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The United Kingdom formally left the European Union on 31 January 2020. Under the terms of the UK-EU Withdrawal Agreement, the UK is currently in a transition period until 31 December 2020. During this time, EU law remains binding on the UK. Once the transition period has ended, the UK will no longer be bound by EU law.

The UK and the EU are currently negotiating a future relationship agreement. If an agreement is reached before the end of the transition period, the UK will be bound by the terms of that agreement, which will likely include provisions on employment standards. If an agreement is not reached, the UK will be able to amend or repeal EU-derived workers’ rights without breaching international law.

Current position: EU and UK employment law

A significant portion of UK employment law is derived from and grounded in EU law. Most EU workers’ rights are set out in directives and are implemented in the UK through primary or secondary legislation.

By virtue of the European Communities Act 1972 (ECA), wider principles of EU law also have effect in the UK. This includes the ‘principle of supremacy’ which says domestic law must be disapplied if it conflicts with EU law that has direct effect. It also includes the ‘interpretative obligation’ which means that courts must interpret domestic law in a way that is compatible with EU law. UK courts are bound to follow the judgments of the European Court of Justice (ECJ) and can also refer to the ECJ questions relating to the interpretation of EU law.

In a number of cases, EU law has introduced new rights into UK law, such as the right to holiday pay or the protection for agency workers. In other cases, EU law has extended rights that already existed in UK law, such as the right to equal pay. In a number of areas, the UK has chosen to go further than what is required by EU law. For example, the UK provides 39 weeks of paid maternity leave compared to the 14 weeks required by EU law.

Retained EU law

The European Union (Withdrawal) Act 2018 provides that most of EU law that has effect in the UK on 31 December 2020 will be saved as “retained EU law”. This means that secondary legislation, like the Working Time Regulations 1998, will still have effect, as well as primary legislation that implemented EU law, like the Equality Act 2010.

The principle of supremacy and the interpretative obligation will continue to apply to UK legislation passed or made before the end of the transition period. UK courts will also be bound to follow judgments of the ECJ issued before the end of transition, although the Supreme Court, the Court of Appeal and other appellate courts have been given the power to depart from ECJ judgements by applying certain tests.

The EU Charter of Fundamental Rights will not be saved as retained EU law.

EU-derived domestic legislation keeps its status as either primary or secondary legislation. This means that the Working Time Regulations 1998 can be amended by new secondary legislation but the Equality Act 2010 can only be amended by primary legislation.

What will happen if there is no deal?

If the UK and EU do not reach a future relationship agreement by 31 December 2020, from 1 January 2021 the UK will no longer be bound to EU employment standards. There will be no immediate change as existing EU employment rights will be saved as retained EU law. However, Parliament could amend or repeal retained EU workers’ rights. The UK would be under no obligation to implement new EU employment directives.

Employment law is a reserved matter for Scotland and Wales. As such, decisions about amending or repealing retained EU workers’ rights would be for the UK Parliament.

Employment law is devolved in Northern Ireland, meaning it will be for the Northern Ireland Assembly to legislate to amend or repeal retained EU workers’ rights. However, Article 2(1) of the Protocol on Ireland/Northern Ireland in the Withdrawal Agreement requires Northern Ireland to continue to apply EU equality law. The European Union (Withdrawal Agreement) Act 2020 provides that the Northern Ireland Assembly does not have the competence to legislate incompatibly with Article 2(1).

What will happen if there is a deal?

The Political Declaration on the framework for the future relationship says that a future UK-EU agreement should contain a ‘level playing field’ (LPF) clause that ensures both parties uphold common employment standards in force at the end of transition.

The EU’s draft text for the future UK-EU agreement contains a clause that would prevent both sides from reducing their employment standards below ‘common standards’ at the end of transition. It also contains a ‘ratchet clause’ that says that if both sides choose to raise their employment standards in the future, they cannot reduce their standards below the new common baseline.

The UK’s draft text, which is heavily based on the EU-Canada trade agreement (CETA), contains a clause that prevent both sides from waiving or failing to enforce their own employment standards in order to gain a trade advantage. The parties would “recognise that it is inappropriate” to reduce standards but this is a soft, non-binding, obligation. The parties would “seek to ensure” high levels of protection in the future but, again, this would be aspirational and non-binding.

Reports in the media suggest that the level playing field is one of the key remaining issues to be settled in the negotiations. A key point of contention appears to be an EU demand that if one side raises their labour standards in the future but the other side doesn’t, the side that has raised its standards can take reciprocal action. The reports suggest that the UK has agreed to such a provision in principle although discussions are ongoing about when a party would be allowed to take reciprocal action and what mechanisms there would be for determining what action they can take.

It is not possible to provide a concrete assessment of the impact of a deal until one is agreed and its text is published.

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