After the political upheaval of the autumn, the Government is pressing ahead with its “Brexit Freedoms Bill”, officially known as the Retained EU Law (Revocation and Reform) Bill. If passed, it will bring the most profound changes to employment law in decades.
The Bill essentially reverses the position created by the EU Withdrawal Act, which preserved the status quo on EU derived law, creating a “snapshot” of the law as it existed at 31 December 2020. This was done to avoid a legal vacuum when the UK left the EU. EU laws could then be scrapped or amended as and when Parliament saw fit.
Instead, under this Bill, the default is that all “secondary” legislation derived from EU law and retained EU direct legislation will be revoked at the end of 2023 unless it has been preserved, restated, reproduced or replaced before then. In other words, legislation will automatically be scrapped unless a positive decision is made to keep it. This secondary legislation includes the Working Time Regulations, TUPE Regulations, and Regulations affecting part time, fixed term and agency workers among others.
Whilst ministers have suggested that there is no intention to scrap key workers’ rights, given the sheer numbers involved (over 2,400 according to the Cabinet Office’s Retained EU Law Dashboard), there is obvious concern that there is insufficient time available to properly consider what legislation should be preserved, restated, reproduced or replaced. There is real possibility that bad law will be created, or something will be inadvertently missed, because there simply isn’t time to consider it properly and/or consult with stakeholders over the impact of any proposed changes.
Further, the effect of the Bill is not limited to revoking secondary legislation. The Bill also abolishes retained EU law, the supremacy of EU law, the general principles of EU law and replaces the test for higher courts departing from both retained EU and domestic case law. It also allows lower courts and Tribunals to refer questions of interpretation to the higher appeal courts to see if the old EU or domestic case law should be followed or not.
The combined effect of this will allow large employers, groups of employees and unions to seek to reopen case law interpreting EU derived laws. This won’t just be those in secondary legislation but, for example, discrimination laws contained in the Equality Act or duties to consult in redundancy situations contained in the Trade Union and Labour Relations (Consolidation) Act. The effect on all businesses will be legal uncertainty as those cases find their way through an Employment Tribunal system with a considerable existing backlog, and then the appeal courts. Indeed, this encouragement to challenge previously settled law could exacerbate the problem and clog up the courts for years to come.
To take just one example, EU case law requires workers to be paid “normal pay” whilst they are on holiday. This principle has been applied to both commission and overtime: holiday pay should reflect this and not just basic pay. These cases were controversial: many complain that they create an administrative headache for employers having to work out the holiday pay due to staff with fluctuating income.
If the replacement Working Time Regulations simply follow the current wording, which does not explicitly require “normal pay”, employers will be left with a dilemma: carry on paying “normal pay” during holiday periods, or follow the letter of the law and pay only basic salary?
The dilemma is a difficult one: no employment lawyer will be able to say for certain how an Employment Tribunal would deal with a claim that holiday pay had been insufficient because it did not include commission or overtime. Will the Tribunal follow the old case law, or will it refer the matter to the appeal courts to see if it should depart from these EU principles? What will the appeal court do? The only thing employment lawyers will be able to say with any certainty is that it will take considerable time and cost a lot of money to get a definitive answer.
The uncertainty is likely to last years as cases wind their way through the Employment Tribunals and appeal courts. Getting it wrong could be very expensive: employers could face claims from multiple staff covering long periods. In the alternative, one business could take the decision to maintain “normal pay” during holidays whilst its competitors might not, and have lower costs as a result enabling them to undercut their rivals.
Changing holiday pay practices may well of course also require changes to contracts of employment – an administrative hurdle and potential source of dispute with staff. Varying contractual terms is often fraught with difficulty, requiring consultation and possibly even fire and rehire if agreement cannot be reached.
In a conversation I had about the Bill with an HR advisor, she described it as the Millennium Bug for employment law. Those old enough will remember the concern that we would wake up on 1 January 2000 to find computer systems unable to function as two digit dates meant they were unable to distinguish 1900 from 2000. Huge efforts to reprogramme systems averted the feared Y2K disaster. Without similarly huge efforts to audit and then mitigate the effect of the Bill with replacement legislation, we face the prospect of waking up on 1 January 2024 with seriously malfunctioning employment law.
We at the Employment Lawyers Association are so concerned about the impact of this Bill that we signed a joint letter with the TUC, IOD, CIPD and others calling for it to be withdrawn. This is unusual for an organisation that prides itself on its apolitical approach. Such is our concern about the potential impact of this Bill.
If the Bill is passed, we fear a period of unprecedented change and uncertainty for employment regulation causing confusion and disruption for all employers.