Long reads

Brexit: the end of employment rights?

28 Jan 2021 By Jo Faragher

The UK's exit from the EU has torn the country cleanly down the middle, but it’s also poised to reignite the debate over worker protections

Anyone following the political comings and goings in the run up to the Brexit deal last year could be forgiven for thinking that mackerel were higher up the agenda than workers’ rights. Indeed, the final 1,200-page EU-UK Trade Cooperation Agreement includes a whole section and several annexes on fisheries and species of fish. The word ‘fish’ appears 368 times, compared to just 141 references to ‘employment’. 

Does that mean little is likely to change, even as other norms are ripped from the statute book? Not quite. Although business secretary Kwasi Kwarteng recently confirmed the government is planning to review EU-derived labour laws before changing his mind a week later, the fact that it has agreed to largely preserve existing protections in return for a tariff-free trade deal means we’re unlikely to see a dramatic reduction in rights for workers in the short term at least. Crucially, the agreement includes a non-regression clause, meaning the UK cannot ‘undo’ or change any employment laws originally made by the EU where this might affect trade and investment. “This means we can’t substantially go back on EU-derived laws that we have already enacted,” says Dr John McMullen, employment partner at Spencer West. “We’d have to argue that an aspect of law had a serious impact on trade if we wanted to make major changes.”

It’s a subject that matters – not just to the tens of millions of employees whose freedom and financial wellbeing depends on the protection they are afforded in law, but because the question of whether a libertarian approach to employment rights leads to greater prosperity has never been definitively settled. It was only eight years ago that Grant Shapps, then Conservative Party chairman and now transport minister, was bemoaning the fact that firms had to find ‘disingenuous’ reasons to get rid of staff. It should be easier, he said, to dismiss people. There is a long tradition of British politicians casting envious glances at the perceived lack of employment protections in the US, with TUPE and the Working Time Directive often cited as legislative burdens the country could do without. 

It is a divisive debate pitting trade unions and the Labour movement against powerful big business factions. But is it about to be reopened? Think tank the Institute for Public Policy Research has concerns that the impact on trade and investment of any changes to laws would be so “difficult to prove” it could leave room for a slow erosion of workers’ rights. Its recent analysis of the deal says: “Proposed ‘rebalancing measures’ – sanctions in the form of tariffs, designed to compensate one side for an unfair disadvantage – face being referred to a complex arbitration system before they can be introduced. Rebalancing measures are only likely to be used in a rare number of scenarios.” Thomas Player, partner in the HR practice at Eversheds Sutherland, says that, while we won’t see major changes in the short term, “what might happen is a gradual movement away from some of the unpopular EU-derived legislation such as working time rules or holiday pay”. 

Experts suggest we have seen more, rather than less, regulation in recent years, despite successive attempts by politicians to reduce red tape. In several areas, the UK goes beyond EU requirements; for instance, the EU Working Time Directive sets a minimum of 20 days’ holiday per year for a full-time employee, while the UK offers 28. “It’s a mistake to think that all these regulations come from the EU – most regulation is UK based. There’s no requirement to have a minimum wage, for example, and lots of occupations are regulated in the UK that aren’t elsewhere, which closes off jobs to a lot of people,” says Len Shackleton, professor of economics at the University of Buckingham and research fellow at the Institute of Economic Affairs. 

In the past, he points out, there has been an appetite among some politicians to deregulate areas such as redundancy – a consultation in 2012 recommended the creation of ‘compulsory no-fault dismissal’, for example, which would make it easier for businesses to fire people without legal ramifications. Deregulation still holds favour, too. Tory peer and MEP Daniel Hannan recently called for the UK to “rip up regulatory barriers” on guarantees of equal pay for temporary agency workers, among other things. 

Of course, it’s impossible to consider the future of employment rights without thinking about the impact of the pandemic. The Covid crisis, in many ways, has highlighted the need for worker protections, particularly when it comes to wage protection and equality. Player points to the employment bill commitments laid out in the December 2019 Queen’s speech, most of which are still to be enacted into law. “The government showed its intention to enhance certain employment rights but got stuck because of the pandemic; it will be interesting to see if they modify these priorities as we come out of it,” he says. Planned legislation currently in the ‘waiting room’ includes rights for neonatal care leave, enhanced redundancy protection for new and expectant mothers, and a default right to flexible working. For political reasons if nothing else, the government will not want to be seen ditching these. “Off the back of the pandemic, there will be more job losses and we’ll be looking at how the world of work has changed, and what support, rights and flexibilities workers need in this new world,” he adds.  

One element of the UK legislative landscape highlighted in Matthew Taylor’s review of working practices and the government’s subsequent Good Work Plan is the country’s poor record on enforcement. “We’ve gone backwards in terms of labour relations and enforcement,” says Duncan Brown, principal associate to the Institute for Employment Studies, pointing to the fact that a significant proportion of awards to successful tribunal claimants goes unpaid, and how bodies such as the Equality and Human Rights Commission often lack the resources or teeth to place sanctions on employers that flout the rules. 

Aileen McColgan QC, a barrister and visiting professor of law at the University of Leeds, believes the UK stacks up “very poorly” in terms of enforcement of rights, with the onus placed on employees themselves to seek redress through stressful and expensive tribunal claims rather than an independent complaints mechanism. “We rely exclusively on an individual enforcement model, whereas in other countries there is more collective regulation including in the form of trade unions and work councils, and legislation is of secondary importance,” she says. 

A single enforcement body was one of the core recommendations of the Good Work Plan, and Player believes the push towards making this a reality will gain ground this year. “The EU and the UK have committed to proper enforcement mechanisms in order to stick to the agreement regarding labour rights, and the UK does not currently have a robust inspectorate regime save for health and safety and pay,” he says. “The pandemic has shown the potential for labour and supply chain abuses, yet if you’re an agency worker, for example, looking to claim your outstanding holiday pay, it’s up to you to take action.” Brown agrees: “There needs to be a push towards more collective responsibility – if you’re not a member of a union, [taking action] can seem impossible as the processes are so complicated and you need to be reasonably clued up. The pandemic has highlighted the need for more intervention, not less.” 

HR professionals can often feel stuck in the middle between the need to comply with employment legislation and pressure for their organisation to remain flexible, particularly in such a volatile labour market. A recent piece of research by the CIPD on employment status found that many HR stakeholders appreciated the option to employ someone as a ‘worker’ on a flexible or lower-cost basis while still recognising they should have basic employment rights, despite the confusing nature of the legislation on this. “The majority of interviewees felt the desired improvement in job quality, earnings and security for low earners would be better addressed by improving protection and providing some benefits for gig workers (by state and/or employer programmes),” said the report. “In tandem, this could be supported by increasing the flexibilities and by extending and better applying the rights already available within employed status, to maintain and enhance the UK’s labour market flexibility and competitiveness.” 

CIPD public policy adviser Gerwyn Davies says this delicate balance will need to be maintained as organisations cope with the dual impact of Brexit and the pandemic. “HR needs to ensure that this is not a divisive tension, especially in its response to the acute cost pressures many are currently under,” he says. “Encouragingly, the evidence suggests that employers are handling their response to the downturn in a sophisticated and flexible way. We know, for instance, that many are employing a variety of tactics, such as introducing pay freezes and reducing hours to help keep a lid on costs rather than opting for redundancies.”

Looking towards the longer term, there are several areas policymakers could choose to change that would not threaten the stability of the UK’s cooperation agreement. “There are some areas of dissatisfaction,” says Richard Fox, senior partner in the employment team at Kingsley Napley. “One is the issue of uncapped compensation in discrimination claims. If it’s unfair dismissal, you’re limited by statute as to what you get, but with discrimination you’re not.” This can lead some claimants to tie in discrimination or whistleblowing, for which the compensation is also uncapped, to dismissal claims, he adds.

Kerry Garcia, head of employment, pensions and immigration at Stevens & Bolton, predicts we are more likely to see minor changes to existing rights, such as how holiday pay is accrued. “For example, under EU law certain overtime and commission payments must be included when calculating holiday pay. It may be that this changes in the future so that only basic pay is taken into account, assuming that a change of this nature would not affect trade or investment,” she explains. 

Garcia also thinks we could see changes to agency worker regulation and rules affecting employee transfers. “It is possible that laws protecting agency workers and certain laws in relation to TUPE transfers may be reformed too (such as changes to make it easier for employers to harmonise terms following a TUPE transfer, which is not permitted under EU law),” she adds. “This assumes that such changes are not significant enough to impact trade or investment and so breach the level playing field provisions.” CIPD research supports this: more than half (56 per cent) of respondents to a recent survey felt that the Agency Workers Regulations should be reviewed. 

Working time could be another area of focus: a CIPD survey found that almost four in 10 respondents felt regulations brought about by the European Working Time Directive were “too prescriptive and impede flexibility in the workplace”, compared with 20 per cent who disagreed. The Working Time Regulations currently demand that employees work no more than 48 hours per week unless they opt out, as well protecting rest periods, paid holidays and protecting night workers – protections that could be weakened over time, according to lawyers. But while we could see reform in these areas that government and business bodies feel could boost productivity and competitiveness, this is not likely to be until the dust has settled after Brexit and there is more optimism about a post-pandemic labour market. Fox adds:  “If they did think about changes to holiday pay accrual and the like they’d need to consult widely, and decide politically if it’s the right moment. It’s not beyond the government to challenge its commitments to Europe but it’s not likely to do so anytime soon.” 

This year could also throw the spotlight on worker representation. The Brexit deal will require changes to how UK employers deal with European works councils, for one, while a Supreme Court case in May involving Kostal, an automotive parts firm, could see changes to employers’ powers to change terms and conditions. (The company wrote to employees asking them to accept a pay deal in 2015, but union Unite has argued this is unlawful.) “The pandemic has shown unions’ objections to companies firing and rehiring employees, or attempts to unilaterally change terms and conditions. This could have an impact on companies’ ability to change terms in a unionised environment,” says Player. 

On the issue of worker status, a judgment is still awaited in the landmark case against Uber, which could change the employment landscape if the Court of Appeal judgment that drivers should be considered workers for the purposes of holiday pay and minimum wage is overturned. 

For the short term though, any potential changes to employment rights are theoretical and speculative – what Davies describes as “a modest watering down rather than a bonfire”. Which, for a profession that has never worked harder than in the past 10 months, will come as a welcome relief. 

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