How will Brexit affect UK employment law?

The United Kingdom and the European Union agreed a Trade and Cooperation Agreement on 30th December 2020.

The UK’s withdrawal from the EU is unlikely to have an immediate impact on its employment lawdespite much of it being derived from EU law. Existing EU law has been converted into domestic legislation but it will be for Parliament to decide whether to retain, amend or repeal it.

In the short term it is unlikely that there will be major changes in employment rights or that significant gaps in protection will appear. Here we explain why.

Can the UK reduce existing employment protection?

No. Not significantly. The agreement confirms the rights of the EU and the UK to set and modify their employment laws, subject to their international commitments (such as membership of the European Convention on Human Rights and their obligations under the agreement.

However, both sides have committed not to weaken or reduce their labour and social standards below those in place at the end of the transition period of 31st December 2020, in a manner ‘affecting trade or investment’, including by failing to effectively enforce their law and standards.

If a dispute arises between the UK and the EU about these commitments and the parties are unable to resolve it through consultation, they can refer the matter to a panel of experts after 90 days.

These ‘level playing field’ provisions restrict the UK’s ability to make major changes to existing employment law. Minor changes to legislation that would not give UK employers a competitive advantage may be permissible even if they reduce existing employment protection.

Time will tell us what change would be significant enough for the EU to consider it worthwhile to initiate dispute resolution procedures.

Can the UK ignore existing European Court of Justice (ECJ) decisions?

Yes, in theory, but it’s unlikely in practice. The UK Supreme Court will be bound by ECJ decisions made before 31st December 2020 to the same extent as it is bound by UK case law. Our courts must continue to interpret UK law in line with EU law, but the Supreme Court and Court of Appeal may depart from EU case law ‘when it appears right to do so’.

This freedom to depart from ECJ decisions does not alter the fact that the UK courts must, until a law is amended, continue to apply the particular Directive that the UK law is implementing. So, our courts are unlikely to depart from ECJ decisions that had the same aim.

Harmonising employment contracts after a TUPE transfer; calculating holiday pay, and capping compensation in discrimination claims have been cited as areas, currently governed by EU law, where the Government could propose changes.

What about new ECJ decisions?

Courts and employment tribunals are no longer bound to follow new ECJ decisions but can consider them where relevant.

Must the UK implement new EU directives?

The UK is not bound to adopt new directives, but any divergence of rights that materially affects trade could activate rebalancing provisions, including imposing tariffs.