UK: employment law and migration on a deal/no-deal Brexit

The last few weeks have seen a flurry of publications providing a slightly clearer picture of the employment and immigration consequences of a Brexit deal or no-deal.  In addition to the final text of the draft Withdrawal Agreement setting out the arrangements for the UK’s withdrawal from the EU on 29 March 2019 and the draft Political Declaration on the future relationship between the EU and the UK, the European Commission has published a Q&A on citizens' rights under the Withdrawal Agreement and a proposed Regulation on visa-free travel while the UK Government has published a policy paper on citizens' rights in a no-deal scenario and its much-delayed Immigration White Paper.  So where does all this leave employers? 

No deal

Employment law

The European Union (Withdrawal) Act, together with secondary legislation made under it, provides for EU law (with necessary amendments) to be imported into UK law on exit.  Two draft statutory instruments have now been published making various technical amendments to employment legislation, to apply from the end of March 2019 in the event of a no-deal Brexit.  The parliamentary sifting committee has recommended that they be subject to the affirmative resolution procedure requiring debate and approval in both Houses of Parliament.

The only substantive changes proposed by the draft regulations relate to European Works Councils (EWCs), which cannot continue to function as currently in the event of Brexit (unless the EU agrees to treat the UK as if it were still a member state for these purposes).  The draft regulations provide that no new requests to set up an EWC or information and consultation procedure can be made after exit day;  they also attempt to maintain employee rights in relation to existing EWCs to allow them to continue to operate as UK EWCs.  However, post Brexit, multinationals will have to comply with European Works Council legislation in an EU member state and therefore continuing to run a UK EWC in addition is unlikely to be welcomed.  Most are likely instead to relocate their EWC arrangements from the UK (and may voluntarily choose to permit UK employees to continue to participate).

In theory, Parliament could make future legislative changes to employment law, but these are likely to be limited given commitments made to date.  The Prime Minister announced on 2 October 2016 that existing workers' rights will be guaranteed during her premiership and the Government has continued to maintain this position. This is confirmed in the Government's technical note on workplace rights in the event of a no-deal Brexit, here.

Perhaps the most likely targets for abolition or amendment in the longer term would be the Working Time Regulations and the Agency Workers Regulations, which have both been heavily criticised as imposing unnecessary burdens on business. Interestingly, the Government's Good Work Plan published on 17 December 2018 (see here) announced minor changes to both these pieces of legislation, in both cases strengthening employees' rights.  Amendments might also be made to TUPE to make it easier for employers to harmonise terms of employment, and the Government might consider placing caps on compensation for discrimination claims at some point in the future.

In terms of case law, under the European Union (Withdrawal) Act, in theory at least, the Supreme Court could re-examine and potentially overturn established doctrines. Much-litigated issues such as holiday pay could be re-opened, making the legal position unpredictable until suitable cases are decided by the UK courts. Given the volume of EU legislation and CJEU case law in the field of employment law, this will be concerning to employers and employees alike.

Migration

The Government is committed to ending free movement and taking back control of its borders. On 19 December 2018 the Government published its much-delayed White Paper setting out its plans to introduce a new single, skills-based immigration system for all nationalities (save for Irish citizens, whose rights will continue as now).  The current cap on the number of skilled workers will be removed, as will the requirement to carry out a resident labour market test, and instead a minimum salary threshold will be set (at a level to be consulted on). For lower skilled workers, there will be a transitional arrangement for nationals of low-risk countries to obtain a visa to come for a maximum of 12 months followed by a 'cooling-off' period of a further 12 months. The White Paper confirms plans to permit short-term business trips to the UK.  It also confirms that, on moving to the new system, employers will not be required to undertake retrospective right to work checks on existing EU employees.

With regard to the rights of EU citizens currently living and working in the UK in the event of a no-deal, the Government's 6 December 2018 policy paper (available here) confirmed that EU citizens will need already to be resident in the UK by 29 March 2019 to be eligible to claim settled status (available to those who have been resident here for five years; those with fewer than five years in March 2019 will be able to apply for a temporary residence permit to cover the period until they have accumulated five years).  They will need to apply for the new status by 31 December 2020.  Until December 2020, EU citizens will be able to rely on their passport or national ID card to evidence their right to reside in the UK (and employers will not be required to differentiate between those arriving before or after 29 March 2019, effectively meaning that EU nationals arriving between 30 March 2019 and 31 December 2020 will be able to work until 31 December 2020 but will not be able to obtain settled status). The UK would also continue to honour the right of those who obtain settled status under the scheme to be able to leave the UK for up to five years without losing their right to return.

The paper calls on the EU and Member States to offer reciprocal protection for the rights of UK nationals living in the EU in the event of a no-deal scenario.  The paper also confirms that EFTA nationals resident in the UK and UK nationals in one of the EFTA states as at 29 March 2019 will be able to remain.

On 13 November 2018 the European Commission adopted a proposal for a Regulation which would include UK nationals in the list of nationals exempt from the requirement to have a visa when crossing the external borders of the Schengen area for short-stay visits, to apply from 30 March 2019.  This means that UK citizens would not need a visa when travelling for up to 90 days in any 180-day period to an EU member state (except Ireland) or a Schengen Associated Country (Iceland, Liechtenstein, Norway, Switzerland). As Ireland does not participate in the Schengen acquis on visas, the bilateral travel arrangement between the UK and Ireland is not affected by this proposal.  This proposal is conditional on the UK granting reciprocal and non-discriminatory visa-free travel for all EU member states.

On a no-deal Brexit, after 29 March 2019 professionals seeking recognition of their qualifications will no longer be able to rely on EU rules and will need to comply with relevant domestic rules, as explained in the UK government's technical notice here and the European Commission's technical notice here.

With a deal

Employment law

In the event of a deal on Brexit, the European Union (Withdrawal) Act would be amended to put it on hold until the end of the transition period. The draft Withdrawal Agreement provides that EU law will continue to apply during a transition period through to at least 31 December 2020.  Employment law rights derived from EU law would therefore be maintained for this period as a minimum.  It is highly likely that employment rights would be maintained after the transition period too, as:

• The backstop arrangements included in the draft Withdrawal Agreement (applicable in order to avoid a hard border in Ireland should it not be superseded by an agreement on the future UK-EU relationship) also deal with employment rights.  The backstop includes level playing field measures to ensure fair competition between the UK and the EU including in relation to labour and social standards.  It provides for non-regression of current levels of labour and social protection and "as regards fundamental rights at work, occupational health and safety, fair working conditions and employment standards, information and consultation rights at company level and restructuring". In effect this would embed EU law in UK law beyond the transition period until such time as a full agreement on the future relationship is reached.
• The Political Declaration setting out the Framework for the Future Relationship between the EU and UK (which accompanied the draft Withdrawal Agreement) includes a commitment to work together to safeguard "high standards of … workers' rights" and a statement that the future relationship must ensure open and fair competition, including provisions on social and employment standards.  The commitments should combine appropriate and relevant European Union and international standards and adequate mechanisms to ensure effective implementation.  It also notes that the future relationship should incorporate the UK's continued commitment to respect the framework of the European Convention on Human Rights. The Conservative government had originally planned to replace the Human Rights Act 1998 (which incorporates the European Convention of Human Rights) with a British Bill of Rights, but this was put on hold at least for the course of the current Parliament in view of Brexit;  this reference in the Political Declaration makes a future repeal of the Human Rights Act even less likely.
• The UK Government's White Paper detailing its proposal for the future relationship between the UK and the EU (published on 12 July 2018) also proposed that the UK and the EU commit to the non-regression of labour standards and to uphold their obligations deriving from International Labour Organisation commitments.

It is also worth noting that some EU law-derived rights will have been transposed into employment contracts and policies and therefore would continue to apply until varied in any event.

In terms of case law, under the draft Withdrawal Agreement, EU law would continue to apply throughout the transition period, including rulings of the CJEU handed down during the transition period (or thereafter if commenced before the end of the transition and involving the UK as a party).  Thereafter, the position will be the same as on a no-deal Brexit: the Supreme Court could theoretically re-examine and potentially overturn established doctrines such as in relation to holiday pay.

Migration

Free movement would continue during the transition period.  With regard to the period thereafter, the UK government's commitment to end free movement is noted in the Political Declaration. It states that mobility arrangements must therefore be established to include non-discrimination between the EU's member states and full reciprocity, along with visa-free travel for short-term visits.  These arrangements would be in addition to commitments on the temporary entry and stay of individuals for business purposes and without prejudice to the Common Travel Area arrangements between the UK and Ireland.  The starting point for the UK Government will be the new immigration regime discussed above in relation to a no-deal, but the White Paper notes that there will need to be flexibility to adjust the arrangements as part of trade agreements.

The position for EU citizens currently working and living in the UK in the event of a deal was settled back in March 2018.  The UK Government agreed to introduce a new 'settled status' for EU citizens who have been resident in the UK before 31 December 2020 (those arriving between 30 March 2019 and 31 December 2020 will need to register if they stay for longer than 3 months). Settled status will only be available to those with five years' residence, but individuals resident in the UK before 31 December 2020 but without five years will be able to apply for a temporary residence permit to cover the period until they have accumulated five years. The Government has suggested that EU citizens who already have a permanent residence card will be allowed simply to exchange this for settled status without having to go through the full application process. Applications for settled status must be made by 30 June 2021;  the scheme has already been opened on a live trial basis and will be fully opened by 30 March 2019. UK nationals in the EU will have reciprocal rights, and the UK Government hopes to secure onward movement opportunities for these UK nationals should they decide to change their EU member state of residence.  These arrangements are now reflected in the terms of the draft Withdrawal Agreement.  The EU Commission has published a Q&A on the rights of EU and UK citizens as outlined in the withdrawal agreement, here. The Government is seeking to secure similar protections vis-a-vis the EFTA states.

Under the draft Withdrawal Agreement, EU citizens or UK nationals will continue to be able to rely on professional qualifications, which were recognised before the end of the transition period in the country where they reside or work, to carry on activities in that country.  The Political Declaration simply states that the UK and EU should develop appropriate arrangements on those professional qualifications that are required to follow regulated professions, where in the parties' mutual interest.

Practical steps for employers

The key impact will be for employers who recruit or second employees cross-border. Employers with a significant migrant workforce, or with suppliers with a substantial migrant workforce, will need to keep a close eye on the Brexit negotiations and continue to communicate and support affected employees, whilst formulating contingency resourcing plans in the event of a no-deal.

While Brexit is likely to have very little immediate impact on employment law itself, more generally employers will need to factor employment law obligations into broader business decisions as a result of Brexit, particularly if considering relocations, restructurings or redundancies, bearing in mind the extended timelines for collective consultation obligations.  Multinationals with European Works Councils under UK legislation will need to develop contingency plans, while others may need to review and update employment documentation and multi-jurisdiction benefits packages.  Cross-border transfer of employee data may also need to be reviewed for ongoing compliance with data protection law and whether additional steps may be required to transfer EU data subjects personal data (eg, put model clauses in place if there is no immediate adequacy decision in favour of the UK as a third country).