Tuesday, February 2nd, 2021
Having left the transition period at the end of 31 December 2020 (11pm GMT), the UK’s relationship with the European Union is now governed by the UK-EU Trade and Cooperation Agreement. What are the implications of the Agreement on employment law in the UK?
Whilst there is nothing in the UK-EU Trade and Cooperation Agreement that specifically changes employment law in the UK, a key condition to ensure that trade remains tariff and quota free is that a “level-playing field” continues in policy areas including employment law rights and standards. The UK is no longer bound by EU directives and the jurisdiction of the Court of Justice of the European Union (CJEU). However, if the UK is to diverge significantly from EU employment rights in a way that materially impacts trade or investment, the EU can take “rebalancing” measures. These “rebalancing” measures may include the imposition of tariffs. The Agreement further provides that both the UK and EU shall continue to adhere to their respective labour and social levels of protection – the principle of “non-regression”.
Ultimately, the UK-EU Trade and Cooperation Agreement ensures that neither the UK, nor the EU, can take measures in relation to employment rights and standards that create a competitive advantage for one party, and thereby have a “material impact” on trade and investment. An example may be if the UK decided to repeal working time legislation, which is likely to materially affect trade by enabling UK employers to require employees to work far more hours than their EU counterparts. Whether more minor amendments to current legislation would affect trade in the same way is difficult to say, although it seems unlikely.
On 14 January 2021, in response to a Financial Times article that reported the government’s alleged plans to “rip up” EU-derived employment legislation, including ending the 48-hour maximum working week, the Business Secretary, Kwasi Kwarteng MP, rejected such claims. Via his account on Twitter, Mr Kwarteng stated that the government “…[is] not going to lower the standards of workers’ rights” and intends to “protect and enhance workers’ rights going forward“. On Wednesday, 27 January 2021, Mr Kwarteng informed ITV that a post-Brexit review on employment rights, which had previously been circulated among business leaders, will no longer be going ahead.
The enforcement provisions of the UK-EU Trade and Cooperation Agreement confirm that the UK and EU will maintain “system[s] for effective domestic enforcement, and, in particular, an effective system of labour inspections in accordance with its international commitments relating to working conditions and the protection of workers”. A failure to enforce the UK’s laws that are covered by the Agreement may amount to a breach of the non-regression principle referred to above. For such reasons, it may be advisable for the UK to ensure a compliant system of labour inspections by implementing the recommendation of a Single Enforcement Body, to co-ordinate state enforcement of employment rights, that was outlined in the final report of the Taylor Review of Modern Working Practices.
If the non-regression principle is breached by the UK, so that the UK’s employment protections fall below the “level-playing field”, a panel of experts from the UK and the EU will decide whether a failure to comply with the obligations has occurred. The panel can become involved after a 90-day consultation period, where the two parties are given the opportunity to resolve the matter between them. If the matter is not resolved, the panel of experts becomes responsible for delivering a report confirming whether the UK has complied with its obligations.
If the panel determines that the UK has breached the non-regression principle, the parties will consider how to remedy the situation. An appropriate remedy may involve the UK changing its laws to provide additional labour protections, so that the playing field becomes balanced. If the UK and the EU are unable to agree on an appropriate remedy, the panel will decide what measures should be administered.
In the event that new employment legislation comes into force in the UK, we can advise employers on those changes and assist them to formulate policies and practices that are compliant.
Hanne & Co provide cost effective and responsive legal advice and services to employees and employers. Please do not hesitate to contact the Hanne & Co Employment Team on 020 7228 0017, where we can book you in for a free half hour consultation call.
Tom Stubbs is a Paralegal in Hanne & Co’s Employment Law Team