Employment Law

UK exit – potential impact on employment law 

By Jane Copley, Prospect Legal Officer

In the event that the UK leaves the EU it would need to re-negotiate a new relationship with Europe in respect of employment law and rights. So, what are the implications for employment law?

Challenging misconceptions

There are a variety of misconceptions about the impact of a potential exit from the EU, but from an employment rights perspective, I believe these centre in the main, on two things:

  1. All EU-derived laws will disappear overnight; and
  2. The UK would lose human rights protections

… in which case it is first perhaps first necessary to establish the locus of employment law within the EU framework.

Some UK laws are primary legislation – that is an Act of Parliament – for example the Equality Act 2010 (EA10), and others are secondary legislation, whereby statute is enacted to incorporate EU law. An example is the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). What happens to UK employment law in an exit scenario will depend not only on the way in which the Government intends to extricate itself from the EU, but also on the extent to which the UK aims to distance itself from Europe.

A potential exit could, for example, end up having little impact on the application, for example, of working time and agency worker legislation in the UK (the Working Time Directive (WTD) and Agency Worker Regulations (AWR)). Scenario: if the UK was to leave the EU and join the European Economic Area (EEA) or European Free Trade Area (EFTA), then it would still have to accept the majority of current EU employment policies. This would mean remaining bound by EU directives, which apply widely, are not confined to the economic union, and cannot be opted out of. It would not necessarily, therefore, as one employment lawyer has commented; “alter the position of where we are now.”[1] If this scenario was to play out, however, and the UK still had to comply with EU social and employment laws, it is important to recognise that it would no longer have a right to negotiate the development of those laws.

Exiting the EU – in theory (and this is outlined very basically, there are many overlapping and complex facets at play in this scenario) – should mean that Government will have the ability to amend or repeal EU legislation by enabling acts through Parliament (presently difficult to do, in a practical sense, as an EU member state) In practice, and in the event that such amendments or repeal are in any way contentious, however; any opposition that may occur within and outside Parliament suggests that it will not be as easy as many commentators think for a stand-alone UK to simply dispense with employment regulations and be done.

The complexities inherent in this process are not lost on employment law specialists. Philip Landau, of Landau Zeffert Weir (2013)[2] has remarked that: “the difficulty with changing existing EU directives is that once they are adopted, they are almost impossible to remove, as repeal requires the consent of the other EU member states”  So…

  • The Government could decide to repeal the European Communities Act 1972 (the statute enacted to incorporate EU law); with the result that all the regulations passed under it (for example; TUPE, WTD) would disappear, at least from the statute book. Stand-alone acts of parliament however (for example, the EA10), would remain as is; or
  • it could repeal all primary and secondary legislation in one go, which could give rise to a whole gamut of convoluted and elaborate legal changes for both employers and employees, not to mention creating a period of uncertainty and “limbo” for all.
  • Another approach might be to maintain the status quo and address individual laws one-by-one over time.

We also need to consider the effect on case law. It is not possible to ignore this because past ECJ rulings have inevitably become interwoven with UK legislation and legal decisions over time. UK courts have incorporated ECJ decisions into their own jurisprudence and to attempt to unravel this will present a variety of problems, not least because UK courts may no longer be obliged to apply ECJ judgments, signifying a potentially worrying departure. This also increases the potential to create a hugely complex scenario whereby future judgments (those to date cannot be undone except under further case law) could be freed from a reference to the ECJ, but not from past judgments at precedent-setting level.

To what extent would exit affect employment rights?

Notwithstanding member’s personal motivations and priorities, what complexion will exit put on employment rights?

It is perhaps first necessary to establish just how much UK employment law lies outwith the remit of the EU. When considering the impact of either remaining in or exiting the EU, it is worth bearing in mind that in terms of employment law, the EU does not have as much scope, as many commentators would have us think, to actually create it (the process by which the EU formulates law, via the “Ordinary Legislative Procedure” – formerly, “codecision” – is complex and protracted), although there is a considerable element of overlap in many areas. Large areas of employment law are excluded from EU scope. To illustrate, for example; pay (excepting equal pay), terms and conditions (except in respect of equality), job termination (excepting collective redundancies), industrial relations and disputes.

Article 151 of the Treaty on the Functioning of the EU (TFEU) provides that the EU can legislate on “the working environment to protect workers’ health and safety, protection for workers on termination of their contracts, and information and consultation on transfers of business and collective redundancy”. Other areas of competence include: works councils, consultation of employees, equal opportunities and equality of treatment. Large amounts of regulation and employment law derive from these areas.

Does this therefore dilute the argument that exiting the EU would dramatically reduce protective rights, or does it turn it into an argument over what constitutes priorities in terms of employment law? Certainly unravelling EU-derived rights would have repercussions, not least for contracts of employment.

Contractual mayhem?

In the event of exit, rights that have come from the EU will continue to be (1) expected by employees in the UK, not least because many of these rights will have been transposed into contracts of employment and also into employers’ organisation/business/workplace policies and procedures.

Take for example; protection from discrimination, maternity rights, holiday entitlement, or data protection principles. Attempting to isolate certain elements from employees’ contracts would give rise to all manner of legal challenges, with the knock-on effect being massive – and doubtless severely detrimental – repercussions for employee relations.

(2) Most employees have clauses in their contracts relating to EU-derived protections, such as working hours, or holiday pay. Any employment law changes that emanate from EU exit might mean large-scale reconfiguration of employment contracts, which inevitably focuses on the already present strategy of “termination and re-engagement”, whereby employees’ contracts are terminated and they are then subsequently re-employed on a revised set of terms.

(3) This could cause problems from a business perspective, insofar as companies or organisations tendering for contracts within EU member states (among other things) may well still be required to meet EU standards of employment protection (in respect of their European workers), as will companies that are operating within the rest of the EU. This creates an uncertain vacuum.

Human rights protections

It is important to establish that if the UK were to leave the EU this would not mean that it would also exit from the European Court of Human Rights (ECHR). The ECHR is a separate entity outwith the structure of the European Union and the UK is committed to it as a result of having signed the European Convention on Human Rights (this inevitably affects discrimination and equality issues). This is an important issue to make clear.

The CJEU (formerly European Court of Justice (ECJ)) is, however, an EU institution. If the UK withdrew from the EU, then this would leave the Supreme Court as prime authority on employment rights decisions in the UK.

I have not elaborated on this aspect due to the need to confine commentary to the potential impact on employment rights.



[1] Jacqueline McDermott, Keystone Law

[2] Economics, government & business, Employment law features, April 2013

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