As negotiations for the UK’s exit from the EU progress, the CIPD will continue to provide resources to support your planning
Employment law in the UK is derived from a number of sources including Acts of Parliament and decisions on points of law made in the courts. European law became a further source after 1973 when the UK joined the European Economic Community, which subsequently evolved into the European Union. The impact of the UK’s membership of the EU in employment regulation grew considerably after 1997 when the Social Chapter of the Maastricht Treaty started to apply. Until negotiations on the nature of the relationship between the EU and the UK after Brexit are complete, the extent to which European employment law will apply in the UK in the future is unclear. A variety of possible outcomes is foreseeable.
This member-only factsheet explains the basis for the EU’s impact on UK employment law to date, and suggests how European employment law may continue to play a role in the UK post-Brexit. It maps out the process whereby EU social policy is made by the Council of Ministers and the EU Parliament, and is then translated in to directives and regulations, which must then become part of each Member State’s national laws. It describes the enforcement role played to date by the European Court of Justice and suggests how this might change post-Brexit.
Our research on employment law shows that, in a number of ways, the rhetoric around employment law deriving from Europe doesn’t match the reality. While much has been said and written, particularly before the June 2016 referendum, about the need to roll back important aspects of our employment law framework to free businesses of red tape, it’s clear that businesses recognise the value of employment protection.
Many of our employment law regulations exist to protect workers against exploitation, ensure they are paid a fair wage and are not subject to discrimination in the workplace. They can also help improve people management practices. Even the more controversial aspects of employment law, such as the Working Time Regulations, have broad support from UK businesses. On the whole, the UK enjoys the benefits of employment laws which achieve a balance between worker protection and business flexibility.
As the future of employment regulation is debated while Brexit negotiations continue, and the UK’s withdrawal from the EU draws nearer, it’s vital that we don’t ‘throw the baby out with the bathwater’ by making sweeping changes to our employment legislation that businesses haven’t asked for and which may remove some important protections for people working in the UK.
Brexit and EU employment law
As a result of the referendum held in June 2016, the UK is currently in the process of negotiating its departure from the EU. The expected date at which the UK will cease to be a member is 29 March 2019, but it is likely that this will be followed by a transition period of around two years, in which most existing regulations will continue to apply as well as existing enforcement arrangements. At present it would seem likely that new European regulations which are introduced during the transition period may well also apply in the UK, even though UK government representatives will not have participated in their creation. Visit our Brexit hub for resources and support for HR professionals as the negotiations develop.
What happens after the transitional period is unclear and will be the subject of ongoing negotiations, but it is possible to envisage a number of possible future scenarios applying in the 2020s.
Scenario 1: No substantive trade deal is agreed
In this scenario negotiations to agree a close, future partnership between the UK and the EU fail and Brexit occurs without any agreement being made regarding employment regulation. Subsequent trade between the UK and the EU would take place under World Trade Organisation (WTO) rules which say nothing about employment regulations. Parliament and, where relevant, the devolved administrations in Scotland, Wales and Northern Ireland would then be empowered to repeal or amend existing employment law which originates in the EU. Rulings of the European Court of Justice would no longer be binding on the UK courts and over time we could expect to see considerable divergence developing between EU employment law and that which applies in the UK. It is likely that the UK courts would continue to pay attention to ECJ rulings, but they would be considered advisory and there would be no obligation to follow them as is presently the case. In this scenario future new EU employment law would not apply in the UK.
Scenario 2: A future trading relationship is agreed
This is the government’s preferred outcome. It would mean that future trade between the UK and the EU is carried out according to a new set of rules that would be negotiated between now and the end of the transition period. Opinion is divided about how far employment regulation will form part of any such trade agreement. Existing trade deals between the EU and other countries, such as Canada, Japan and South Korea, do not include any harmonisation of employment laws, the agreement merely being that both parties commit to observe International Labour Organisation (ILO) conventions.
It is likely, however, that in order to secure a more comprehensive trade deal than those the EU currently has, the UK would need to agree to a considerably greater level of ongoing regulatory convergence. Otherwise the UK would be in a position to gain what would be seen as an unfair competitive advantage over states that remain in the EU. Moreover, as government ministers have repeatedly stated their commitment to maintaining existing European employment law post-Brexit, writing such a commitment into any future trade agreement would not be politically problematic.
Under this scenario new, future EU employment regulation would not automatically apply in the UK nor would future rulings of the ECJ be binding on the UK courts, but some form of agreement to mirror the European regulatory regime on a voluntary basis for a period might well form a part of the final deal.
Scenario 3: The UK remains in the single market
Advocates of a so-called ‘soft Brexit’ are attracted by the proposition that the UK should leave the EU but remain integrated with it in certain areas including the single market (known as the ‘internal market’ in most EU countries). This is sometimes referred to as the ‘Norway option’ and would involve the UK continuing to trade openly and freely with the EU as it does at present. However, as is the case with Norway, it would also mean that all EU employment regulations would continue to apply in the UK post-Brexit, that new EU employment law would also apply and that the rulings of the ECJ would continue to be legally binding on the UK courts. There would be no UK representation on the ECJ and UK governments would have no say in the drafting of any new laws.
How the EU helped shape UK laws
When the UK joined the European Economic Community (EEC) in 1973, the Treaty of Rome committed member states to enforcing the principle of equal pay for equal work between men and women, but this was already in the process of being introduced in the UK at that time. As the EEC evolved into the European Union (EU), the scope of European employment law has expanded considerably and now covers the following areas:
- health and safety
- transfers of undertakings (TUPE) - rights protecting workers when a business changes hands
- discrimination on grounds of sex, race, ethnicity, national origin, disability, age, sexual orientation and religion/belief
- working time
- data protection
- information and consultation
- part-time and fixed-term employees and agency workers
- family-friendly rights.
New EU labour law has sometimes required Parliament to amend existing laws to bring them into line with the EU. On other occasions, the UK has had to create entirely new employment rights which probably would not have been introduced here if the UK was not an EU member.
How European law is made
European law is derived from three principal sources: EU directives, treaties and regulations.
Most EU employment law derives from directives setting out general principles which member states are then obliged to adopt into national law. Governments have a degree of flexibility in how they 'give effect' to the directive’s principles through national laws. The amount of time in which they have to do this varies, depending on the significance of the change. In practice the UK has sometimes missed the deadline dates by several months, as have other countries.
For the Equal Treatment Framework Directive, for example, member states had three years to bring in laws making sex, race and sexual orientation discrimination unlawful, but they had four years for disability discrimination, and six years for age discrimination. The UK already had well-established national laws covering race and disability discrimination, but new regulations had to be introduced to implement rights protecting against discrimination on grounds of sexual orientation, belief and age.
The Agency Workers Directive was agreed in May 2008 and had to be implemented by 5 December 2011. On this occasion, the UK was ahead of schedule, bringing in regulations on 1 October 2011 (separate regulations on Northern Ireland came into force on 5 December 2011).
National governments have had considerable flexibility over how they give effect to directive principles. Take for example, the Agency Workers Regulations 2010.They were drawn up by a Labour government. The next government (the Conservative/Liberal Democrat coalition) considered replacing them with less restrictive regulations, on the grounds the previous government had 'gold-plated' the directive, going much further than compliance required. In the event, the regulations were implemented in their original form.
Once the deadline date for introducing legislation has passed, a directive is directly enforceable against public service bodies (technically ‘emanations of the state’) such as the NHS. So if a government fails to bring in legislation to implement a directive, or to implement the directive fully, public sector employees can challenge it in the courts.
In fact, the ECJ has found the term 'emanation of the state' includes non-government employees working in corporations providing services under government supervision, such as water companies. In some cases, these employees can rely entirely on the wording of a directive and not on the statute implementing it when pursuing tribunal cases. The same is not true of employees in the private sector.
The government itself can be challenged in court on the grounds that it has failed to implement a directive fully. In 2007, for example, the then Equal Opportunities Commission (EOC) effectively forced the government to bring forward the Sex Discrimination (Amendment) Regulations 2008 extending sexual harassment and maternity leave rights which the EOC claimed were needed for the UK to comply fully with the sex discrimination directives.
Sometimes, governments revisit areas of employment regulation which derive from EU directives and amend them (they can do this provided the basic requirements of the original directive are still met). The Coalition government modified regulations introduced under the previous Labour government which went further in regulating employment practices than was strictly required by the relevant directive. A major example were the changes which took effect from January 2014 to the way the UK’s Tupe regulations operate (the rules that protect employment rights in business transfers derived from the EU Acquired Rights Directive).
The EU’s constitutional powers are set out in treaties negotiated by the 28 member governments and ratified by national parliaments, the most recent being the Treaty of Lisbon which came into effect in December 2009. These amending treaties refer to two so-called 'main treaties' setting out the constitutional arrangements of the EU in detail: the Treaty of Rome 1958 and the Treaty of Maastricht which came into effect in 1993.
The legal principles contained within the articles of a treaty can be directly enforceable in national courts from the date the treaty comes into effect, provided they are 'clear and precise, unconditional and unqualified' and are not subject to any additional EU legal measures. When deciding cases, the courts are obliged to apply the principle in the treaty if it conflicts, or is incompatible, with any existing national laws.
There is only one major employment-related treaty article which has direct effect in the UK: Article 157 of the Treaty of Rome, enshrining the principle that men and women should be paid equally for carrying out work of equal value. The practical effect of Article 157 in the UK has been highly significant.
For example, the UK government was effectively forced to introduce the Equal Pay Amendment Act 1983 after the ECJ ruled that existing UK equal pay law was not fully compliant with the Article. The result was the introduction of the principle that a woman can use a man employed to do a wholly different kind of job in her organisation as her comparator when claiming their jobs are of equal value, and that men can cite women as comparators in the same way.
European regulations also have direct effect and come into effect on a set date. For the most part they are used to amend existing law in relatively minor ways, and have mainly concerned health and safety, such as is the EU regulation on the Registration, Evaluation and Authorisation and Restriction of Chemicals (REACH) on handling hazardous chemical substances which has been phased in over a 10-year period since 2007.
But we now have the EU General Data Protection Regulation, adopted by the European parliament on 14 April 2016, and applicable across all member states, including the UK, from 25 May 2018. This replaces the 1995 Data Protection Directive and ushers in new rights for data subjects, such as the right to be forgotten, and a new requirement for data processors to gain ‘explicit’ consent for processing sensitive personal data. The GDPR is not affected by Brexit, as the government has already committed to amending the UK’s existing Data Protection Act 1998 in line with the EU regulation, and there is with a new Data Protection Bill currently going through Parliament.
How European directives are made
European directives in the employment field tend to start out as proposals put forward by the 'social partners' in dialogue with the European Commission, whose officials oversee the whole law-making process. The term 'social partners' in this context means trade union and employer association representatives meeting at European level. Their proposals are then discussed in the Council of Ministers, the principle law-making body in the EU and, once a draft Directive has been agreed, are debated and voted on in the European Parliament.
Sometimes, however, the Council of Ministers will ask the European Commission to formulate a draft directive, and the European Parliament also has the capacity to initiate new legislation.
Council of Ministers
The next stage in the legislative process, when the Council of Ministers considers the draft directive, is the most important. The Council is made up of one representative from each member state, normally the employment minister in the case of employment-related draft directives. The UK’s chosen delegate will normally be either the Secretary of State or a minister from the Department for Business, Energy and Industrial Strategy.
The Council meets in private to debate the draft directive, usually in a series of meetings held over a number of months. Draft directives in some areas require unanimous support. However, employment legislation is decided by qualified majority voting, requiring a ‘yes’ vote from at least 16 countries representing between them at least 65% of the total EU population. A new directive can only be prevented when a ‘blocking minority’ is formed, consisting of at least four of the member states representing at least 35% of the EU population.
The UK has frequently been involved in trying to form blocking minorities, usually in a bid to water down the practical impact of draft directives so as to make them more ‘palatable' to a sceptical national electorate. This is achieved by doing deals with ministers from other governments who are looking to block different directives that are going to be difficult for them to sell to their electorates.
It is through this mechanism that successive UK governments have managed to retain the provision which permits employers to require employees to 'opt out' of the 48-hour working week limit that is central to the Working Time Directive. No other country in Europe operates the opt-out system and the UK is periodically put under considerable pressure to abandon it. However, ministers always seem to manage to stave off attempts to impose a change on the UK by conceding points to others in different areas and thereby forming an effective blocking minority.
Members of the European Parliament (MEPs) are directly elected to serve five-year terms. The UK sends 73 MEPs to sit in the Parliament. The last elections were held in May 2014. The Parliament can vote down a directive, accept it or, as often happens, accept a directive in principle, but want to see it amended. Where this happens the amended directive is sent back to the Council of Ministers for a 'second reading'. When the two bodies fail to agree about the amendments, negotiation occurs, but ultimately where agreement cannot be reached, the Council of Ministers version becomes law unless the Parliament decides to vote it down completely.
Once a draft directive has been approved both by the Council of Ministers and by the European Parliament, it becomes a full directive and must be implemented in all member states through national legislation.
How European law is enforced
National parliaments implement EU directives, and in the vast majority of cases enforcement is in national courts and through nationally-based enforcement authorities. In the case of employment law, most EU measures are enforced via the employment tribunal system.
If someone has a complaint about, for example, age discrimination, they would take their complaint to an employment tribunal just as they would if their case was based on employment regulations that emanated from the UK. In the case of data protection law, the Information Commissioner’s Office has the key enforcing role, while the Health and Safety Executive (HSE) plays a significant role in the enforcement of health and safety measures with an EU origin.
The big difference between EU law and UK law is that in those areas in which, under a Treaty, the EU has powers to legislate, appeals can be made on questions of legal interpretation beyond the UK Supreme Court to the ECJ, whose decision is final.
The European Court of Justice (ECJ)
The ECJ sits in Luxemburg and each Member State nominates a judge. In practice, it is rare for all 28 judges to sit in judgement over a case at the same time. Most of the work is carried out by panels of 13 judges, assisted by nine Advocates General, one of whom is always from the UK, who review all the cases before they are heard by the court. There is no obligation on the judges to accept an Advocate General's view on how a case should be decided, but this does happen in the majority of cases. ECJ rulings are binding on all national courts and cannot be appealed.
Over the years the ECJ has made many highly significant rulings in employment law, many of which have been UK cases. For example, the court ruled in the case of Barber v Guardian Royal Exchange Group  that employers must equalise occupational pension arrangements for male and female employees and, as a result, occupational pension schemes across the whole of Europe have had to equalise retirement ages and ensure their accrual systems do not favour either sex.
In another case, Stringer v HMRC , the ECJ significantly overturned the decision of the UK courts on appeal. As a result workers now continue to accrue the holiday entitlements they are due under the Working Time Directive when they are off sick. So if an employee is away for a year before leaving, or being dismissed on health grounds, accrued holiday pay has to be paid to them for that year by their employer.
Useful contacts and further reading
EUROPA - official website of the European Union
European Union law - an EU case law archive, and summaries of EU legislation
Books and reports
BARNARD, C. (2014) EU employment law. 5th ed. Oxford: Oxford University Press.
CONWAY, G. (2015) EU law. Abingdon: Routledge.
DAVIES, K. (2015) Understanding European Union law. 6th ed. Abingdon: Routledge.
FAIRHURST, J. (2016) Law of the European Union. 11th ed. Harlow: Pearson Education Ltd.
FOSTER, J. (2015) Foster on EU law. 5th ed. Oxford: OUP.
KACZOROWSKA, A. (2013) European Union law. Abingdon: Routledge.
The influence of EU law. (2011) IDS Employment Law Brief. No 927, June. pp14-19.
The Lisbon Treaty: implications for employment law. (2009) IDS Employment Law Brief. No 891, December. pp18-19.
CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.
Members and People Management subscribers can see articles on the People Management website.
This factsheet was written and updated by Stephen Taylor, with the CIPD viewpoint by Paddy Smith, Senior Public Affairs Officer.
Stephen Taylor: Senior Lecturer in Human Resource Management (HRM), University of Exeter Business School and Chief Examiner for the CIPD
Stephen Taylor is the author/co-author of several HRM books, including the bestselling texts 'Human Resource Management' (with Derek Torrington, Laura Hall and Carol Atkinson) and ‘Armstrong’s Handbook of Human Resource Management Practice (with Michael Armstrong).
He is a frequent speaker at HR conferences and Acas events for employers, and has regularly represented parties in employment tribunals. He also undertakes HR consultancy, tutoring and training work, and previously worked in a variety of HR management roles in the hotel industry and in the NHS.
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