Brexit: The Key Implications for Employers and HR Professionals
Now that the UK and the EU have finally signed up to a trade agreement, it would be amiss of us not to mark the occasion with a short article covering the key Brexit issues which we believe will be of most interest to employers and HR professionals.
There has been much debate around how employment laws may change in the future given the UK’s new found freedom but it comes as no real surprise to learn that the trade agreement will limit those freedoms to some extent, in view of the level playing field commitments. Also in this article, Jonathan Chaimovic gives a brief summary of the new immigration regime to help employers understand what they need to do in order to recruit EU/EEA nationals in the UK. And finally, for employers who need to transfer employee information into and out of the UK, Mark Williamson looks at the practical steps organisations should take to ensure there is no breach of data protection laws.
The UK/EU Trade Agreement
The trade and co-operation agreement reached by the UK and EU covering the post transition period arrangements was finally signed on 30 December 2020. The level playing field commitments in the agreement have been designed to ensure that neither party obtains a competitive edge in various regulatory areas. In relation to employment law, it was agreed that neither party will weaken or reduce their labour and social standards below the levels in place at the end of the transition period in a manner that would “affect trade or investment”, including by a failure to enforce those standards. This applies to fundamental rights at work, health and safety standards, fair working conditions, employment standards, information and consultation rights, and restructuring of undertakings. Separate commitments in the section on road transport require both parties to comply with working time rules (including rest periods and breaks) for drivers transporting goods between the UK and EU.
The trade agreement also includes rebalancing measures to address future divergence of laws which have a material impact on trade or investment. Such divergence of laws will need to be significant and supported by reliable evidence of the impact, not mere conjecture or remote possibility. Importantly for the UK government, any disputes will not come under the jurisdiction of the European Court of Justice but will be referred to a panel of experts following a 90-day discussion period. The rebalancing mechanism set out in the agreement allows the parties to apply tariffs where there are significant divergences in the level playing field. There is also a provision allowing for the review and suspension of trade in certain circumstances.
The UK government will therefore have to avoid any weakening of employment rights that has a significant impact on trade or investment, since this could lead to a major dispute and a risk of tariffs or suspension of trade. This is unlikely to preclude minor changes to legislation, even where employee protections are reduced, providing there is no impact on trade and investment. It does, however, mean that the UK government will not have complete freedom to change employment laws in the future, despite having left the EU.
So what, if anything, is likely to change in UK employment law?
There has been much speculation as to which aspects of employment law future UK governments might change. In particular, it has been suggested by some commentators that the Agency Workers Regulations, which give equal rights to agency workers after 12 weeks, could be abolished. This is now less likely, as abolition of these rights could give the UK a clear competitive advantage which would affect trade. Other laws susceptible to change are those relating to working time. Whilst a wholesale repeal of the Working Time Regulations is now highly unlikely, some minor amendments, for example the abolition of the 48 hour maximum working week may be possible, as that is unlikely to have much impact on trade (particularly given the UK’s opt-out). Arguably, a resetting of holiday pay rights so that commission and overtime are not included in the calculation of holiday pay might also be acceptable. Other EU derived rights such as TUPE and collective redundancy consultation may see some amendments in time, but we are unlikely to see a full scale abolition of TUPE and collection redundancy laws. Finally, discrimination laws and family friendly rights are highly unlikely to be weakened, although a future government may be tempted to re-introduce a cap on maximum tribunal awards.
The new immigration framework means that many organisations will have to revise some of their recruitment processes. The changes to the Immigration Rules were mostly agreed as part of the Withdrawal Agreement in 2020 and were therefore independent of, and largely unaffected by the Trade Agreement. Nevertheless, we set out a brief summary of the new framework below.
What are the implications of Brexit for EU, EEA and Swiss (EES) nationals?
Free movement of EES nationals to the UK ended at 11pm on 31 December 2020. EES nationals residing in the UK before 1 January 2021 may apply for immigration status under the EU Settlement Scheme (EUSS) allowing them to remain in the UK, depending on eligibility, for Pre-Settled or Settled Status. Applications under the EUSS must be submitted by 30 June 2021. Post 31 December 2020, EES nationals entering the UK for employment/self-employment purposes must meet the same requirements to work in the UK as non-EES nationals. In many cases, this will require sponsorship by their prospective employer to work in the UK under the new Points Based System (PBS) framework. Irish nationals are unaffected by the changes and will continue to enjoy the unfettered right to work and reside in the UK.
What are the key features of the UK’s new post Brexit Points Based System (PBS) framework?
- The PBS came into force from 9am on 1 December 2020 for non-EES nationals and 1 January 2021 for EES nationals. Prior to 1 December 2020, non-EES nationals seeking permission to work in the UK for UKVI approved sponsored employment could apply under the previously applicable framework, namely Tier 2 of the previous Points Based System. Under the new PBS, Tier 2 General is replaced by the Sponsored Skilled Workers’ (SSW) framework. The (previously Tier 2) Intra Company Transfer category (ICT) remains, albeit with some revisions.
- Some categories in the new immigration rules, including the UK Ancestry and Sole Representative of an Overseas Business provisions, remain outside the PBS.
- Unlike its predecessor, applications under the SSW do not require prior compliant advertisement, are exempt from any Quota restrictions, and the applicable skills threshold has been reduced from RQF 6 (Graduate Level) to RQF 3 (A level). The “Cooling Off” requirements have also been abolished. SSW migrants and their eligible dependents remain eligible to apply for Indefinite Leave to Remain (ILR) after five continuous years.
- Key changes to the ICT framework include a relaxation but not abolition of the “Cooling Off” provisions. Unlike the SSW, the RQF 6 threshold remains applicable together with higher minimum salary thresholds. As previously, time spent in the UK under the ICT framework does not itself accrue eligibility for ILR.
- Eligible dependents of SSW or ICT migrants retain the right to work in the UK albeit with some limitations.
How should employers assess and record the right to work from 2021?
- The basic position has not changed as a result of Brexit. When recruiting staff, UK employers must carry out checks to ensure that any prospective employee has the right to live and work in the UK before employing them. They should also conduct follow up checks as necessary where an employee has a time limited right to work in the UK.
- An employer continuing to employ an individual whilst having reasonable cause to believe they do not have a right to work in the UK will be guilty of a criminal offence. Potential sanctions include a custodial sentence and unlimited fines. Failure to properly document an employee’s right to work may also trigger a Civil Penalty presently set at a maximum of GBP 20,000 per offence as well as potentially revocation of the employer’s Sponsors’ Licence. An employer will have a defence to any Civil Penalty if able to prove that fully compliant right to work checks were completed prior to commencement of the employment.
- In certain circumstances and with the prospective employee’s consent and data, an employer will be able to complete right to work checks online via the UKVI portal. Employers can also take advantage of the prevailing Covid Concession where neither online nor in person manual checks are possible.
- Different right to work obligations will apply for EES nationals employed as of 31 December 2020, those recruited between 1 January 2021 – 30 June 2021 and from 1 July 2021 onwards.
For more information please see the Home Office guidance on the right to work checks.
Multinational companies seeking to transfer personal data relating to their staff across borders, whether to or from the UK must ensure that they comply with data protection laws.
What is the effect of Brexit on the application of the GDPR to the UK?
The EU General Data Protection Regulation (GDPR) lies at the core of Europe’s digital privacy legislation, setting out guidelines for the collection and processing of personal data of individuals. As a European Regulation, it has direct effect. This meant it automatically came into effect in the UK in May 2018, and applied in the UK until 31 December 2020 (the end of the transition period). The Data Protection Act 2018 sets out the framework for data protection law in the UK. In addition to the 2018 Act, which is still in force, the GDPR will continue to apply post Brexit because it was directly incorporated into UK law by the European Union (Withdrawal) Act 2018 on 31 December 2020. The Information Commissioner’s Office (ICO), which publishes data protection guidance on its website, now distinguishes this from the EU’s GDPR by referring to it as the “UK GDPR”.
Post 1 January 2021, can employers still transfer employee personal data between the UK and EU countries?
Up until 31 December 2020 UK employers could transfer personal data freely between the UK and the EEA under the EU Withdrawal Agreement. From 1 January 2021, the UK became a “third country” and two sets of rules apply in relation to data transfers. In essence these rules mean that UK organisations do not need any new arrangements for transfers from the UK, but will need to put in place safeguards to maintain data flows from the EEA to the UK:
- Transfers from the UK to the EEA– the UK government has confirmed (for now) that the EEA has an “adequate” data protection regime which means that “restricted” data transfers from the UK to the EEA are permitted. A “restricted” data transfer is broadly one which is caught by the UK GDPR, and involves a transfer to a country outside the UK where the sender and receiver of the personal data are separate organisations (even if they’re in the same group). It’s important to note that the UK’s confirmation as to the adequacy of the EU data protection regime has been given on an interim basis. This means there’s a possibility that it could be reversed in future (particularly, for example, if the European Commission fails to issue a reciprocal adequacy decision to allow free flow of data from the EEA to the UK). The ICO advises organisations to update their documentation and privacy notices to expressly cover those transfers. Transfers from the UK to other non-EU/EEA countries can continue under existing arrangements.
- Transfers from the EEA to the UK – the Treaty which the UK government has agreed with the EU allows personal data to flow freely from the EU (and EEA) to the UK for no more than six months until 30 June 2021. But in order to allow for the free flow of personal data to continue long term from the EU (and EEA) to the UK, it will be necessary for the European Commission to issue an EC adequacy decision (i.e. a decision to confirm that the UK has an adequate data protection regime). The European Commission is currently carrying out an adequacy assessment of the UK. In the meantime, as a sensible precaution the ICO recommends that businesses working with EU and EEA organisations who transfer personal data to them put in place alternative transfer mechanisms to safeguard against any interruption to the free flow of EU to UK personal data, particularly if no EC adequacy decision is forthcoming.
The ICO advises that usually the simplest way to provide an appropriate safeguard for a restricted transfer from the EEA to the UK is to enter into standard contractual clauses with the sender of the personal data. Some organisations may have in place binding corporate rules covering a UK based entity which are authorised under the EU process. These will continue to provide an appropriate safeguard for restricted transfers but will need to be updated to recognise the UK as a third country. A different safeguard, such as provisions inserted into an administrative arrangement, will be appropriate for transfers from an EEA public body to a UK public body where one of the parties is unable to enter into a contract. The ICO has published guidance for businesses to help with this.
Please contact Clyde & Co for more information on Brexit or any other issues involving labour and employment matters in the United Kingdom.
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