In or out? Brexit – the impact on employment

Wednesday 1 June 2016

No one can predict the outcome of the referendum and the uncertainty surrounding a potential ‘Brexit’ has an impact on how we consider employment law and the economy. But to what extent?

Some surveys suggest that employers are already exercising caution. The latest Report on Jobs from KPMG and REC found that growth in permanent hires has slowed as companies take a ‘wait and see’ approach, while demand for temporary staff and interims is growing at a much sharper rate.

In addition, the consequences for employment law of a ‘Brexit’ could be mixed. The Working Time Regulations, for example, may dictate a 48-hour working week, but they also provide a generous paid holiday allowance of 28 days. The TUC claimed recently that “around a million workers are at high risk of being forced to work excessive hours if the UK leaves the EU”, but many employers include opt-outs from the 48-hour week in their contracts already.

“The majority of rights we get from the EU are enshrined in UK law – these would need to be repealed and stripped away, and I can’t imagine any government doing that,” says Martin Warren, practice group head for employment at Eversheds. Indeed, the direction of travel in recent years has frequently been towards offering greater protection to workers than EU law requires – shared parental leave and forthcoming grandparental leave, for instance – so there would be little political or social appetite for this to change.

The government has said if the public votes ‘leave’, it would invoke Article 50 of the Lisbon Treaty, which effectively gives the EU notice of the UK’s intention to withdraw. A period of at least two years where the UK would negotiate its new relationship with the EU would then follow – so it’s unlikely anything dramatic would happen immediately. “Employment law will be fairly low down the list of priorities at first,” says David Speakman, counsel at law firm Linklaters. “There are something like 53 trade agreements with markets outside of the EU that the UK may have to renegotiate. We’ll have to work out how our financial institutions interact with those in the union, sort out how removing grants will impact on certain industries – lots of things are likely to be on the political agenda before it turns to employment law.”