31st December 2020 marked both the end of 2020 and the conclusion of the Brexit transition period, which brought the UK's membership of the European Union to an end.
Just a week previously, on Christmas Eve, the Government announced that a trade deal had been successfully reached with the EU. While the details of the trade deal are still being scrutinised, the impact of Brexit on employment law going forward is now slightly clearer and it may be possible to say with some more certainty than in the past four years what will happen to employment law in the future.
What commitments did the UK Government make in respect of existing employment rights?
The trade agreement stipulates that the UK Government is free to make changes to employment rights, so UK employment law may begin to diverge from EU law in certain areas and the Government may choose to introduce new legislation to enact such changes. However, a crucial point of the trade agreement just reached is that the UK must not reduce or weaken the level of EU derived employment rights, which existed in the UK prior to Brexit, in a way that would have a “material impact on trade or investment”. What does “Material impact on trade or investment” mean?
It remains to be seen what type of divergence from existing employment law standards would meet this definition. However, the important point is that if the UK Government were to introduce changes which materially impacted trade or investment, then the EU could look to resolve this via an arbitration process and by taking “appropriate rebalancing measures”, which could potentially include the imposition of trade tariffs. In practical terms this means that the continued terms of the trade agreement are effectively contingent on these preserved employment rights and the UK will need to be careful in considering any future changes it seeks to make to employment rights. This condition has likely been included to ensure the continuity of the “level playing field” of each member state’s workforce. This common set of rules and standards is based on the idea that no one country within the customs union is able to gain a competitive advantage over other member states by utilising cheaper employment standards.
What to expect in the future?
Going forward, it is clear that the UK can choose to deviate from existing EU law and the Government may look to take such steps to demonstrate its clear divergence from EU law in a way that demonstrates its newly regained sovereignty. However, in practice the UK will not have absolute freedom to change all of its employment laws if it also wishes to maintain the trade deal just agreed. The UK government will need to take care to ensure that any such a deviation from EU based rights would not cause a material effect upon trade or investment between the UK and EU.
Whilst UK courts and tribunals will no longer be bound to follow new European Court of Justice decisions (issued in 2021 and beyond) the UK Withdrawal Act indicates that the UK courts may still have “regard” to them where relevant. This means that EU case decisions may still remain of relevance to ongoing UK employment rights when UK courts make judgments on domestic employment rights. My view is that in practice it is unlikely that there will be any significant changes to existing employment law which is derived from EU law, especially in areas such as working time or discrimination laws. Any future changes are more likely to be to the form of such laws and not so much the main substance, so as to ensure compliance with the terms of the new Brexit trade agreement. As a prediction, possible early targets for reform could include a change regarding the calculation of holiday pay for those whose pay fluctuates and some reform of the rules which apply to business transfers.
Paul McGowan is the founder and Principal Solicitor at Newcastle based employment law specialists Collingwood Legal. Email: paul.mcgowan@collingwoodlegal.com tel: 01912822882.
