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Employment law and the impact of EU Trade deal and Brexit- Changes ahead?

2nd February 2021
Since the Brexit vote there has been a lot of talk of the impact on employment law rights and workers’ rights in the UK. Sadly, much of this been done to try to make political points, or to spread fear or suspicion. In this article we shall examine the impact of Brexit on employment law, and the arrangements in the subsequent UK legislation and the trade deal reached with the EU in December 2020.

Firstly, it is important to realise that not all UK employment law derives from or came from the EU. For example, the protection against unfair dismissal (still the most common single type of claim brought in the Employment Tribunals) pre-dates the UK’s membership of the EU (or the EEC as it was known at the time), and most of the case law that has developed in this area has focused on issues that are not derived from EU law. Similarly, the next most common types of claim heard in the Tribunals are those relating to payment of wages. These are normally based on contractual terms between the employer and employee, and do not involve consideration of EU law.

Secondly, it ought to be clear to anyone that no UK Government (of any political colour) is going to seek to sweep away the laws preventing discrimination in the workplace. On any analysis such an approach would lose far more votes than any party could ever hope to gain by advocating such an approach.

So, brushing aside the hyperbole that has surrounded the party-political discussion on this topic, how is UK employment law likely to be affected by Brexit and the EU trade deal?

The UK legislation enacted in 2018 effectively converted existing EU based law in effect in the UK, and preserved domestic law that was based on EU law. The effect therefore was that the EU law continued to apply in the UK during the “transition period”.

The legislation effectively results in the EU law that was in place in the UK at the end of 2020 remaining in place in the UK at the end of the “transition period,” unless and until it is repealed. So, for example, the Working Time Regulations 1998 (which implemented an EU Directive into the UK’s domestic law), remains in place unless and until it is repealed or amended in the UK. The situation is therefore clear in relation to EU law which was implemented in the UK by domestic law, such as in the cases of the Working Time Regulations and the Transfer of Undertakings Regulations (known as TUPE).     

A practical point to note is judgments given after the transition period in any UK cases that had commenced in the European Court of Justice before the end of the transition period will apply to the UK. Interpretation of UK law that was in place before the end of the transition period is still required to be in line with the decided EU law as at the end of the transition period. So, in practice this means that cases on the Working Time Regulations, for example, must still be decided in accordance with the EU law principles that applied as at the end of the transition period, unless and until such law is changed in the UK.    

In the transition period there was a lot of discussion and attention given to the arguments about maintaining “the level playing field”. The Trade deal agreed by the UK and EU does include some provisions that relate to the issue of the level playing field. The Trade deal includes a provision which requires the “non-regression” of various rights, including rights at work. This means that neither party to the deal is allowed to weaken or reduce the rules on existing employment law. However, the restriction only applies to any change in a “manner affecting trade or investment.” Having said that, the Trade deal does state that both the UK and EU retain their rights to exercise reasonable discretion and to make bona fide decisions regarding the allocation of labour enforcement resources with respect to other labour law.

It is too early to really say how far the Trade deal restricts the UK from changing its employment law, as the unknown part of the equation is the phrase “in a manner affecting trade or investment”. The Trade deal obliges the two parties to make all efforts through dialogue, consultation, exchange of information and co-operation to address any disagreement on the application of these provisions. This is of course really going to be down to the political will, priorities and motives of the UK or EU at any given time.  

Our predictions on areas that may be changed

A word of caution is essential here. The following list is simply our preliminary opinion, and not legal advice, as to the areas of law that may be changed now that the transition period has come to an end.

Calculating holiday pay

The case law currently requires overtime payments, regular bonuses, and some other payments to be considered when holiday pay is calculated. This can make the calculation rather complicated, and confusing. The simple fact that various factors in addition to the normal hours of work are to be taken into account in calculating holiday pay can make it difficult for employers and individuals to know exactly what payment should be made for their holiday pay. Therefore, as the calculation is not simple under the current case law, arguments and disagreements can arise very easily, as the employer and individual can disagree over the figures to be taken into account in the payment calculation.

We suspect that this will be a topic that will get the attention of the Government and industry, and may be simplified by returning the calculation to being based on the individual’s basic normal hours of work.

Working Time

Although it provoked a lot of discussion, we doubt that the 48 hour working week limit had much of an impact across the UK economy. As a proportion of the workforce, very few actually regularly work over 48 hours per week. A feature that many people misunderstood was that the weekly working hours figure was to be calculated over a significant period, ie the rules did not stop an individual working 49 hours one week, when they had an average weekly number that came to a figure lower than 48 hours. The UK retained an opt-out anyway, and many people signed such opt-outs- effectively reducing the impact of the limit on working hours. Furthermore, we often found that individuals wanted to work extra hours, in order to receive the relevant overtime pay that often came with it. Therefore, it is possible that the Government may simply remove the 48 hour limit, but this is likely to receive a lot of adverse criticism in relation to health and safety arguments. (NB the rules relating to the calculation of holiday pay are found in the Working Time Regulations, so we expect this aspect of the Working Time Regulations to be changed by the UK Government – see above).

Transfers of Undertakings (TUPE)

This is now a well-established part of employment law. We do not see this being repealed. It is possible that there may be some tweeking to the Regulations, in the areas of the consultation requirements, and to the rights of employers to standardise terms of employment across staff after a transfer (which is currently prohibited in most instances). We do not expect that such changes are likely to have a significant impact in reality, but they may well be viewed as ideal targets in the attempt to reduce red-tape.

The issue of standardising (or rather “harmonising”) terms of employment is a common cause of frustration for businesses when they realise that the law makes this very difficult. It is also a cause of great friction between staff when it becomes clear to them that some staff enjoy better terms than others simply because of “inherited” terms due to a TUPE transfer. Frankly, it would make it easier for all sides if the UK Government were to clarify the law on harmonising terms of employment, so we do expect that this will receive attention, and changes.

Discrimination law- compensation

We do not see any major political party in the UK seeking to repeal the anti-discrimination legislation. This is an area of law that has expanded in the past 20 years, with protection against age discrimination, and sexual orientation discrimination. There is no public appetite for those protections to be removed.

There may be the possibility of compensation being capped for unlawful discrimination- whereas it is currently uncapped. Awards for unfair dismissal area already capped, and it may be that compensation for unlawful discrimination could be capped in a similar way. It is worth noting that the average awards of compensation for unlawful discrimination are lower than the current cap on compensation for unfair dismissal, so such a change would have an impact on a limited number of people (more likely to be those on high earnings).                

Agency Workers

Under the current law, agency workers can enjoy rights broadly similar to those of employees once they have been employed by the agency client business for a short period. Many in industry see this as undermining the advantages of using agency staff. Agency workers are entitled, after 12 weeks service with the particular client, to the same salary, benefits, prospects for promotion, and access to training. Many employers, and employment agencies, question the point of such entitlements, as they undermine the flexibility that businesses typically need and want when using agency staff. We therefore see this as a likely target for change, being and an obvious target for criticism over excessive “red-tape” on UK businesses.    


As the UK Government, and the media, are focused on the impact of the Coronavirus, the topic of changes to employment law is probably not going to receive the attention and scrutiny that it might otherwise receive. However, we do think that the areas listed above will be subject to change in the coming years.

It is clear that elements of EU law that have been adopted and implemented into UK law will remain in place for some time to come, and much of it will simply not be repealed due to the lack of political and electoral incentive to do so.

The trade deal reached with the EU does allow for some “retaliation” by the EU, which could theoretically be triggered by divergence in employment law regimes between the EU and UK. But equally, such retaliation is likely to be prompted by domestic political motives rather than those that purely relate to “trade or investment” between the two sides. It is important to note that both sides have a right to retaliate, and economic concerns over a damaging “tit for tat” approach may well limit the risks of such actions. Nevertheless, political cycles, such as elections in other EU member states, may prompt tough talking and positioning in regard to the trade deal, and any real or perceived divergence in employment law standards between the UK and the EU may be used as justification for such tough talking.

While we expect a gradual process of change in UK employment law, and divergence from EU employment law, we certainly do not anticipate any bonfire of EU employment laws within the UK.      

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.

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