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16 February 2017

Brexit – what employers need to know

Before the Brexit referendum in June 2016, some made dramatic predictions of “a bonfire of workers’ rights”.  Fast forward a few months, and the indications are rather more positive for employees, but there is still no certainty.

What is the government’s position on Brexit and employment law?

In October 2016, the Prime Minister stated that workers’ existing legal rights will continue to be guaranteed in law as long as she is Prime Minister. In February 2017, the government issued its White Paper entitled “the United Kingdom’s exit from and new partnership with the European Union”.  This lays out 12 guiding principles, one of which is “protecting workers’ rights”.  The White Paper sets out an intention to ensure the continued protection of workers’ rights and a commitment to maintaining the UK’s status as a global leader on workers’ rights.

Could Brexit mean current employment laws are repealed?

The above statements are not binding.  In theory at least, Brexit could mean that the UK could repeal those employment laws it has had to adopt because it is a member of the EU. 

However, Brexit is unlikely to undermine employment rights to a dramatic extent:  

  • The UK will want to trade with the EU and the EEA post-Brexit.  In the Prime Minister’s speech in January 2017, she said that the UK will push for a free trade agreement, giving it the greatest possible access to the EU.  (Whether that is what the UK will actually get, and what the terms of any agreement will be, are another matter.  There is a negotiating position being built here.)  However, from an employment law perspective, trade agreements with the EU are likely to require the UK to maintain a certain level of legal protection for employees. 
  • Many European-derived employment laws have become integrated into our working lives. For these laws, there is likely to be little appetite for change and uncertainty from employers and employees. 
  • Much English employment law is purely domestic, and unrelated to the requirements of EU membership.  This includes the law of unfair dismissal, the minimum wage, the right to request flexible working and the recently introduced shared parental leave.
  • The UK sometimes ‘gold plates’ the minimum employment protections required by EU membership, and makes domestic laws more favourable for employees.  Examples of this are maternity rights and the TUPE regulations.  This would not be consistent with erosion of employment protection at the earliest opportunity following Brexit. 

Which laws are at risk?

That said, the UK has strongly opposed some EU employment laws in the past, and these are the ones expected to be most vulnerable post-Brexit.  Consider:

  1. The Agency Workers’ Regulations 2010, which came into force in 2011 and gave greater protection to some agency workers.  The UK took issue with agency worker protection more than most other states, and these complicated regulations have been unpopular with businesses.
  2. The UK’s Financial Conduct Authority challenged the cap on bankers’ bonuses through the European Court of Justice, but was not successful.  Perhaps the UK would scrap the cap if free to do so.
  3. Recent decisions of the European Court of Justice relating to the way holiday pay is calculated have been unpopular with businesses.  This includes employee-friendly decisions on accrual and carry-over of holiday entitlement whilst on sick leave, and the requirement to include overtime and commission payments in holiday pay. 

Changes in employment law are often driven by the political climate of the day, and this is likely to influence the priorities for any post-Brexit review of employment law. 

The pace of change

Overnight change is unlikely.  The current intention is for a Great Repeal Bill to be enacted, which would provide for two key things to happen:

  • it would repeal the European Communities Act 1972.  This legislation enshrines the supremacy of EU law in UK law; and
  • it would transpose all EU law into domestic law - with the caveat “wherever practical”. 

The idea is that the block upon which EU-driven legislation in the UK is built would be pulled out, and the gap quickly plugged with a new domestic law, before any unintended consequences can occur.    The UK would then review, repeal or amend over 40 years of EU based law – including a substantial body of employment law – at a more realistic pace.  This is likely to take many years, and this untested mechanism may have its hiccups.

The difference from day one would be that UK courts would no longer be able to refer questions about EU law to the European Court of Justice.  UK judges could still have regard to EU decisions. 

What about the right to work of EEA nationals?

The ability to access highly qualified staff, and easily transfer them from the UK to other EEA locations – and vice versa - is important for many businesses.  An issue that is causing anxiety and uncertainty for many employees and employers is immigration status. 

Will the estimated 2.8 million non-UK EEA nationals still be permitted to work in the UK following Brexit?  What about the million or so UK nationals in other EEA states? What about occasional business trips to Europe, or those whose daily commute involves travel across a border between the UK and another EU state?

At the time of writing, we still do not know what will happen.  The Prime Minister has confirmed that there will be controls on the number of people who come to Britain from Europe after Brexit.  She has also stated that she would like to guarantee the status of EEA citizens in the UK, but needed reciprocity from other EEA states.  In February 2017, an attempt to amend the draft ‘Brexit Bill’ to include a guarantee for these citizens was unsuccessful.

Employees may apply for permanent residence if they have lived and worked in the UK for five years (and sometimes if they have not worked for the full period).  Permanent residence is confirmation that the EEA national has indefinite leave to remain in the UK and they are a permanent resident of the UK.  It is unlikely that this status would be retracted following Brexit.  It is also possible to acquire British citizenship through residence.  The process is called ‘naturalisation’.  Most EEA countries allow dual nationality, but some do not, so individuals should check before they apply. 

Employees who have not spent five years in the UK may apply for an EEA Registration Certificate.  This confirms their status under EU law, and that they have a right to reside and work in the UK.  When the UK leaves the EU, it will be easier for the employee to evidence that he/she employee was exercising rights under EU law.  This may be important if the UK implements a cut-off date and transitional immigration arrangements.  

British nationals living and working in another EEA member state may already be able to qualify for permanent residence or acquire citizenship.  The processes will vary from country to country.  British nationals with ancestry of another EEA country may be able to acquire citizenship of that country.

Is relocation the solution

After the Prime Minister’s speech in January, it was reported that some employers, particularly in the financial services sector, were planning to move roles away from London, to Paris, or perhaps Frankfurt or Spain.

Relocation is not going to be worthwhile for many UK employers.  It is most likely to be an option for businesses which already have an established base in another European location, or where a presence in within the single market is essential. There are language and cultural barriers to consider, UK employment law processes to be followed, and the employment laws of the new country to be observed.

To relocate existing employees, employers should not assume that a mobility clause in the employment contract can be relied upon.  If redundancies are necessary, a fair redundancy consultation process needs to be followed, and redundancy payments made.  Where 20 or more redundancies within a period of 90 days are envisaged, collective consultation obligations will apply.

Employers may also have obligations under the TUPE Regulations and the Posted Workers Directive.   

What could employers be doing now?

In terms of practical steps, employers affected by Brexit can:

  • Consider how Brexit might impact upon operations and staffing needs.  Where appropriate, reassure employees that the organisation is following the situation closely – particularly migrant workers with shortage or specialist skills who are in high demand and who may become disillusioned with the uncertainty of Brexit.  Let them know who they can speak to if they have Brexit-related concerns.
  • consider how Brexit would affect data protection procedures, employee share plans, pension plans and any European Works Council.  This applies to  employers with a workforce in other European countries as well as the UK
  • facilitate access to immigration advice, and encourage EEA employees to make any immigration applications which are likely to put them in a stronger position if they are no longer able to rely on EU citizenship to live and work in the UK.  (Go about this delicately, there is a risk of race discrimination.)
  • be mindful of the risk of discrimination claims.  Employers can be vicariously liable for discriminatory statements their employees make.  In a Brexit context, this may be:

    • race discrimination – for example asking an EU colleague if he has made plans to ‘go home’. 
    • age discrimination – if an employee alleges or assumes that a colleague voted a certain way in the referendum because they fit a particular age bracket.
    • religion or belief discrimination – the Equality Act protects holders of certain philosophical beliefs.  Those who are subjected to a detriment at work because of their Brexit views may have a discrimination claim.

Finally, for all the excitement, let’s not forget that nobody has lost the right to live and work in the UK because of Brexit yet – and we still do not know if that is going to happen at all.  Recruitment, dismissal and promotion decisions that are influenced by uncertainty over EU nationals’ future rights to work in the UK may amount to unlawful race discrimination.