What does the Brexit trade deal mean for employment law? | ブログ記事一覧 - Centre People Articles

The UK and EU have published the text of their Trade and Cooperation Agreement (the Agreement), alongside a summary issued by the UK government and an explanatory brochure from the EU Commission.

In summary, in return for a tariff and quota-free trade deal, the UK has agreed that it will not reduce employment law rights below the standards that exist on 31 December 2020 – if doing so would affect trade or investment. The UK is free not to implement future EU employment laws, but the EU may, in certain circumstances, apply “rebalancing measures” (such as tariffs) if it has proof of a “material impact” on trade or investment.

Commitment not to reduce employment rights

The Agreement provides that the UK and EU must not weaken or reduce the level of employment rights in place as at 31 December 2020, if that would affect trade or investment. This includes by failing to effectively enforce its law and standards.

This commitment extends to:

fundamental rights at work
health and safety standards
fair working conditions
employment standards
information and consultation rights at company level, and restructuring of undertakings.

There are also separate commitments relating to road transport to comply with rules on working time, rest periods, breaks and tachographs for drivers transporting goods between the UK and EU.

The Agreement also says that both sides shall continue to strive to increase their labour and social levels of protection.

These provisions clearly restrict the UK’s ability to make major changes to employment law. It is not, however, a complete prohibition, because a weakening of employment rights is disallowed only when this affects trade or investment.

Major changes, such as removing working time or agency worker laws altogether, are very likely to affect trade as this would give UK employers a competitive advantage. Minor changes, such as amending a particular aspect of holiday rules, would arguably not affect trade in the same way.

The Agreement commits both sides to maintaining a system for effective domestic enforcement, including effective systems of labour inspections, court action and remedies.

It is arguable that the UK does not currently have an effective system of labour inspections. However, the UK has committed to setting up a “Single Enforcement Body” to widen and co-ordinate better central enforcement of employment rights.

The obligations relating to court actions and court remedies might also limit the UK’s ability to (for example) reintroduce fees for Employment Tribunal (ET) claims, or to amend remedies for breach of employment rights, such as by introducing a cap on compensation for discrimination.

The requirement for effective remedies in the Agreement also refers specifically to “interim relief”. This is where an ET can require an employer to keep paying a dismissed claimant before their final claim is heard. Interim relief is not currently available in the UK for discrimination cases. However, the specific reference to interim relief in the Agreement means this could be an area for future disputes.

Future EU laws – the rebalancing provisions

The Agreement does not require the UK to follow / implement new EU employment rights. Instead, it provides that, if UK employment rights become significantly different from EU employment rights, in a way that materially impacts trade or investment, the EU can take “appropriate rebalancing measures” (including imposing tariffs).

Any alleged impact on trade or investment must be based on reliable evidence. This means that the UK is not required to “follow the ECJ [European Court of Justice] rule book” in order to benefit from tariff-free trade.

What happens to existing EU-derived employment law?

This is unaffected. EU-derived domestic legislation in effect immediately before 31 December 2020 simply carries on as part of the UK’s domestic law. This means that legislation such as TUPE and the Working Time Regulations do not just vanish but continue in force.

Any UK domestic legislation implementing EU rights must continue to be interpreted in line with the relevant EU law. This means we may continue to “converge” with EU law.

But there will be some divergence, as the higher courts (Court of Appeal (CA) and Supreme Court (SC)) do not need to follow pre-2021 ECJ decisions and can depart from them if it “seems right to do so”. Tribunals and other courts will remain bound by pre-2021 ECJ decisions.

One particular example is that some of the decisions on calculating holiday pay that have been particularly problematic for employers could be overturned. The SC is due to consider three holiday pay cases in 2021, which may give some indication of the higher courts’ willingness to depart from ECJ rulings.

What about new ECJ decisions?

The starting point is that courts and ETs are no longer bound to follow new ECJ decisions (issued in 2021 and beyond) but may consider them where relevant. This is likely to cause disputes in any ET case on a topic where the ECJ hands down a new and potentially relevant judgment, since one side will be arguing that the ET should ignore it while the other will be arguing it should be followed.

ETs must still, however, read UK legislation in conformity with the EU law it was intended to implement (see above). Ultimately, all the ECJ does is interpret what the relevant EU law means. We expect ETs to take a cautious approach and follow new ECJ rulings in most situations.

What about new EU directives?

The UK is free to ignore any new EU Directives. There are three new EU employment Directives due to be implemented over the next two years and in practice we have already adopted or plan to adopt many of the measures contained in them, these are:

Whistleblowing Directive (due to be implemented December 2021).
Transparent and Predictable Working Conditions Directive (due to be implemented August 2022).
Work-Life Balance for Parents and Carers Directive (due to be implemented August 2022).

If the UK’s decision not to adopt these Directives in full results in a significant divergence on employment rights in a way that materially impacts trade or investment, then the EU can trigger the rebalancing provisions, but only if it can establish proof of such impact.

Social Security

From 1 January 2021, the general rule remains that social security contributions are due in the country in which the employee is working. Under the special rules for detached workers, it may be possible to continue to pay social security contributions only in the UK notwithstanding that the employee is temporarily working in an EU country. Certain conditions must be satisfied, including that the period of work in that state does not exceed a specified maximum (generally two years) and the country in question has decided to apply the detached worker rules.

If the country in which the employee is working has decided not to apply the detached worker rules, employee and employer social security will be payable in the country in which the employee is working. EU member states must indicate whether they will apply the detached worker rules by 1 February 2020.

Conclusion

While the UK government has succeeded in negotiating the freedom to diverge from EU employment law, employers should not expect many changes in the short term. The EU and UK employment law agendas are not that far apart in the immediate post-pandemic future. ETs are likely to be cautious, at least initially, and respect most new ECJ decisions.

Employers should expect and prepare themselves disputes over some aspects of employment law which were considered “settled”. We will see whether the UK higher courts will overturn ECJ decisions and, if so, on what basis.

More immediately, employers should remember that European Works Councils can no longer be based in the UK and firms need to decide how to deal with their UK representatives. (Most have already put in place arrangements for this.)

We have tried to cover the frequently asked questions in the area of Employment Law and Brexit at the moment. If you have any specific questions you would like advice on, then please contact: Abi.Frederick@lewissilkin.com or koichiro.nakada@lewissilkin.com of Lewis Silkin LLP.