Social EuropeeBooks For a Europe With a Future Chapter 14 of 15
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The Effect of Brexit on UK Labour Law

By Catherine Barnard

As we repeal the European Communities Act, we will convert the 'acquis' … into British law. When the Great Repeal Bill is given Royal Assent [now the European Union (Withdrawal) Act 2018], Parliament will be free – subject to international agreements and treaties with other countries and the EU on matters such as trade – to amend, repeal and improve any law it chooses. But by converting the acquis into British law, we will give businesses and workers maximum certainty as we leave the European Union. The same rules and laws will apply to them after Brexit as they did before. Any changes in the law will have to be subject to full scrutiny and proper Parliamentary debate. And let me be absolutely clear: existing workers’ legal rights will continue to be guaranteed in law – and they will be guaranteed as long as I am Prime Minister.

British Prime Minister, Theresa May, party conference speech, 1 October 2016

Introduction

In the run up to the referendum in June 2016, Priti Patel MP, one of the leading proponents of leaving the EU, said to the Institute of Directors that ‘[i]f we could just halve the burdens of the EU social and employment legislation we could deliver a £4.3 billion boost to our economy and 60,000 new jobs’. Liam Fox MP, another leading Brexiter who became Secretary of State for International Trade, had expressed similar sentiments prior to the referendum campaign: ‘[T]o restore international competitiveness we must begin by deregulating the labour market. Political objections must be overridden.’ His remarks re-emerged during the campaign itself.

The Remain campaign, galvanised by these and other observations, responded. The StrongerIN website said:

EU laws protect your rights in the workplace, meaning no government can scrap them.

Being in the EU protects your right to paid holiday leave, maximum working hours, equal treatment for men and women, rights for part-time workers, health and safety standards, parental leave, and protection from discrimination on the grounds of sex, race, religion, age disability and sexual orientation.

If we left the EU, your workers’ rights would be up for debate and vulnerable to being scrapped. There could be years of uncertainty for you and your employers.

The vote to leave on 23 June 2016 therefore suggested a victory for those calling for a smaller state and less (employment) regulation. But the Prime Minister, Theresa May, who came into office in July 2016, did not appear to share those views. This was made clear, first in her party conference speech cited in the opening lines of this chapter, and again in her Lancaster House speech on 17 January 2017, where she said:

Indeed, under my leadership, not only will the government protect the rights of workers set out in European legislation, we will build on them. Because under this government, we will make sure legal protection for workers keeps pace with the changing labor market – and that the voices of workers are heard by the boards of publicly-listed companies for the first time.

She repeated those views in the House of Commons on 29 March 2017, the day Article 50 TEU was triggered. The White Paper on the Great Repeal Bill said much the same.

Taking the Prime Minister’s speech at face value, she committed to maintaining all of the EU-derived employment acquis so long as she was Prime Minister. So, the Working Time, Fixed Term and Agency Work Regulations – widely regarded as doomed following Brexit – seemed to enjoy a stay of execution. However, it is by no means clear that these commitments will bind any new Prime Minister.

However, all is not quite as it seems. Let’s start with looking at the EU(W)A 2018, the important piece of legislation passed by the Westminster Parliament in anticipation of (a no deal) Brexit.

The EU(W)A 2018

What it does: Repeal, Convert, Correct

The EU(W)A 2018 has three strands: ‘repeal, convert and correct’. The ‘Repeal’ strand involves ‘repeal[ing] the European Communities Act [ECA] 1972, and in so doing, return[ing] power to UK politicians and institutions’. This was the inevitable consequence of a vote to leave the EU.

Of more relevance for this chapter are the ‘Convert’ and ‘Correct’ strands. As far as Convert is concerned, this is a reminder that the Act is in fact far more about continuity than revocation. Specifically, s.2(1) of the EU(W)A provides that ‘EU-derived domestic legislation, as it has effect in domestic law immediately before exit day, continues to have effect in domestic law on and after exit day’. Section 2(2) then explains what is meant by 'EU-derived domestic legislation' and includes any enactment ‘(a) made under section 2(2) of the European Communities Act 1972’. In other words, it ensures that, for example, Directives which have been implemented into UK law by secondary legislation (SIs), as permitted by s.2(2) ECA 1972, continue to have effect in UK law. Therefore, the Working Time Regulations implementing the Working Time Directive under s.2(2) ECA will continue to apply (unless and until repealed by a future UK government in the event of a no deal Brexit).

Some Directives, as with the Equality Directives 2000/43, 2000/78 and 2004/54, have been implemented by an Act of Parliament (primary law), now the Equality Act 2010. The Equality Act will continue to stand: as a separate Act of Parliament, it should not be affected by the repeal of the s.2(2) powers in the European Communities Act 1972. However, to avoid arguments by lawyers that employment legislation, particularly that found in Acts of Parliament, is nonetheless impliedly repealed following Brexit, s. 2(2)(d) EU(W)A 2018 preserves as EU-derived domestic legislation ‘any enactment so far as-… (d) relating otherwise to the EU or EEA’.

As far as the third, ‘Correct’, strand of the EU(W)A 2018 is concerned, s.8 gives so-called Henry VIII powers (i.e. wide powers given to the executive thus circumventing much parliamentary control, as King Henry VIII himself wanted) to the Minister of the Crown to make regulations as the Minister considers appropriate to ‘prevent, remedy or mitigate – (a) any failure of retained EU law to operate effectively, or (b) any other deficiency in retained EU law’. There was considerable concern that these powers would be used to make significant policy choices/changes and attempts were made to introduce an amendment to ring-fence the Equality Act from s.8 but these were unsuccessful.

An example of the application of the statute: the case of EWCs

So, the effect of the convert strand of the EU(W)A is to preserve all re-existing EU employment law into UK law. However. despite the language of continuity, there is one area for a major potential policy change in the employment field: European Works Councils (EWC). At first sight the UK implementing legislation is preserved. The 1999 Regulations, implementing Directive 94/45, and the 2010 Amendment Regulations, implementing the EWC Directive 2009/38, were adopted under the powers laid down by s.2(2) ECA and so should be retained under s.2(2)(a) EU(W)A 2018. However, the Regulations embed just the sort of problem that s.8 (‘correct’ powers) of the EU(W)A was intended to deal with. For example, Regulation 4(1) applies to the situation where the central management of the Community-scale undertaking or group of undertakings is based in the UK. Regulation 5 says the central management is responsible for creating the conditions necessary to set up an EWC or Information and Consultation Procedure (ICP). An EWC or ICP needs to be set up only where the thresholds are met which includes 1000 employees in the member states and at least 150 employees in each of at least two member states. The problem is that the UK will no longer be a member state.

The Commission had already flagged up this problem in its 'Notice to Stakeholders' of 28 March 2018). It said that in the event of a no-deal Brexit the EWC Directive will 'no longer apply to the UK' to the effect that: (i) some businesses may fall outside of its scope once UK employees are excluded from its headcount test; and (ii) another representative agent in a remaining member state will need to 'take over the responsibilities' for EWC matters if central management or its representative agent is currently located in the UK.

In recognition of these problems, and using the s.8 powers, the UK has passed The Employment Rights (Amendment) (EU Exit) Regulations 2019 which apply in the event of a no deal. The law firm Lewis Silkin provided a helpful summary of these complex regulations. They say: ‘In summary, and contrary to the Government’s commitments to preserve all UK employees’ rights, the Regulations will:

  • end the right of employees to request information on whether their employer falls within the scope of the EWC Directive and, if so, request the establishment of a EWC; and

  • end the application of the UK’s EWC legislation to UK-based businesses or non-EU-based businesses that had designated a representative agent in the UK before Brexit. (The Regulations nonetheless preserve protections from detriment and unfair dismissal for UK representatives participating in bodies operating under other member states’ laws.)’

They also note that the Regulations preserve the application of the UK’s EWC legislation only to businesses that:

  • are non-UK-based;

  • are non-EU-based;

  • have a UK undertaking that, at the date of Brexit, happened to employ more employees than any other group undertaking in the EU; and

  • that undertaking was already responsible for operating their EWC other than as a result of it being designated to do so.

They conclude: ‘We are unaware of any business meeting the above criteria, notwithstanding our extensive experience advising on EWCs. In effect, therefore, the Regulations end the UK’s legal framework for operating EWCs.’

The Commission has subsequently published a further revised note on EWCs post-Brexit covering a range of issues for current EWCs to address including thresholds, locations for central management, applicable law and Article 6 agreements.

The role of the European Court of Justice

The idea of continuity seen in the EU(W)A 2018 extends to the case law of the Court of Justice (CJEU). The CJEU has played a major role, expanding rights and remedies in the social field. Most of this ‘retained EU case law’ will continue to be binding on UK courts and tribunals. Section 6(7) of the EU(W) Act provides that 'retained EU case law' means any principles laid down by, and any decisions of, the European Court, as they have effect in EU law immediately before exit day’. They will have the same binding effect on UK courts or tribunals as decisions of the Supreme Court and can be reversed in the same (relatively rare) circumstances as decisions of the Supreme Court. Future, post-Brexit, decisions of the CJEU will continue to have a persuasive effect on the British courts. According to s.6(1) EU(W)A, a court or tribunal (a) is not bound by any principles laid down, or any decisions made, on or after exit day by the European Court, and (b) cannot refer any matter to the European Court on or after exit day. However, s.6(2) provides that a court or tribunal may nevertheless have ‘regard to anything done on or after exit day by the European Court, another EU entity or the EU so far as it is relevant to any matter before the court or tribunal’.

The principle of supremacy

Under the EU(W)A’s first principle, ‘repeal’, the ECA 1972 and thus the principle of supremacy of EU law will be overturned. However, the principle of supremacy has not, in fact, quite died a death. Under s.5(2) EU(W) Act 2018, EU-derived law has supremacy post-exit day and can be used to disapply UK legislation enacted prior to exit day. So, for example, if a provision of the Equality Act 2010, a pre-Brexit piece of legislation, contravenes Article 157 TFEU, now incorporated into UK law by virtue of s.2(2)(d) of the EU(W) Act, Article 157 will prevail (see by analogy Walker v Innospec [2017] UKSC 17), albeit that, post-Brexit, any decision of the British courts to that effect can be reversed by Parliament.

What is lost to UK employment law?

Despite the language of continuity, there are in fact some major changes that have been introduced which will have considerable effect on UK employment law. First, the Charter of Fundamental Rights (CFR) has been removed by section 5(4) of the EU (Withdrawal) Act 2018. This provides simply that ‘The Charter of Fundamental Rights is not part of domestic law on or after exit day’. That said any reference to the Charter will be transformed into a reference to general principles. Section 5(5) EU(W)A 2018 provides:

Subsection (4) does not affect the retention in domestic law on or after exit day in accordance with this Act of any fundamental rights or principles which exist irrespective of the Charter (and references to the Charter in any case law are, so far as necessary for this purpose, to be read as if they were references to any corresponding retained fundamental rights or principles).

Post-Brexit, it is only those general principles which have been recognised as general principles of EU law by the CJEU ‘in a case decided before exit day (whether or not as an essential part of the decision in the case)’ which can be invoked in British courts after exit day. That presumably would include the right to strike as recognised by the Court of Justice as a general principle of EU law in Case C-438/05, Viking Line ABP v The International transport Workers’ Federation, the Finnish Seaman’s Union EU:C:2007:772 [44].

However, post-Brexit, general principles cannot be used to strike down the validity of UK law (Schedule 1, paragraph 3(2) EU(W)A), nor can they apply in a horizontal, Mangold-style situation (Sched 1, para. 3(1)). Furthermore, the possibility of Francovich-style damages claims has also been removed (Sched 1, para. 4).

What about post-Brexit EU employment legislation?

Let’s assume the Withdrawal Agreement eventually is adopted into UK law (a big assumption as things currently stand): will new EU employment law continue to apply to the UK? The answer is: ‘it depends’. If the backstop provisions of the Withdrawal Agreement (WA) apply in the UK, because no future EU/UK trade agreement has come into force at the end of the transition period laid down in the WA, then the non-regression clause of the backstop applies. Article 4(1) of Annex 4 provides:

With the aim of ensuring the proper functioning of the single customs territory, the Union and the United Kingdom shall ensure that the level of protection provided for by law, regulations and practices is not reduced below the level provided by the common standards applicable within the Union and the United Kingdom at the end of the transition period in the area of UK is committed to maintain its obligations to comply with in the area of labour and social protection and as regards fundamental rights at work, occupational health and safety, fair working conditions and employment standards, information and consultation rights at company level, and restructuring.

Article 6 adds that the UK shall ensure effective enforcement of Article 4 and of its laws, regulations and practices reflecting those common standards in its whole territory and, to the wry amusement of UK labour lawyers, it also commits the UK to maintaining ‘an effective system of labour inspections’ (there is no general labour inspectorate in the UK), ensuring that ‘administrative and judicial proceedings are available in order to permit effective action against violations of its laws, regulations and practices, and provide for effective remedies, ensuring that any sanctions are effective, proportionate and dissuasive and have a real and deterrent effect’.

However, in a bid to get the Withdrawal Agreement through Parliament on its fourth outing the Prime Minister committed not just to non-regression in the event of the backstop coming into force but more general dynamic alignment of UK labour standards. She said on 21 May 2019:

We will introduce a new Workers’ Rights Bill to ensure UK workers enjoy rights that are every bit as good as, or better than, those provided for by EU rules. And we will discuss further amendments with trade unions and business.

However, three days later the Prime Minister announced her resignation.

If the WA does eventually become part of UK law it will mean that the UK will go into a transition period during which time all EU employment law, including new Directives adopted in that period, will apply to the UK as they do at present. During the transition period the UK and the EU will start to negotiate the future trade deal and this may result in a continued obligation to respect EU employment law. Donald Tusk, President of the European Council, made clear in the draft Presidential Guidelines on negotiations over the UK’s departure that any future free trade agreement between the EU and the UK should be ‘balanced, ambitious and wide-ranging’. Further, such a deal must ensure ‘a level playing field in terms of competition and state aid, and must encompass safeguards against unfair competitive advantages through, inter alia, fiscal, social and environmental dumping’. The language was modified somewhat in the final version: any free trade deal with the UK must ‘encompass safeguards against unfair competitive advantages through, inter alia, tax, social, environmental and regulatory measures and practices’. But the intention is clear: the UK will have to respect workers’ rights, although at what level is not spelled out.

Conclusion

All of this is highly speculative. The politics in the UK are so troubled at the moment that there is a very good chance that the UK will leave with no deal at all either at the end of October 2019 or sometime after that. There is every chance that by then the UK has a new Prime Minister who may be much less wedded to the commitment to maintain or even improve employment rights and will use the opportunity to strip away the protection preserved by the EU(W)A 2018. Philip Hammond, currently Chancellor of the Exchequer, recognised as much. In an interview with Die Welt, he said that ‘[w]e are now objectively a European-style economy … with a social model that is recognizably the European social model that is recognizably in the mainstream of European norms, not US norms’. He concluded: ‘I personally hope we will be able to remain in the mainstream of European economic and social thinking. But if we are forced to be something different, then we will have to become something different.’ Workers’ rights may be less secure than first appears.