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Education e-briefing - Brexit: Some frequently asked questions about workers and employment law

  • United Kingdom
  • Brexit
  • Education - Briefings

21-07-2016

According to the new Prime Minister, Theresa May, “Brexit means Brexit” and, in the coming months, the UK Government will trigger the process for the UK to withdraw from the EU.

However, up until such time as the UK actually leaves the EU, nothing changes from a legal perspective. Even serving notice to exit the EU gives rise to an anticipated two year period of negotiation, meaning that businesses will not be subject to overnight change.

In terms of UK employment law, our view is that the likelihood of major change after leaving the EU is small, at least in the short to medium term. Instead, delay and uncertainty followed by piecemeal change, which will depend on the terms of the UK’s future relationship with the EU and the political colour of future UK governments, is more likely. Of greater, immediate concern to many employers is the impact Brexit may have on the free movement of workers.

Despite not expecting wholesale employment law change upon Brexit, the vote to leave the EU nonetheless raises a number of workplace issues for HR managers, in addition to immigration concerns. We consider some of these employment issues below.

1. Will we need to make any changes to our offer letters, employment contracts or European secondment/assignment documentation as a result of the referendum outcome?

A review is recommended. For example, check that all offer letters and contracts of employment contain “right to work” clauses to support a contractual basis for change, if this is needed in the future. Also, European secondment/assignment terms may need to anticipate the possibility of employees losing the right to work in the host EU country.

2. Will we need to make any changes to our staff handbook or policies?

Not immediately. Depending on what relationship the UK agrees with the EU, a UK government (current or future) may decide to repeal certain existing employment protection derived from EU employment laws - see introduction above - which may necessitate handbook and policy changes. However, given that Brexit may not happen until the end of 2018, at the earliest, you should not delay any updates to handbooks and policies you would otherwise plan to make.

3. What impact will Brexit have on pension arrangements?

The immediate effect for pensions schemes will be the impact on funding levels as a result of changes in investment values. The markets have reacted negatively to the vote to leave and, for some schemes, this may result in a significant deterioration in funding levels. Where schemes have hedged the risk or invested in gilts this may be irrelevant or they may actually see a funding improvement. However, for those schemes with exposure to equity markets, this is likely to be negative. Linked to this, there may be a short window of opportunity to consider buying in or out some or all of the scheme’s liabilities.

Trustees should also consider any negative impact on their employer’s covenant (the ability of the employer to fund the pension scheme). This will be particularly relevant for those seeking to conclude funding negotiations.

4. What action can we take against employees who abuse colleagues over how they voted in the referendum?

Inevitably, the referendum and Brexit are discussion topics between colleagues. However, if behaviour becomes abusive, it’s time to take action. Abusing colleagues whatever the reason is likely to merit disciplinary action. Failing to act may expose you, as employer, to liability, for example for harassment, discrimination or even constructive dismissal.

5. Reports of racial harassment against foreign workers have increased in the UK since the referendum. What should we do about instances of racial harassment in the workplace?

Any form of racial harassment should be dealt with robustly and in accordance with your policies on discrimination and harassment. Failure to act swiftly and appropriately may expose you, as an employer, to liability for the acts of its employees.

Now is a good time to ensure your policies are up to date, well publicised to employees (to make clear what will not be tolerated) and visibly supported by senior management.

If employees are experiencing racial abuse outside the workplace, this may be a matter for the police.

6. How will Brexit affect the current holiday pay litigation in the UK?

Until Brexit, the UK has little scope to amend the Working Time Regulations (WTR) and rights to paid holiday. That may change post-Brexit but not until the exit process is concluded and, even then, may be limited by whatever deals we manage to negotiate for a future outside of the EU.

7. Our organisation relies heavily on agency workers. How will the Agency Worker Regulations be affected?

There are no immediate implications. Once the UK leaves the EU, depending what future relationship the UK agrees, current agency worker protection may be reformed. The UK relies heavily on agency staff, so any such post-Brexit legal reforms could influence the numbers of these workers – positively or negatively.

8. Our organisation uses contractors. Will this be affected?

If economic uncertainty associated with Brexit causes you to slow down recruitment activities, you may decide to increase your reliance on contractors on a temporary basis. It is a good idea to ensure you have appropriate contracts and policies to support the use of contractors, for example, to check whether they are correctly categorised as being self-employed, as opposed to worker or even employee status (with the resulting risks of adverse tax and other consequences if wrongly labelled). Depending on the nationality of your contractors, there may be right to work issues which need to be considered.

9. We are evaluating moving part of our UK operations overseas. What employment law issues do we need to think about?

Employees whose roles are transferred overseas are likely to be redundant and will be entitled to notice and other entitlements on termination. Consultation processes will need to be followed (individual and, depending on the number of employees affected, potentially collective).

Where an entire operation (or part) is to be transferred overseas, TUPE is likely to apply. This in turn may overlay additional information and consultation with representatives of affected employees.

Employing staff in other jurisdictions will require compliance with local employment laws. In many countries it may be necessary or advisable for tax reasons to set-up a local entity or branch to employ the staff. Local law advice should be sought.

10. We transfer employee data around the EU. Do we need to change our approach to data protection because of Brexit?

New EU regulations (General Data Protection Regulations) are due to come into force in 2018 and will be directly applicable to all EU Member States. So close to Brexit, the UK is not likely to be subject to these regulations directly but UK businesses transferring data to and from EU will nonetheless be required to adhere to them (for more information, visit our data protection hub).

11. How will business travellers be treated when visiting the UK in the future (and vice versa where our employees visit EEA countries)?

This will be determined as part of the negotiation of the UK’s exit, whether free movement continues and the nature of the immigration system post Brexit. In the absence of free movement, it is possible that business travellers may require permission to enter the UK.

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