How a Brexit from the EU could change employment law
In the Queen’s Speech, the government announced plans to introduce a European Union Referendum Bill for an in/ out referendum on Britain's membership of the EU. On the face of it, a ‘Brexit’ would give the UK power to repeal or reshape much of the employment legislation that businesses dislike. But what would a vote to leave actually mean for employers?
Organisations commonly view the EU working time and the agency workers directives as undermining the flexibility of the UK's labour market and increasing the costs of hiring staff. Businesses would be particularly keen to see the repeal of the maximum 48-hour working week and the removal of working time record keeping requirements and this seems likely under a Conservative government.
If the vote was in favour of leaving the EU, the UK would have greater freedom to decide how statutory holiday pay should be calculated. European Court of Justice decisions in cases such as Lock v British Gas would no longer be binding and new rules could specifically exclude fluctuating payments such as commission or overtime from holiday pay calculations.
Repealing the agency workers directive would remove the requirement for agency workers to be paid the same rate for the job as permanent staff once they have been in post 12 weeks, reducing business costs and record keeping requirements. This seems likely to be regarded as a "quick win" by the government following a Brexit.
Protection against discrimination is a cornerstone of EU law. More recent anti-discrimination legislation – such as adding religion and belief, sexual orientation and age to the ‘protected characteristics’ in the Equality Act 2010 – resulted from the need to meet EU requirements, but prohibitions on race, sex and disability discrimination were in force before the UK was required to implement such legislation by EU directives.
Although leaving the EU would in theory give more scope for the UK to look again at which characteristics should be protected, changes in social attitudes make it politically unattractive to carry out a significant roll-back of anti-discrimination law. Nigel Farage's suggestion that race discrimination legislation could be repealed was seen as controversial in the run-up to the election, and it is unlikely the Equality Act 2010 would be repealed on a wholesale basis.
However, there would be scope to introduce a cap on the compensation that could be awarded in a discrimination claim, perhaps to reflect the cap applied to unfair dismissal claims. Such a move would currently be incompatible with EU law, but would be possible after the UK’s exit. The CBI in particular has suggested that a cap would curb claimants' unrealistic expectations about the compensation they might receive and make it easier to settle claims at an earlier stage.
Rights such as those provided for new and expectant mothers are often criticised as examples of business-unfriendly European legislation. In practice, however, existing rights to maternity, paternity and parental leave and pay go significantly beyond what is required by EU law. Again, it seems unlikely that a post-exit government would be keen to scale back such rights in any meaningful way – or that larger employers would want to abandon their existing family friendly policies anyway, given their significance as a recruitment and retention tool. However, it is possible that exemptions around family leave rights could be introduced for micro-employers.
Although returning control of employment law to the UK is seen as an advantage of leaving the EU, political considerations make it relatively unlikely that core employee rights would be significantly reduced following an exit. There may be more scope to change the sort of legislation that is criticised as red tape, but the extent to which this is possible will depend on the form that a UK exit takes.
One option following an exit would be for the UK to remain within the EEA, reflecting the relationship that Norway has with the EU. However, if this happened, the UK would still have to comply with EU social and employment laws but would no longer have a right to negotiate the development of those laws. The UK would remain bound by the employment laws that it finds particularly burdensome, while having lost the ability to influence the outcome of the European legislative process.
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