The Potential Impact of Brexit on Employment Law

30th November 2020

Following the unprecedented circumstances that the world has faced this year, it is easy to forget that on 31 December 2020, the “Transition Period” of Britain’s EU exit will end, and from 1 January 2021 the UK is set to leave the single market and customs union, either with or without a future trade deal.

In anticipation of this date, employers across all industries are preparing for situations such as loss of passporting rights, implementation of cross border mergers and data transfer agreements. However, employers should also be mindful of the impact that Brexit could have on employment law and subsequently the rights of their employees.

At present, there are several European Court of Justice (ECJ) decisions and interpretations of EU law which must be followed by domestic courts in the UK, however, as part of the European Union (Withdrawal) Bill, the UK courts and tribunals will no longer be obliged to follow ECJ decisions and may depart from EU law in their decisions. Thus, employers and employees may see significant changes in areas such as the following:

  • Discrimination Law

As a result of EU case law (Marshall v Southampton and South West Hampshire Area Health Authority (No 2) (1993)) the Sex Discrimination Act was amended to remove the cap on damages awarded to successful claimants in sex discrimination cases and following this, claims for discrimination under the Equality Act 2010 also became uncapped.

However, an unlimited cap on damages is a significant concern for employers and following Brexit, there is growing support for the cap to be reintroduced in discrimination cases in UK courts. The basis upon which the reintroduction of the cap could be made is to provide employers with greater certainty on their levels of financial liability and to deter some employees from bringing spurious claims with the incentive of uncapped damages.

Whilst some businesses may back any move by the UK Government to introduce capped compensation in sex discrimination cases to help with the economic recovery post Brexit and Covid-19, there would be uproar from women’s rights movements and campaigners, discrimination lawyers, as well as advocates and supporters of equal opportunities and diversity and inclusion in the workplace. This is because women have been adversely affected to a far greater degree as a result of the Covid-related economic downturn given that many of them work in the hardest hit sectors, such as retail, care and hospitality. The Fawcett Society reported earlier this month that women were more likely than men to lose work or have to take up the lions’ share of childcare during the pandemic. A third of working mothers reported having lost work or hours due to a lack of childcare during the pandemic and this rose to 44% for Black, Asian and Minority Ethnic (BAME) working mothers. As such, there is a real danger that the gender pay gap could widen even further.  For women to be deprived of adequate protection against discrimination on grounds of their gender in such circumstances would be grossly unfair and morally unjust.

  • Redundancies

Consultation periods for collective redundancies are an EU-based right and presently, where an employer is considering making 20 – 99 redundancies within a 90-day period or less, consultation must start at least 30 days before the first dismissal takes effect. Similarly, where 100 or more redundancies are being proposed within a 90-day period or less, consultation must start at least 45 days before the first dismissal takes effect. Following Brexit, changes could be made to the threshold of the number of affected employees which trigger consultation. This would mean that employers may not have to engage in collective consultations for as little as 20 redundancies, however this may be something that Trade Unions oppose and could therefore remain unaltered.

  • TUPE

At present, EU law states that transferee employers cannot change the terms and conditions of transferring employees’ contracts of employment unless there is a technical, economic or organisational reason for doing so. In addition, and in accordance with EU law, following a pre-transfer objection employees are only able to bring a claim for constructive or wrongful dismissal against the transferor employer, even if it is the transferee employer’s anticipated change that has given rise to the anticipatory breach and subsequent claim (as was decided in University of Oxford v Humphreys).

It is thought that following the UK’s departure from EU law, changes may be introduced to make it easier for: (1) transferee employers to harmonise transferring employees terms and conditions of employment to make them more consistent with those of their existing employees; and (2) transferring employees to bring a claim against their proposed new employer following a pre-transfer objection, rather than the transferor employer, given it is the transferee employer’s anticipated change which has given rise to the anticipatory breach.

  • Maximum Weekly Working Hours pursuant to the Working Time Directive/Holiday Pay

Currently, the EU Working Time Directive sets out a maximum working week of 48 hours. The UK has a well-known opt-out system to this Directive, and it may be the case that post 1 January 2021, the UK will remove this limit entirely. However, if the maximum limit on working hours is removed, it may be the case that employees feel pressured to work longer hours particularly during the pandemic where employees are desperate to retain their jobs, and similarly in anticipation of the uncertainty that Brexit will give rise to. A removal of the limit is therefore likely to be contested by Trade Unions.

In addition, EU law currently states that when holiday pay is calculated, employers need to take into account additional payments such as overtime and commission. This decision superseded the accepted view of the UK courts that employers only needed to consider a worker’s basic pay. It may therefore be the case that following Brexit and in light of the pandemic, the UK courts revert back to this original calculation of holiday pay. If they do, once again they are likely to face a backlash from Trade Unions.

Ultimately, the true extent and impact which Brexit will have on employment law is not yet known, however employers should be mindful that after 31 December 2020, general and well established employment and HR practices may need to be significantly altered and it is important to therefore keep up to date with Government Guidance, update policies and procedures accordingly, train relevant staff on the new legal position and its practical effect and seek legal advice where required.

Authors: Michelle Chance, Employment Partner and Verity Ingle, Employment Solicitor.