Brexit by now has become a household term. In July, I outlined the exit process and the possible options for the UK’s future trading relationships with the EU and other nations. Last week, I began this two-part series, noting the UK will have to devise new rules for a future as an independent trading nation, discussing the ramifications on immigration. Here, I discuss how Brexit applies to might impact employment law, data protections and restrictions on supplying recruitment services.

Employment Laws. Since 1997 EU legislation has led to UK laws on working time and paid holiday; rights for fixed-term, part-time and agency workers; family leave; transfers of undertakings; collective redundancies; information and consultation with employees; and equality rights.

Many of these rights are now embedded within workplace culture and any government would face considerable opposition to their removal. However, that is not to say that those laws would not be subject to some change. For example, the European Court of Justice in a recent decision on the approach that employers across the EU should take to the calculation of holiday pay, concluded that workers should be compensated for results-based commission. For sales-based roles this adds unplanned costs to the personnel budget, and adds both cost and complication to the administration of holiday pay. Without the supremacy of the European Court of Justice overseeing the interpretation of paid leave law in line with the Working Time Directive, the UK government could amend the Working Time Regulations to limit holiday pay to basic salary, a move which would be popular with employers.

Specifically in relation to contingent workers, the Agency Workers Regulations could be repealed altogether, or amended. The Agency Workers Directive took at least 10 years of negotiation amongst EU member states. As a piece of legislation which sought to protect workers across 28 EU countries with wildly differing stages of development within their agency work markets, it legalized agency work in Greece, and lifted restrictions in many other countries, but was seen as an unnecessary burden in the UK, which is the third-largest staffing market, in terms of sales revenue, in the world.

Some potential changes to the legislation could include the exemption of more workers, for example on the basis of income threshold or skill level. The qualifying period of 12 weeks could be extended; and the clunky rules around the so-called “Swedish Derogation,” which exempts agency workers on employment contracts that guarantee pay between assignments, from the rules on equal pay, could be amended in favor of something more workable.

There would inevitably be opposition from unions to any proposals that undermine workers’ rights, but Brexit provides the opportunity to remove some of the administrative burdens attached to an unloved piece of legislation.

Data Protection. The UK currently has a light-touch approach to enforcement of data protection laws, compared with some other European nations. This lack of consistency has lead the EU to adopt the General Data Protection Regulation, which will harmonize the regulatory system with more stringent rules in 2018.

While the UK may wish to retain its current regime, the UK laws will need to be sufficiently robust to satisfy the EU that they provide the same level of protection for EU citizens as the General Data
Protection Regulation. Otherwise, businesses will need to adopt alternative measures, such as binding corporate rules or model contract terms when transferring data across borders. Alternatively the UK will have to agree to a similar regime to that of the EU-US Privacy Shield, which may simply add another layer of bureaucracy for businesses to comply with.

Restrictions on Services. When the Labour government rewrote the Conduct of Employment Agencies and Employment Businesses Regulations (“the Conduct Regulations”) in 2003, they introduced complex restrictions on the ability of employment businesses in the UK to charge so-called “transfer fees” to clients for employing temps directly or moving temps from one staffing supplier to another. The provisions of Regulation 10 have proved largely incomprehensible to most people ever since. In circumstances where the balance of power lies with the client rather than the staffing supplier, these provisions have been manipulated by clients to avoid paying such fees at all.

The justification for maintaining this curtailment, in the recent review of the Conduct Regulations, of what should be a commercial arrangement between two businesses, was that the EU’s Agency Workers Directive (AWD) required member states to “ensure that any clauses prohibiting or having the effect of preventing … an employment relationship between an agency worker and a user undertaking should be null and void” save that temporary agencies may receive “a reasonable level of recompense for services rendered to the user undertaking”.

It is to be noted these restrictions predated the AWD by five years, and the 2016 amendments were expressly introduced to “reduce certain regulatory burdens” on staffing firms. So given the only justification for Regulation 10 would disappear with the UK moving beyond the reach of the AWD requirements, this would be an opportunity for the staffing industry to lobby government to remove this particular regulatory burden.

In reality, no one can predict at this stage how the legal landscape will look for the contingent workforce sector once the UK achieves its “independence” but businesses should be alert to possible changes in these areas of the law and plan accordingly.