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24th June 2012

Brexit - Employment Law Implications

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The UK has voted to leave the European Union and businesses and HR professionals all over the country are spending the days afterwards considering what effect, if any, the vote will have on them. In reality, no-one of course actually knows at the moment but below are some of my thoughts on the main areas which may be affected in the area of employment law/HR. Freedom of movement This applies to: UK employees working elsewhere in the EU; and other EU employees working in the UK. Unless the Government’s exit negotiations result in the freedom of movement being retained, which is unlikely, I suspect that the UK Government will permit other EU individuals to continue to live and work in the UK if they are in the UK at a particular cut off date. In return, I also suspect that other EU countries will adopt the same approach for UK citizens. Whether or not this is the case (though I struggle to believe that the Government will start deporting non UK employees who are currently entitled to live and work in the UK), there will however at some point be restrictions imposed on individuals who are able to live and work here. This will also therefore presumably lead to restrictions being placed by other EU countries on the ability of UK citizens to work outside the UK. All this will therefore in turn lead to restrictions on businesses’ ability to employ whichever EU citizen they feel is the best person for the job, in any EU country they wish. EU law The source of a great number of employment laws is EU law in one form or another, such as: Directives resulting in new Regulations, for example the Working Time Directive/Regulations (providing minimum holidays, entitlements to breaks and maximum working hours), TUPE, Agency Workers Regulations and some family friendly rights. Judgments of the European Court of Justice. There are a significant number of changes or fresh employment laws each year, which impact on businesses in one way or another. Some of the current EU based laws can give very real headaches for employers. Again, however, I struggle to believe that any Government will start to unpick or tweak the current laws (with perhaps a few exceptions, such as the possible repeal of the Agency Worker Regulations and some changes to TUPE) as in doing so, they will be taking away employees’ rights, the vast majority of which would be categorised as social (and therefore morally justifiable) laws. My view is that the great majority of the current EU based employment laws will just carry on as before, and any unpicking or tweaking made will be very limited – with perhaps the exception of a repeal of the Agency Workers Regulations. As for any new Directives, and indeed Directives which are currently in existence but which do not need to be implemented for some years, these could presumably simply be ignored. It may be however that the UK Government thinks it would be a good idea to replicate some or all of them – either because they are seen to be reasonable or having certain laws may be a condition of a particular trade deal with remaining member states. I therefore believe that there will be fewer new EU based employment laws/changes in our laws which will affect businesses. If there are any, they would in my view be very modest – we already have a very large number of EU based employment laws covering numerous areas, and there are very few areas which an EU Directive doesn’t already cover and are not already part of our laws. Reorganisations, including changes to terms such as remuneration, redundancies and complete closures This could well be an area which will affect many businesses and could be as a result of, say:Imports being more expensive (e.g. because of a weaker sterling or increased tariffs) plus higher borrowing costs, resulting in the need to cut costs elsewhere. The decision not to have a base in the UK due to problems in moving workers from and to other EU countries. A reduction in the UK’s economy. Bank borrowing restrictions. Businesses will therefore need to be prepared to deal with these difficult issues to protect the business going forward. Summary So, in my view the areas which will affect businesses from an employment law/HR perspective most are: the removal of the freedom of movement, and the need to carry out reorganisations. When? The freedom of movement issue will not kick in for quite a while yet and would be timed in terms of years ahead rather than months - it’ll take a long time for any restrictions to be put into place. There is already talk of putting in restrictions sooner rather than later, even in breach of the current freedoms. As however the UK will want a smooth and negotiated exit with continuing trade with the rest of the EU, I don’t think that is realistic. As for reorganisations, when that could start to happen – if indeed at all – is anyone’s guess. Please get in contact with me if you have any questions at all arising out of the referendum vote.