The UK's departure from the EU: what are the implications for employers?

Following the end of the Brexit transition period on 31 December 2020, the UK is no longer required to align itself with EU rules. Future relations between the UK and the EU in certain areas are now governed by the Trade and Cooperation Agreement (TCA) agreed between the parties. 

In this briefing we look at two key areas in which Brexit may impact on employers: the freedom of movement of employees and potential changes to UK employment laws.

Freedom of movement of employees

Up until the end of the Brexit transition period on 31 December 2020, the principle of free movement applied so that EEA and UK nationals were free to travel across the UK and EEA without restriction. That has now ceased and the UK has instead introduced a new(-ish) points-based immigration system (which will now encompass EEA nationals) for those looking to live, work and study in the UK. The implications of this are discussed below.

EEA citizens already in the UK at the end of 2020

It is important to consider the position of EEA nationals who were already living and working in the UK by the end of 2020. Many employers will have such individuals on their staff. These employees may be eligible to apply to the Home Office for either "settled" or "pre-settled" status, entitling them to carry on living and working in the UK. More information about the position of EEA citizens in the UK is given in the following table.

Applications for settled or pre-settled status can be made online and the process is reasonably straightforward. Many employers will already have identified which of their staff need to apply and offered them help and support in doing so. Those who have not yet done this should do so now if they wish to avoid affected employees failing to make valid applications by the deadline, thus jeopardising their right to go on working in the UK.

As shown in the table above, EEA nationals must have been continuously resident in the UK for five years in order to obtain settled status. Periods of absence from the UK of up to six months in any rolling 12 month period are permitted and an absence of up to a year may be allowed if it is for an "important reason", such as serious illness. However, a break that is longer than permitted will stop the clock running on the period of continuous residence. Given that home working has become the norm during the pandemic, it is possible that an EEA national may have returned to their home country for a substantial period and this could have an impact on continuous residence. Government guidance currently indicates that an important reason permitting an absence from the UK of between six and 12 months would include certain Covid-related scenarios where the individual has been forced to remain overseas because, for example, there have been travel restrictions or they have been in quarantine. It is important for employers to have oversight of absences from the UK to avoid difficulties with meeting the continuous residence requirements which could impact an employee's right to continue living and working in the UK.

There are provisions within the scheme to allow family members of EEA nationals who hold pre-settled or settled status to apply for status and to join their EEA relatives after 30 June 2021, although eligibility criteria will apply.

The points-based immigration system

The UK's points-based immigration system lays down the rules for all overseas arrivals in the UK from 1 January 2021, whether from within or outside the EEA, excluding Irish nationals. It is likely to be the main route for entry into the UK for EEA nationals who were not already living, working or studying in the UK before the end of 2020 and who cannot therefore apply for settled or pre-settled status. 

Under the new regime, a number of immigration routes are available to allow the recruitment of a non-UK national to work legally in the UK where the relevant conditions are met. The points-based system requires an employer to hold a sponsor licence and to identify which route best applies to their candidate. The most suitable route will depend on the role being carried out, its duration and who the employing entity will be. There are minimum thresholds and requirements for those being sponsored under this regime, including in respect of the skill level of the role and salary. For more information on the detail of the new system, please see our briefing here.

Travel to the UK and within the EEA

The future of travel to the UK and within the EEA is an area which is particularly important to employers. For individuals who regularly commute cross-border, the "Frontier Worker" permit may be helpful. This allows individuals resident in the EEA who started to commute to work in the UK before 31 December 2020 to continue to do so, provided they meet the eligibility criteria (including returning to their home country at least once every 6 months or twice in a 12 month period). Applications for a Frontier Worker permit may be made up until 30 June 2021. Similar rules apply to frontier workers resident in the UK commuting to work in the EEA, provided those arrangements were already in place by 31 December 2020 (and subject to any local rules of the EEA state to which they wish to continue commuting).

For those looking to travel for business to the UK (as opposed to taking up work in the UK), they may rely on the immigration rules applicable to visitors. These allow an individual to make visits to the UK of up to 6 months at a time. The individual is not allowed to undertake substantive work under this route but can carry out certain limited activities such as attending board meetings, signing contracts or undertaking a site visit. There are also strict rules preventing payment being made for activities carried out whilst visiting the UK (with limited exceptions, such as travel expenses). Visitors from some countries, including those in the EEA, do not need to apply for a visitor visa in advance of travel but will have to comply with the visitor rules and be prepared to evidence their reason for travel upon arrival into the UK. However, frequent travellers may find it easier to obtain a visitor visa in advance to speed up the process on arrival.

Business travellers going from the UK to the EEA should follow the government guidance for all travellers. Currently the requirements are that their passport must have at least six months left until expiry and is less than 10 years old, they must have travel insurance and, if they plan to drive, they should check what documentation is needed. Travellers to the Schengen area (which is most of the EEA states) will not normally need a visa or work permit where their cumulative travel time does not exceed 90 days in a 180-day period and activities are limited to those permitted. Permitted activities vary between countries but generally cover things such as business meetings as well as holiday travel. If an individual  will exceed the 90-day limit  - taking account of cumulative work and leisure trips – or if the individual needs to carry out more substantive work, a visa/local permit may be required. Given the 90 day restriction and that it includes both business trips and holidays, employers may wish to ask regular travellers to keep a detailed record of all their travel so that compliance with the limit can be monitored.

Business travellers will also need to check if there are any Covid-related restrictions imposed by the country of destination, such as pre-or post-arrival testing or mandatory quarantine requirements. This information is generally available on the UK government's foreign travel advice website. Individuals must also of course comply with any UK restrictions on outgoing travel.

What will happen to UK employment laws in the future? 

Many of the employment rights that exist under UK law are derived from obligations imposed on member states under EU directives. This is not the whole picture, however, as in some cases the UK has gone further than required under EU law and there is also a body of UK employment rights which exist entirely separately from EU obligations.

Employment laws as at 31 December 2020

The body of EU-derived UK employment law as at 31 December 2020 has been retained in its entirety, thus preserving the status quo for the time being. When interpreting this body of retained EU law, the UK courts will follow EU case law up to the end of 2020, although there are powers for the UK Supreme Court and the Court of Appeal to depart from any such rulings. UK courts may also choose to have regard to EU case law after the end of 2020 but this will not be binding.

Future divergence 

One of the main sticking points in the negotiations over the TCA was the need for a level playing field between the UK and the EU. This is particularly important in the context of employment laws given the EU’s concern that the UK might cut employment rights, meaning reduced costs for employers and therefore the possibility of unfair competition.

What the TCA says in this area is something of a compromise. Under what is known as the non-regression principle, it provides that neither the EU nor the UK will weaken or reduce the employment standards in place at the end of 31 December 2020 in a manner that affects trade or investment between the two parties. Any such weakening of standards applies not just to changes in the law but also to any failure to enforce those standards effectively. The TCA goes on to say, moreover, that both parties will continue to strive to increase their levels of employment protection. 

The non-regression principle does not necessarily mean that the UK cannot change its employment laws in the future. Amendments to retained laws that do not affect trade or investment are permitted so this gives scope for limited changes that do not impact on competitiveness. If the UK makes changes to the retained employment laws and the EU believes that those changes do affect trade or investment, then the TCA contains a procedure to try to resolve this. The parties will consult initially to try and agree a resolution but, failing this, a panel of experts will make the final decision on the appropriate remedy.

The non-regression principle applies to the retained body of employment laws as at 31 December 2020. Going forward from then, the UK may choose not to keep in step with future employment protections introduced by the EU. If there is significant divergence between the UK and the EU which impacts in a material way on trade or investment, either party can take “rebalancing measures” which could include imposing tariffs on goods. The implementation of rebalancing measures would be subject first to consultation between the parties and, if necessary, arbitration.

Enforcement of employment protections

The TCA also provides that each party has to have in place a system for the effective domestic enforcement of employment protections. At the moment, the UK has a number of different bodies involved in enforcement although the government is proposing to introduce a single enforcement body at some point in the future.

European Convention on Human Rights

The UK has agreed in the TCA to respect the rights set out in the European Convention on Human Rights. The Convention will, therefore, continue to be relevant where it impacts on employment law.

Are we likely to see changes to UK employment laws?

Despite the provisions of the TCA and the government's expressed commitment to maintaining employment rights in the UK, the Business Secretary confirmed recently that the government has begun a post-Brexit review of UK employment law. He insisted, however, that it would not lead to a reduction in workers’ rights. 

Speculation is therefore rife as to what might be on the government’s agenda. Areas of EU employment law that are unpopular among some UK employers include, for example, the 48-hour working week and the inclusion of overtime in holiday pay calculations. These could potentially be early targets for revision. Time will tell what, if any, changes are proposed, how significant they are and what the EU's response might be.

Next Steps

Most employers will have taken steps to deal with the impact of Brexit on their workforce. However, the detail of the TCA and some aspects of the new immigration system have only come to light comparatively recently. In light of this, some of the action points which employers may wish to consider are as follows:

• understand the new UK immigration system: how will your workforce be affected, what immigration routes might be available to you and will you need to apply for a sponsor licence?
• be familiar with the business travel rules: understand in particular the limited activities which business visitors may undertake and the time limits.
• assist employees to achieve settled and pre-settled status: ensure the deadline of 30 June 2021 is not missed and that the continuous residence requirement is met.
• keep in touch with secondees: be on top of the immigration requirements in each EEA country where UK employees are seconded.
• review employment policies:  ensure they are compliant with the new immigration system and are not discriminatory on the grounds of immigration status. 
• keep a watching brief on UK employment laws: these are under review so be aware of changes that may impact on your policies or procedures.

Further information

For more information on any of the issues raised in this briefing, please speak to your usual Ashurst contact or to any of the people whose contact details are given below.