Counting down to the end of EU law in the UK
With less than a year to go until EU law is due to be permanently severed from UK law, we consider how employers can prepare for the incoming Retained EU Law (Revocation and Reform) Bill.
The Retained EU Law (Revocation and Reform) Bill (the Bill) started life as the Brexit Freedoms Bill and is designed to consolidate the impact of Brexit by removing what some have dubbed EU “red-tape” from the UK statute books. Despite the Bill being highly controversial, it has progressed to the House of Lords with no amendments being made to its substantive provisions.
Sunsetting EU law
The principal effect of the Bill is to bring an end to the operation of EU law in the UK and the date for this to take effect is on 31 December 2023. For employment law, the impact of this will be seismic: removing the foundation on which the last 50 years of employment laws have been built.
All EU-derived secondary legislation will expire under the Bill unless the government takes positive steps to preserve it. This means that key pieces of legislation including TUPE, the Working Time Regulations 1998 and the Agency Workers Regulations 2010 will be revoked, absent further action. (Note that primary legislation, such as the Equality Act 2010, is not in scope of the Bill.)
In addition to the expiry of regulations, the Bill will also remove the interpretative principles used by courts and tribunals to make sense of rights derived from or shaped by EU law. The effect of removing these principles is likely to undermine many important judgments of the European Court of Justice and the UK appeal courts on which employers and employees currently rely.
No bonfire of worker rights?
The government has made a number of clear, express statements that worker rights will not be affected by the Bill. However, the Bill does not contain a carve out for employment rights. Without positive action by the government, key employment laws will expire on 31 December 2023.
The Bill gives government ministers the power to preserve legislation and it may be that the intention is to retain employment laws in this way. However, this will still not have the effect of preserving the status quo. The removal of EU interpretative principles will immediately call into question the relevance of many important domestic and ECJ cases which have shaped our understanding of employment rights. The principles contained in these cases will be open to challenge and until such time as these challenges are litigated, employers will be left in a position of uncertainty.
How should employers prepare?
It is almost certain that if the Bill is passed in its current form, employment laws would undergo a period of significant confusion. What should employers be doing to try and mitigate the impact of the Bill? We set out some suggestions below.
TUPE and outsourcing arrangements
Service providers and other employers whose businesses are reliant upon outsourced or insourced services will be particularly exposed. Employers should begin an audit of any outsourcing agreements due to terminate on or after 1 January 2024. It is unclear whether TUPE rights and obligations will exist once the Bill takes effect, and consequently whether a change in service provider would still trigger the transfer of employees.
The termination provisions of most outsourcing agreements will be premised on the existence of TUPE rights. Employers should consider whether these provisions would still function effectively if they were no longer underpinned by TUPE. If not, it is worth considering whether there are steps that could be taken to mitigate the impact. For example, could the agreement be terminated prior to the end of 2023 while there is still certainty as to which party will take liability for employees? Alternatively, where the sunsetting of TUPE would result in the outsourced employees remaining with the employer, employers should evaluate the likely costs of absorbing or making employees redundant.
The right to 5.6 weeks of annual leave is contained in most contracts of employment and, in the majority of cases, employees could enforce their contractual right to holiday rather than needing to rely on the Working Time Regulations 1998. However, some of the more complex rights and obligations relating to annual leave, such as how to calculate holiday pay or the rules on carry over of leave will be at high risk of being a casualty of the Bill. These rights were conferred by EU case law, rather than being derived from legislation. Employers should consider how such rights are reflected in their contracts, policies and practices and consider what flexibility they would require were the status of these rights to change.
One of the key rights under the Agency Workers Regulations 2010 is the right to parity of terms after performing a 12-week assignment. Were the AWR to be sunsetted under the Bill, this obligation would cease to bind employers acting as hirers and temporary work agencies. Employers who use agency workers may wish to consider how the obligation is currently expressed in the umbrella agreements they have with temporary work agencies and in particular whether the agreement gives them sufficient flexibility were their obligations to agency workers to change.
For more information on the Bill, see our blog Goodbye EU law