Introduction

Employment law in the UK is derived mainly from Acts of Parliament and case law. European law became a further source after 1973 when the UK joined the European Economic Community (subsequently the European Union) and the impact of the EU on employment regulation grew considerably when the UK joined the Social Chapter of the Maastricht Treaty in 1997.

The UK formally left the European Union on 31 January 2020. Negotiations then took place for 11 months, resulting in an agreement about how the future relationship between the UK and the EU would be managed. The agreement contains a ‘non-regression’ arrangement as far as employment law and workers’ rights are concerned. In practical terms this means that as of 2021 the UK is no longer bound to follow EU law in the field of employment, but has agreed not to reduce the level of existing social protection in such a way as to distort competition.

This factsheet for CIPD members explains the EU’s impact on UK employment law and how EU social policy is made by the Council of Ministers and the EU Parliament. This then becomes directives and regulations, which must become part of member states’ national laws. It describes the enforcement role played to date by the European Court of Justice (ECJ) and how this will change as a result of the UK’s departure from the European Union.

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The UK left the European Union on 31 January 2020 following the European Union (Withdrawal Agreement) Act 2020 being passed by Parliament on 23 January 2020. The UK then entered a transitional period ending on 31 December 2020 during which negotiations to conclude the EU-UK Trade and Cooperation Agreement took place. This agreement covers all formal aspects of the future relationship between the EU and the UK. It contains a comprehensive free trade arrangement as far as goods are concerned and a range of institutional arrangements to govern its practical operation. It has a short passage on employment rights which represent a compromise between the two sides’ opening negotiation positions. The relevant section of the agreement is Article 6.2. The key paragraph says:

“A Party shall not weaken or reduce, in a manner affecting trade or investment between the Parties, its labour and social levels of protection below the levels in place at the end of the transition period, including by failing to effectively enforce its law and standards.”

This is, in effect, a ‘non-regression’ arrangement. From the UK’s point of view (Northern Ireland excepted) it means that while existing European employment regulation will no longer have to be applied in the UK from 2021, there can be no reductions in the level of protection that currently exist so significant that they create an unfair advantage to trade or the attraction of investment.

Specific regulations that have a European origin can be amended in the future, but not in a way that would distort fair trade. Relatively minor amendments might thus be made, for example, to the Working Time Regulations, but it would not be possible to repeal them altogether or to make significant changes that would give the UK an unfair advantage when competing economically with the EU. The same is true of existing enforcement mechanisms. The agreement commits both parties to not reducing their effectiveness as a means of gaining a competitive advantage over the other.

At one stage during the negotiation of the trade agreement, the EU made it clear it was seeking a position of ‘dynamic alignment’ in respect of employment rights whereby the UK government would be obliged, as part of the agreement, to give effect to all future EU employment regulations and that failure to do so would result in the erection of punitive tariffs by the EU ahead of any formal arbitration process. No such clauses appear in the final agreement. The UK will thus not be obliged to mirror future EU employment legislation.

The agreement makes it clear that after 31 December 2020, with the exception of some discrimination laws in Northern Ireland, the European Court of Justice no longer has any constitutional role in the UK. No judgments it makes in the future will apply in the UK and there will be no obligation for the UK courts to follow these precedents. They may choose to do so, but future ECJ rulings will be ‘persuasive precedents’ and not, as formerly, ‘binding precedents’ which the UK, like all member states, has had to follow.

While not covered in this agreement, the EU Withdrawal Act 2020 had already determined that existing ECJ rulings will apply in the UK unless and until the Supreme Court decides to alter any precedents when ruling on a relevant case.

The Trade and Cooperation Agreement allows for a system of arbitration to apply if either side breaches any of its terms – including those relating to employment rights. The arrangements here are complex but they involve an initial consultation phase, lasting 30 days, during which diplomats will try to settle the matter in dispute. If this fails, there is the possibility of an appeal to a body known as ‘the Partnership Council’ which will adjudicate. The council will contain equal numbers of expert representatives from the UK and the EU, with a neutral chair appointed from another country. The council will then rule on whether a distortion in the terms of trade exists and whether tariffs can be imposed to rectify the imbalance.

What all this means in practice is that, for the foreseeable future, all existing employment law with a European origin or which has been an area of European competence will remain on the UK statute book. In other words, nothing will change in the short term.

In the longer term, it’s possible that relatively minor amendments may be made to employment rights and, potentially, some existing ECJ judgments may be overturned or altered. But the agreement precludes any radical change of a nature that would potentially give the UK a competitive advantage when trading with the EU.

Existing, core employment rights will not therefore be diluted.

Over time EU and UK employment rights will start to diverge as new regulations are introduced by one side or the other. UK law will, however, no longer change as EU law changes and new EU employment rights will not apply in the UK any more than new UK employment rights will be followed in the EU. There will also be divergence over time in court judgments. In the past the ECJ has sometimes overturned rulings of the UK Supreme Court in employment cases. This will no longer happen. The Supreme Court in the UK will be the final court of appeal on all matters, including existing employment rights that have an EU origin.

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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, already being introduced in the UK at the time. As the EEC evolved into the European Union (EU), the scope of European employment law expanded considerably and eventually covered 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.
  • ata protection.
  • Information and consultation.
  • Part-time and fixed-term employees, and agency workers.
  • Family-friendly rights.

New EU labour law sometimes required Parliament to amend existing UK 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 had the UK not been an EU member.

European law is derived from three principal sources: EU directives, treaties and regulations.

Directives

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 do this and the amount of time in which they have to do it varies, depending on the significance of the change.

For example, member states had three years to implement the Equal Treatment Framework Directive (2000) but 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 for sexual orientation, belief and age discrimination. In practice, the UK sometimes missed the deadline dates by several months, as did other countries.

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 the Agency Workers Regulations 2010 on 1 October 2011 (Northern Ireland’s regulations came into force on 5 December 2011). These regulations are a good example of the flexibility member states are given over directives’ implementation. They were drawn up by a Labour government and the subsequent government - the Conservative/Liberal Democrat coalition - considered making them less restrictive, on the grounds the previous government had gone much further than compliance required. In the event, however, the regulations were implemented in their original form.

Once the deadline for implementing a directive has passed, it is directly enforceable against public service bodies (technically ‘emanations of the state’), such as the NHS in the UK, in court actions. The way a directive has been implemented can also be challenged in the courts. In 2007, for example, the then Equal Opportunities Commission effectively forced the government to bring forward the Sex Discrimination (Amendment) Regulations 2008 extending sexual harassment and maternity leave rights on the grounds these were needed to comply fully with the sex discrimination directives.

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.

Governments can amend employment regulations deriving from EU directives provided the basic requirements of the original directive are still met. For example, the UK’s changes in 2014 to the TUPE regulations (which protect employment rights in business transfers) go further than is strictly required by the EU Acquired Rights Directive.

Treaties

The EU’s constitutional powers are set out in treaties negotiated by member governments and ratified by national parliaments:

  • The Treaty of Rome 1958.
  • The Treaty of Maastricht, which came into effect in 1993.
  • The Treaty of Lisbon, which came into effect in December 2009.

The legal principles within a treaty can be directly enforceable in national courts from the date it comes into effect, provided they are 'clear and precise, unconditional and unqualified' and are not subject to any additional EU legal measures.

Only one major employment-related treaty article has had direct effect in the UK: Article 157 of the Treaty of Rome, enshrining the principle that men and women should be paid equally for work of equal value. 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 doing a wholly different kind of job in her organisation as a comparator when claiming their jobs are of equal value, and that men can do the same.

Regulations

European regulations also have direct effect. They can be used to amend existing law in relatively minor ways, and hitherto have mainly concerned health and safety. The exception is the General Data Protection Regulation (GDPR), applicable in the UK from 25 May 2018. This replaced the 1995 Data Protection Directive and ushered 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 government committed to amending the UK’s Data Protection Act 1998 in line with the EU regulation prior to Brexit, and we now have a new Data Protection Act 2018.

European directives in the employment field usually start out as proposals from the 'social partners' (trade union and employer association representatives meeting at European level) in dialogue with the European Commission. The proposals are then discussed in the principal EU law-making body, the Council of Ministers, and once a draft directive has been agreed, are debated and voted on in the European Parliament.

Council of Ministers

The council, which meets in private, has one representative from each member state, normally an employment minister in the case of employment-related directives. A draft directive is debated in a series of meetings held over a number of months and, in some areas, require unanimous support. 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.

It was through this mechanism that successive UK governments managed to retain the 'opt out' from 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 was periodically been put under considerable pressure to abandon it.

European Parliament

Members of the European Parliament (MEPs) are directly elected to serve five-year terms. Until 31 January 2020, the UK sent 73 MEPs to sit in the Parliament. The EU 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'. 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.

National parliaments implement EU directives, and in the vast majority of cases enforcement is in national courts. In the case of employment law, most EU measures have been enforced via the employment tribunal system. In those areas in which the EU has powers to legislate, hitherto appeals have been made on questions of legal interpretation beyond the UK Supreme Court to the ECJ. Since Brexit, the Supreme Court’s decision is final.

The European Court of Justice (ECJ)

The ECJ sits in Luxemburg and each Member State nominates a judge. Most of the work is carried out by panels of judges, assisted by Advocates General, who review all the cases before they are heard by the court. ECJ rulings are binding on all member states’ national courts and cannot be appealed.

Over the years the ECJ has made many highly significant rulings in UK employment law cases. For example, the court ruled in the case of Barber v Guardian Royal Exchange Group [1990] 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 [2009], 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.

Useful contacts

GOV.UK - Brexit 

LEGISLATION.GOV.UK – EU legislation and UK law

EUROPA - official website of the European Union

EUROPA – EU-UK Trade and Cooperation Agreement - A new relationship, with big changes

EU-UK Trade and Cooperation Agreement [full version], December 2020

UK-EU Trade and Cooperation Agreement Summary, December 2020

European Union law - an EU case law archive, and summaries of EU legislation

Books

BARNARD, C. and PEERS, S. (2017) EU employment law. 6th ed. Oxford: Oxford University Press.

DAVIES, K. (2019) Understanding European Union law. 7th ed. Abingdon: Routledge.

FOSTER, J. (2019) Foster on EU law. 7th ed. Oxford: OUP.

MORANO-FOADI, S. and NELLER, J. (2020) Fairhurst, Morano-Foadi and Neller's Law of the European Union. 13th ed. Harlow: Pearson Education.

Journal articles

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.

Stephen Taylor

Stephen TaylorSenior 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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