As a Brexit trade deal has now been agreed, many have been left wondering what the implications will be for UK Employment Law. This is understandable given that a large proportion of the UK’s employment law comes from the EU, including, collective consultation obligations, discrimination rights, duties to agency workers, family leave, transfer of undertakings regulations and working time regulations.

On 24^th December 2020, the UK and the EU reached three agreements in relation to the future UK-EU relationship, which apply from 11pm on 31^st December 2020:

• The trade and co-operation agreement.
• The security of classified information agreement.
• The Euratom-UK nuclear co-operation agreement.

The trade and co-operation agreement contains details concerning the future of employment rights in the UK. We have set out below some of the key implications that the agreement has on UK Employment Law below:

• The agreement states that the UK and the EU have committed to not weaken or reduce their labour and social standards below the levels in place as at 31^st December 2020 “in a manner affecting trade or investment”. This commitment covers the following:

• Employment standards;
• Fair working conditions;
• Fundamental rights at work;
• Health and safety standards;
• Information and consultation rights; and
• Restructuring of undertakings.

The agreement also states that both the UK and the EU will strive to increase their respective labour and social levels of protection. If a dispute arises between the UK and the EU with regards to the above commitments then the matter will be referred to a panel of experts after 90 days. This process therefore provides both parties with the opportunity to challenge one another’s compliance with the agreement. 

Whilst it can be arguably said that the above commitments potentially restrict the UK’s ability to make significant changes to employment laws, they by no means completely prohibit the UK from reducing employment protection as the commitments are reserved to measures “affecting trade or investment”.

• The agreement also requires both the UK and the EU to maintain a system for effective domestic enforcement of their labour and social levels of protection. This will include having a system of labour inspections, administrative and judicial proceedings and remedies. Currently, the UK’s labour inspection bodies include (but are not limited to) the following: the Equality and Human Rights Commission, HMRC and the Health and Safety Executive. The UK has agreed to set up a single enforcement body and we await further information in this respect.

• The agreement addresses a number of rebalancing measures in the event that the UK’s and the EU’s levels of protection in labour and social standards significantly depart from one another. In the event this situation occurs, either party can take appropriate rebalancing measures against the other. The measures will be overseen by an independent arbitration panel. Therefore, although the UK is able to depart from future EU employment laws moving forwards, the EU always has recourse to implement a rebalancing measure if there is significant divergence from EU law and where there is a material impact on trade or investment.

• All existing UK domestic legislation implementing EU law is unaffected by the agreement and will continue to apply. This includes (but is not limited to) the Working Time Regulations and TUPE.

• The UK will no longer have to follow any new EU Directives. However, in the event that the UK decides not to implement a new EU Directive, it remains to be seen whether or not this will amount to “significant divergence” from EU law and whether such a decision will materially impact on trade and investment.

• The agreement also covers working time regulations with respect to road transport and confirms that those drivers transporting goods between the UK and the EU must continue to comply with rules concerning working time, rest periods, breaks and tachographs.

Practical implications

Whilst the “level playing field” provisions restrict the UK’s ability to make major changes to existing employment law, they do not completely prevent the UK from reducing employment protection because the non-regression commitment is limited to measures “affecting trade or investment”. It is unclear what level of reduction of employment rights might be considered to affect trade and investment. However, it seems likely that minor changes to legislation that would not give UK employers a competitive advantage may be permissible even if they reduce existing employment protection. Saying this, employers should not necessarily expect substantial gaps to open up in the immediate future.

In terms of case law, given the lack of guidance on what Employment Tribunals should take into account in deciding how to regard European Court of Justice (ECJ) decisions, and that a failure to follow a potentially applicable ECJ judgment is likely to make an Employment Tribunal decision appealable, we believe that Employment Tribunals will take a careful approach and follow new ECJ rulings in the majority of situations.

If you would like more information about any of the issues raised in this article or on any other aspect of employment law, please contact us on 029 2034 5511 or at employment@berrysmith.com.