UK.” This might include the possibility of employees having to apply for a work permit if there is a repeal of the current EU immigration rules, she added.

 “A proposed points-based immigration system – which could be implemented once the UK withdraws from EU treaties governing immigration – is geared towards attracting skilled migrants. Michael Leftley, head of employment at law firm Addleshaw Goddard, said it would essentially put EU and non-EU workers on the same footing in future, which would prove costly to businesses. “But I’d be very surprised if anything changes for those EU workers who have been here for a number of years. They will most likely be ‘grandfathered’, either by being able to apply for British citizenship or be granted an indefinite leave of stay, thus allowing them to continue to live and work in the UK.”

One measure that employers may wish to consider is to encourage their EU workers to obtain a Registration Certificate, Permanent Residence Card or apply for British Citizenship if they meet the relevant criteria to try and protect their future position in the UK workforce. This would not guarantee such workers’ position after the UK leaves the EU. However, having a formal status confirming that the worker is in the UK exercising their right to freedom of movement from a particular date could be of assistance. UK Visas and Immigration is the government agency that is responsible for this.

Health and Safety Law

Croner gives some pointers on the impact on Health and Safety Law as follows:

“Roughly two thirds of our Health and Safety laws originate from EU legislation, the requirements of which are implemented through UK-specific Regulations. Reports such as 2010’s Government-commissioned report “Common Sense, Common Safety” and the subsequent Löfstedt review in 2011 have shown that UK H&S law is broadly fit for purpose and therefore it is unlikely that the majority of our laws will be significantly changed. What safety changes could we see? Realistically any immediate changes will focus on eliminating contentious ‘regulatory burdens’ where employers feel that they are disadvantaged compared to other countries or the cost of compliance is too great compared to the risks.

“Possible areas of focus include:

  • The Working Time Regulations 1998, which are estimated by the Open Europe think tank to cost the UK economy £4.4bn each year (although a significant proportion of this results to the UK holiday entitlement over and above the Working Time Directive).
  • The requirement for Employers to meet the cost of eye and eyesight tests for Display Screen Equipment work.”

Croner Briefing Brexit June 2016

Pensions

CMS Law-Now (a free online legal information service) has published ‘The impact of Brexit on UK Employment Law’ which is a summary of possible employment law changes. This includes a section on Pensions.

"Much of the EU law relating to pensions – including key areas such as scheme funding, investment and discrimination – is written into UK legislation’ and will continue to apply. However there may be changes:

"For example, there would be scope to increase the flexibility of age discrimination legislation which may permit further exemptions in relation to pension schemes.’

"In addition there is increased scope for the UK to avoid having to comply with the Second Pensions Directive (IORP II) .While it is possible that IORP II will become law while the UK remains an EU member, the Directive  contains an 18 month period for implementation which may be after the UK exits the EU’.

"Finally, funding of pension schemes may become an issue in light of the recent fall in markets and investment value".

Data Protection

The Data Protection Act 1998, implements the EU Data Protection Directive. The EU’s General Data Protection Regulation (GDPR) is due to come into effect on 25 May 2018, which is likely to be before the UK leaves the EU. The GDPR will have direct effect and so will automatically become part of UK law.

The European Union has set up a website Key Changes of General Data Protection Regulation (GDPR) which summarise the proposed changes.


No changes to Employment Law

Some UK employment laws that will not change (due to Brexit) as these are entirely domestic provisions including:

  • Unfair dismissal rights
  • Gender Pay Gap reporting requirements
  • Apprenticeship levy to be introduced via the Finance Bill 2016
  • National Minimum Wage
  • National Living Wage
  • Modern Slavery Act 2015

How the IoD can help

Corporate governance and employment law related resources and factsheets

For any employment law questions, IoD members can contact the legal helpline

Visit our Brexit Hub where you can find the latest Brexit related information


© Institute of Directors. All rights reserved.


The information in this guidance is intended for general information purposes only and does not constitute legal or professional advice. The IoD does not accept any responsibility for any loss which may arise from relying on information contained in this article. It is not a substitute for legal advice and specific and personal legal advice should be taken on any individual matter. IoD does not recommend any firms. The IoD is not accountable for the products, services, acts or omissions on the website(s) linked to this page. Website terms and conditions apply.

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