In December last year, after four years of often fractious negotiations, the UK and EU finally signed the long-awaited post-Brexit trade deal – the EU-UK Trade and Cooperation Agreement (TCA) – which came into effect on 1 January.
In the days following the conclusion of the deal, business secretary Kwasi Kwarteng confirmed that the government would review how employment laws could be changed after Brexit. Many saw his comments as a signpost for comprehensive changes to UK employment laws and the news delighted neoliberals, who saw Brexit as an opportunity for the UK to go alone and become a low-tax and low-regulation state.
Kwarteng’s commitment to reviewing UK employment laws also faced fierce criticism. The media reported that there would be a ‘bonfire’ of employment rights. The Labour party warned that it would fight any attempt to take a ‘wrecking ball’ to employment laws.
In the end, in another government U-turn, Kwarteng admitted on 27 January that his review into employment laws would no longer be happening within the Department for Business, Energy and Industrial Strategy. The move seemed controversial given that Kwarteng had repeatedly lauded the opportunity that, outside the EU, Britain had an opportunity to bring in higher standards for UK workers. However, in reality, substantial changes to UK employment laws were always unlikely, especially during a global recession.
The key reason for this is that the TCA contains level playing field commitments, which aim to ensure that neither the UK nor the EU obtains a competitive advantage in various regulatory areas, including labour laws. The UK and the EU have committed to not reducing their “labour and social standards” in a manner that would “affect trade or investment”. This applies to employment standards, health and safety, working conditions and so forth. The agreement also includes safeguards that will kick in should one side fail to comply with their level playing field commitments – in a way that has a material impact on trade and investment.
So, although there is no absolute prohibition of making wholesale changes to employment laws, if one side suspects that the other has implemented a law that gives it a competitive advantage, it can call for an arbitration panel to resolve the dispute in a binding manner. If there has been significant divergence by one side, the other can apply hefty tariffs.
With these safeguards in place, it will therefore be very difficult for the UK to water down workers’ rights to give UK businesses a competitive edge without facing the very real prospect of retaliatory action by the EU. And a bust up with the EU on workers’ rights is the last thing Boris Johnson needs right now.
This doesn’t mean there will be no changes to employment laws this year. There are likely to be some changes, but they will not be radical. The government will want to demonstrate that a consequence of leaving the EU is that it can change laws free from the jurisdiction of the EU and the European Court of Justice. Parliament could introduce new legislation to scrap the law imposed on the UK by a European case, which prevents the new employer harmonising terms and conditions of employment after a TUPE transfer. The series of European cases that mean holiday pay should include commission, overtime and certain types of bonuses could also be reversed.
It is too early to say what changes the government might want to make in the longer term. That said, rather than make wholesale changes to UK employment laws, there may well be a desire by the government to forge closer links with the EU. If the disruption of Brexit becomes apparent, or if Brexit is a total disaster, the government will probably want to improve the UK’s relationship with the EU. Mirroring EU employment laws is one way to forge closer links.
Joseph Lappin is a partner and head of employment at Stewarts