Insights

Practice Area Articles

United Kingdom

February 05, 2024

By Paul Hastings Professional

KEY DEVELOPMENTS FOR 2024

Impact of EU law following 1 January 2024

The Retained EU Law (Revocation and Reform) Act 2023 (the “Act”) was passed in June 2023, and seeks to restore the sovereignty of Parliament following Brexit by eliminating the supremacy of EU law, halting any rights given direct effect by the EU, and removing EU interpretative principles. Over the years, we have seen a real tension arising from the EU Working Time Directive and the Working Time Regulations 1998. The W in favour of employees, improving their rights in respect of carry over holiday, paid annual leave, and holiday pay rates. In relation to the loss of directly effective EU rights, this will significantly impact the principles of equal pay for equal work for men and women. Although these provisions are included in the UK’s Equality Act 2010, Article 157 of the Treaty on the Functioning of the EU (“TFEU”) includes comparisons with workers from different employers but whose contracts of work emanate from a similar (or the same) foundation. From 1 January 2024, claimant employees will be unable to rely on Article 157 if they claim for unequal pay scenarios. Finally, in respect of EU interpretative principles, the Act will create confusion regarding the application and scope of EU-derived case-law, as well as interpretations on ongoing and future cases. For example, in a marked departure from pre-existing case-law, the courts will no longer interpret EU-derived employment rights through the lens of EU judicial principles such as purposive interpretation and proportionality. This major legal interpretative change is likely to create significant uncertainty both for employers who wish to clarify and know their obligations, and for employees in terms of bringing claims or knowing the rights to which they are entitled. It is possible that the UK government will restate secondary EU legislation in order to replicate provisions into UK legislation; the powers in this regard apply until 23 June 2026 and also hold true for primary legislation. However, the government to date has shown little inclination to codify in domestic law EU principles applicable to employment law. Employers should remain aware of any such changes that may occur in the next few months as the Act becomes operational, and prepare themselves for an increase in disputes.

Political change

2024 heralds a possible UK General Election, which would be held latest in early 2025. As such, it is likely that the current Conservative government will announce new policies in advance of its election campaign. However, given the latest polling figures, a significant proportion of predictions point to the Labour Party gaining power. Employers should therefore be aware of both political possibilities regarding employment law. The government has opened a consultation on its proposal to repeal a ban on using temporary staff to replace workers during strikes, saying that the ban’s effect on employers is unnecessary and disproportionate. The legislation prohibiting the use of agency workers as a temporary measure was repealed in 2022 a short time after its initial passage into law. Following a High Court ruling in July 2023, in which the court found in favour of trade unions arguing that the law was passed without the necessary consultation to the point that it was unlawful and irrational, the government has restricted and clarified the remit for agency workers replacing striking workers, focusing the legislation on ‘key’ sectors such as transport and health care. Separately, the government has announced a new employer guidance and code of practice to help employers force striking workers to return to work. In introducing this legislation, the government is seeking to maintain a reasonable balance between the ability to strike and the rights of businesses and the public. Employers should keep watch over the new guidance and code of practice when dealing with employees who are striking to the severe detriment of the business.

Should the Labour Party enter government, it is possible that the ‘Employment Rights Bill’ be introduced, containing a whole swathe of reforms to employment law. There are proposed changes to unfair dismissal, as Labour is suggesting that employee protection from unfair dismissal would be a day one right. The Labour Party is also pledging to extend this day one protection to all workers and to remove limits on unfair dismissal compensation. The party may additionally extend time limits to bring claims in the employment tribunal beyond the existing three-month limit, a move which benefits employees. The Labour Party further proposes to outlaw the practice of firing and re-hiring, again to the benefit of employees, as well as strengthening the role of trade unions by giving them a new legal right to access workplaces. Given its trade union backing, it is also likely that it would repeal any anti-strike legislation passed by the outgoing Conservative government. These measure would reduce the flexibility available to employers as regards redundancy processes and business efficiency in case of strike action.

Impact of AI on employers and employment law

The launch of ChatGPT in December 2022 has resulted in a perhaps surprisingly speedy and extensive degree of interaction with law firms and employers regarding the extent of artificial intelligence (“AI”) in the workplace. However, opinion is split in terms of the investing potential and deployment timetable of generative AI. To name but a few, AI can be used by HR departments/employers in several spheres of work, such as recruitment, monitoring employees who perform remote work, and redundancy processes. In recruitment processes, AI tools can be used to sift through candidates’ CVs more efficiently, and even conducting video interviews for large-scale processes. However, if the data used to input into the AI system is biased, the AI tool can erroneously focus on elements of candidates’ CVs that are less desirable than intended, resulting in unplanned consequences. In order to ensure more inclusive and fair recruitment processes, employers should retain monitoring and training capabilities over their AI systems. As regards the increased use of AI tools to monitor employees’ performance and productivity, especially when working remotely, employers must use these AI tools in a reasonable and proportionate manner to mitigate possible claims regarding infringements of privacy. It is important to note that employees have a legitimate set of privacy rights in the workplace, and this must be balanced with monitoring processes. Additionally, employers should set out clear polices and transparent communication strategies with employees concerning the scope and reasons underpinning monitoring systems. This would also maintain a positive working culture for employers and employees alike. Finally, if employers are using AI tools to conduct assessments in large-scale redundancy selection processes, they should be mindful of the judicial requirement to demonstrate fair reasons for dismissal where they are defending unfair dismissal claims. Similarly to the recruitment process, employers should combine the use of AI tools with human decision-making in order to provide clear and fair justifications throughout the redundancy process.

In relation to the general interaction between AI and employment law, employers should be considerate of employees’ rights to privacy and consent, especially in the context of AI’s reliance on the collection and processing of employees’ personal data. Additionally, employers should maintain human oversight of the application of AI tools in order to ensure that AI reduce algorithmic bias and comply with anti-discrimination legislation. Furthermore, employers should establish clear and transparent policies regarding AI tools’ ability to generate original works in terms of the intellectual property rights of both employers and employees.

KEY DEVELOPMENTS FOR 2023

U.K. economy

The U.K. is in an economic recession and currently facing a ‘cost of living crisis.’ Attributable to factors including high inflation, low wage growth and soaring energy prices, exacerbated by the COVID-19 pandemic, Brexit and the war in Ukraine. Many of us have never experienced this level of industrial action over pay and conditions in our working life. Few employers can afford for their wage bills to keep pace with spiralling inflation. It is a perfect storm.

As we exited the COVID-19 pandemic, we experienced a war for talent, the great resignation and employees having greater bargaining power than ever before as the disruption to traditional working patterns and practices led to hybrid working and increased flexibility. . However, in light of the current economic situation, we are now experiencing a shift in power. As we end 2022 and look to 2023, we see large global employers announce material headcount challenges and it is clear that the pendulum is swinging back in favour of employers. In 2023, UK employers will be considering how best to respond to this dynamic situation and the various levers that they have to ride out the storm.

Brexit and the relationship with Europe

The post-Brexit landscape continues to pose significant political and legal challenges. These include legislating to uphold the U.K.’s Brexit independence strategy, maintaining sufficient protections for employees and trying to maintain positive relationships with Europe.

The Retained EU Law (Revocation and Reform) Bill, will automatically repeal any retained EU law (which includes U.K. statutory instruments introduced to comply with EU law) with effect from 31 December 2023. Unless new legislation is introduced to tackle the issues posed or specific steps are taken to maintain the status-quo, a raft of EU derived laws that affords protections and rights for workers under EU legislation (including agency workers, paid annual holiday, the 48-hour working week and protections granted by TUPE, etc.) will fall away. As the U.K. considers legislative changes that may put it at odds with existing EU laws, the EU has been flexing its muscles to remind the UK that it can retaliate with sanctions on trade, investment or other activities if the UK breaches the terms of the Trade and Cooperation and Withdrawal Agreement. Therefore, this standoff is likely to become more of an issue as we get to the latter part of 2023. In the longer-term, it will be interesting to see if new European employment directives and regulations will influence the UK Government’s legislative agenda or if this will be seen more in the policies and practices of European and global employers. Ultimately, while Brexit may be done, it and the UK’s on-going relationship with Europe will continue to have an impact on the UK workplace in 2023 and beyond.

Legislative uncertainty

In 2022, we had three prime ministers, and the political and economic uncertainty made headlines around the world. The knock-on effect of this situation was that the proposed legislative agenda of the various governments is in a state of flux. Promised changes, such as the Data Reform Bill aimed at revising the U.K. GDPR, the U.K. Data Protection Act and the Privacy and Electronic Communications Regulations (“PECR”) and the abolition of IR35 (the off-payroll rules), have been shelved for now. Aside from legislative attempts to limit and manage the industrial action referenced above, it is widely reported that instead of a proposed Employment Bill, the Government will now support private members bills. To date, it has given its support to bills in relation to carers leave, tips, flexible working, extended redundancy protection for those having children, new rights for those with premature children and worker protection that will create employer liability for harassment by third parties and introduce new employer duties and obligations in relation to sexual harassment. Therefore, 2023 may be a year that is less about the Government’s employment law agenda and more about those laws that garner cross-party support.

KEY DEVELOPMENTS FOR 2022

Legislative changes expected to be covered in the long-awaited Employment Bill

The long-awaited Employment Bill, originally announced in the Queen's Speech in 2019, was supposed to be published at some point in 2022. However, the Queens Speech in May 2022 was unfortunately quiet on this topic, so it is unlikely that the Bill will come into force this year.

The scope of the Employment Bill is wide-ranging and is expected to include information on the following topics:

A new right to one week's unpaid leave for workers with caring responsibilities – this will be a day one right for all workers and the leave can be taken as a block of one week, or as individual days.
The establishment of a single enforcement body for employment rights – the new enforcement body will have a wide remit to investigate and enforce breaches in relation to national minimum wage, labour exploitation and modern slavery, employment agencies, holiday pay for vulnerable workers and statutory sick pay.
The right for workers to retain their tips in full – the legislation will be supported by a new statutory Code of Practice, and will require employers to pass on 100% of tips without making any deductions (other than those required by tax law) and to distribute tips in a way that is fair and transparent. Employers will be required to prepare a written policy on tips and keep a record of how tips are dealt with.
A new right to up to 12 weeks of paid neonatal leave – this will be a day one right for all workers and will grant parents of babies who are born prematurely or who are admitted to hospital in their first four weeks to take up to 12 weeks' paid leave (one week's leave for each week the baby is in hospital). This entitlement will be in addition to any other parental leave entitlements, such as maternity or paternity leave.
A new right for workers to request a more predictable contract – workers with variable hours (including those on zero hours contracts and agency workers) will have the right to request a more predictable and stable working pattern that guarantees a set number of hours after 26 weeks' continuous service.
A right to request flexible working from day one of employment – currently, workers can make a flexible working request after 26 weeks' continuous service but this may soon become a day one right.
An extension of redundancy protection for women and new parents – the current redundancy protection afforded to women on maternity leave will be extended to apply from the point the employee notifies her employer of her pregnancy, to six months after the end of the family leave period. This will also apply to employees taking adoption leave and shared parental leave (although it is yet to be decided how any extended redundancy protection would work if parents choose to take shared parental leave in multiple blocks).

Employers should continue to monitor the progress of the Employment Law Bill and review their working practices and policies, to ensure that they are up-to-date and fully compliant before any changes come into effect.

Return to work

The COVID-19 pandemic has had a significant impact on the world of work and required employers to adapt their working practices in light of Government mandated lockdowns, sector specific Government guidance, clinically vulnerable members of staff and associated health and safety risks.

Although the Government has since lifted all COVID-19 restrictions in England, many employers are still adjusting to the “new normal” and have adopted new ways of working in recognition of the ease at which many employers (and employees) were able to transition to a remote working arrangement. This has resulted in a significant uptake in flexible working, where employees are provided with more autonomy in terms of deciding whether to work from home or the office.

Employers should update their template employment contracts to reflect any changes to the primary place of work and prepare a suitable remote working policy to set out expectations in terms of confidentiality and data protection obligations, health and safety, and the provision of company property or any contribution towards homeworking costs, if applicable. Although not legally mandated, employers may also want to suggest to employees that they seek independent advice to the extent they have any questions about the impact the homeworking arrangement may have on their taxable income, their home insurance, or otherwise.

Calls for reform of whistleblowing legislation

Although the UK is not implementing the EU Whistleblowing Directive 2019/1937 (the "Directive"), there have been calls for reform for many years. The Protection for Whistleblowing Bill, a private member's bill introduced in the House of Lords had its first reading on 13 June 2022, but the second reading is yet to be scheduled.

The aim of the Bill is to establish an Office of the Whistleblower to protect whistleblowers and whistleblowing and to uphold the public interest in relation to whistleblowing; to create offences relating to the treatment of whistleblowers and the handling of whistleblowing cases; and to repeal the UK's current whistleblowing legislation (the Public Interest Disclosure Act 1998). Some of this will align the UK with the Directive. However, this Bill is a long way off from becoming law and the focus of so many parliamentarians is certainly elsewhere at present.

In the meantime, the FCA has confirmed that anonymous whistleblowing is on the rise. 22% of cases in the first three months of 2022 (21.65%) have been anonymous compared to 15% (15.33%) of cases in 2021. Of the 587 cases relating to employees/ex-employees reported to the FCA in 2021, 355 (60%) did not have an outcome as of March 2022. Therefore, there is no quick resolution for the UK financial services whistleblower and regulator interest and involvement seems protracted. All of these factors point to a potential tsunami of disclosures over at least the next 12 to 18 months and a considerable uptick in workload for in-house counsel.

Employers should continue to monitor this area for developments and should review existing programmes to ensure that they really do nurture a speak-up culture while also complying with the requirements of the law. Whistleblower programmes should be regularly monitored and there needs to be dedicated resources from various teams across the business, including legal, ethics, HR and IT. Companies should ensure that the whistleblowing policy, associated process documents, and roles and responsibilities should be clear, user-friendly and realistic to facilitate prompt investigation. Consideration should also be given to how the whistleblowing policy interacts with other workplace policies, in relations to grievances, harassment, bullying and the code of conduct or ethics policy. There also needs to be effective and engaging training and a well-established practice of enforcement in response to established wrongdoing.

KEY DEVELOPMENTS FOR 2021

Impact of the global pandemic

The global pandemic has had a material impact on almost every aspect of our lives, both inside and outside of the workplace. We will continue to see and experience these impacts. From the continuation of remote working to the prospect of phased returns to work, the prevalence of health and safety concerns, including mental well‑being and ensuring that employees have the right equipment while working remotely, the new challenges thrown up by the vaccine roll‑out and the sharing of health data. From a disputes and litigation perspective, we anticipate a significant increase in complaints and claims linked to health and safety issues and whistleblowing concerns.

Brexit & UK employment law

It was agreed that the UK and EU must not weaken or reduce their labour and social standards below the levels in place as at 31 December 2020 in a manner that would affect trade or investment. If it does, this could lead to major disputes and attract tariffs or result in a suspension of trade.

It is unlikely that the UK Government will make significant changes to existing employment laws in the immediate future. However, it has been suggested that a number of changes could be on the horizon, including the following:

Working Time Regulations: Minor amendments, such as the abolition of the 48-hour maximum working week are expected. Practices in relation to employees' holiday pay may also be amended so that commission and overtime pay are no longer included in the calculation of holiday pay.
Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"): Changes may be introduced to make it easier for (i) employers to harmonise employees' terms and conditions of employment following a TUPE transfer, and (ii) transferring employees to bring a claim against their proposed new employer following a pre-transfer objection, rather than a transferor employer.
Discrimination cases: Discrimination law is unlikely to change significantly, but we might see the re-introduction of a cap on compensation in discrimination claims (as is the case for unfair dismissal).
Redundancies: Changes could be made to the threshold of the number of affected employees which trigger consultation obligations. This would mean that employers may not have to engage in collective consultations for as little as 20 redundancies; however, this may be something that trade unions oppose and could therefore remain unaltered.
Agency Workers Regulations: It was previously suggested that the Agency Workers Regulations, which give equal rights to agency workers after 12 weeks, could be abolished. However, this is now less likely, as abolition of these rights could give UK a clear competitive advantage which would affect trade.
EU laws and case law may become "retained law": The UK is no longer required to align its future employment laws with EU Directives or ECJ decisions in order to continue with tariff-free trade, but the vast majority of EU laws and case law may become "retained law" in the UK. EU-derived employment law will simply carry on as part of the UK's domestic law (i.e., legislation such as TUPE and the Working Time Regulations will continue in force).
Employment law landscape may change: The UK employment law landscape may start to change over time, but this would depend on the Government in charge as well as the terms of any future relationship with the EU.
UK domestic legislation cannot be challenged in the same way as before: UK domestic legislation implementing EU rights must continue to be interpreted in conformity with the relevant EU law, but cannot be challenged in the same way as before (e.g., claims can no longer be brought against the UK Government based on any alleged failure to implement EU laws).
Courts and ETs no longer have to follow ECJ decisions: Courts and Employment Tribunals are no longer bound to follow ECJ decisions (issued in 2021 and beyond) but may have to take them into account where relevant. However, Employment Tribunals are likely to take a cautious approach, at least initially, and respect most new ECJ decisions.
The UK is free to ignore new EU Directives: However, the Whistleblowing Directive, the Transparent and Predictable Working Conditions Directive and Work-Life Balance for Parents and Careers Directive are due to be implemented in 2021 and 2022 and, in practice, the UK is already compliant with many of the measures contained in them.
Rome I and II Regulations will continue to apply: The position on the law governing parties' contractual and non-contractual obligations will not be significantly affected. The provisions of the Rome Regulations have been incorporated into UK domestic law as retained law. Therefore, if a French court determined that English law should apply to the parties' relationship, English law would still be applied in the same way as before, notwithstanding the UK's status as a non-EU member state.
Brussels I Recast Regulation no longer applies to the UK: This means that there is now an increased risk of disputes about which country's court will have jurisdiction to hear a case. The UK has been pursuing a range of options to address this issue and the preferred option is to join the Lugano Convention, which the UK has applied to do. The UK's fallback option (which currently applies) is the Hague Convention, but the protection offered by the Hague Convention is inferior to the Brussels I Recast Regulation in a number of respects.

Transfers of personal data

On a related note, the UK has been granted a 4‑ to 6‑month period of temporary adequacy.

KEY DEVELOPMENTS FOR 2020

Good Work Plan changes taking effect from 6 April 2020

A number of changes set out in the Government's Good Work Plan came into effect on 6 April 2020. These changes are aimed at implementing recommendations set out in the Taylor Review; an independent review of modern working practices conducted by Matthew Taylor in July 2017.

The changes that came into effect on 6 April 2020 include the following:

An obligation on employers to provide written statements of particulars (also known as a "Section 1 Statement") to both employees and workers on or before the commencement of their employment or engagement, subject to certain exceptions. In addition, the scope of the information that the employer must provide in the Section 1 Statement has expanded to include details such as any applicable probationary period, training and benefits.
Holiday pay should be calculated by reference to average pay over a 52-week reference period (or the length of the individual's engagement, if shorter).
Organisations must provide any agency workers with a Key Information document – including details relating to the type of contract, pay and annual leave entitlement – before agreeing to terms under which the work-seeker will undertake work.
The "Swedish derogation" provisions in the Agency Workers Regulations 2010 – which set out an exception to provide pay parity between agency workers and employees subject to certain criteria – have been removed.
The threshold to request workplace information and consultation arrangements has decreased from 10% to 2% of employees in the undertaking, subject to a minimum of 15 employees required to make the request.

Further details about this, and the changes to the IR35 Rules (which have been postponed to April 2021), can be found here.

Employee activism

The #MeToo and Black Lives Matter movements have had a sweeping impact in the UK – both in and outside the workplace. Employee activism has generally become more prevalent and the UK workforce is looking for organisations to be more transparent and to be held accountable for any unlawful or unfair employment practices.

To help achieve and encourage greater transparency, the Government indicated that it would review the potential misuse of confidentiality clauses or non-disclosure agreements in the context of workplace harassment or discrimination complaints and legislate to prevent their misuse. It is anticipated that the Government will make the following changes/clarifications to the law in this area:

In addition, the Government has suggested that it may: (i) introduce a mandatory duty on employers to prevent harassment in the workplace; (ii) increase the time limit for individuals to bring a discrimination claim under the Equality Act 2010 (from 3 months to 6 months); and (iii) introduce mandatory pay gap reporting.

It is likely that the Government will shelve these reforms for the time being, whilst it has its hands full tackling the economic impact of the COVID-19 pandemic. However, this topic may pick up traction once again in 2021 when the Government re-focuses its attention to non-COVID-19 related matters.

Any provision in an employment agreement or settlement agreement preventing an individual from making a disclosure to the police, regulated health and care professionals or legal professionals would be ineffective.
Limitations to any confidentiality clauses in a settlement agreement must be clearly set out.
In order for a settlement agreement to be valid, individuals must obtain independent legal advice on the nature and limitations of any confidentiality clauses in a settlement agreement, in addition to advice on the terms and effect of the settlement agreement more generally.

Vicarious liability for data protection breaches

In April 2020, the Supreme Court in the landmark case of WM Morrison Supermarkets plc (Appellant) v Various Claimants (Respondents) [2020] UKSC 12 provided welcome clarification to the extent to which employers are vicariously liable for the unauthorised and unlawful disclosure of personal data by their employees.

The case involved a disgruntled employee of Morrisons who sent sensitive payroll data to three newspapers and uploaded a copy to a publicly accessible file-sharing website. Morrisons was subsequently alerted and took steps to have the data removed from the internet, and reported the issue to the police. The employee was subsequently arrested, prosecuted for a number of offences and was sentenced to eight years' imprisonment. Alongside this, a civil claim was brought against Morrisons by 5,500 claimants, seeking damages for misuse of private information and breach of confidence, and for breach of statutory duty under the Data Protection Act 1998.

Both the judge at first instance and the Court of Appeal concluded that Morrisons was vicariously liable for the actions of the employee, as his wrongful conduct was committed in the course of his employment and that the act of copying the data and posting it online was "a seamless and continuous sequence of events“which was "closely related" to the task that Morrisons had asked him to carry out. The fact the employee's motive was to harm his employer was deemed irrelevant by the Court of Appeal when deciding the question of whether or not vicarious liability should be applied.

However, the Supreme Court overturned the previous decisions, finding that Morrisons was not vicariously liable for the unauthorized and unlawful disclosure of personal data by the employee. The fact that the employee's employment gave him the opportunity to commit the wrongful act was not in itself sufficient to warrant the imposition of vicarious liability.

This landmark decision brings much needed relief to employers and breaks new ground on the issue of vicarious liability in the context where an employee commits an act which, although damaging to third parties, is primarily aimed at harming their employer. Although employers can breathe a sigh of relief in certain respects, it is important to remember that every case turns on its facts and employers should continue to ensure that they comply with applicable data protection laws, particularly with respect to data security.

KEY DEVELOPMENTS FOR 2019

Employment status in the gig economy

Currently around 1.1 million people in the UK are considered gig economy workers. Given the rise in individuals looking to work in more flexible working patterns, employment status issues are likely to continue to dominate in 2019.

Recent cases have shown that the courts are looking beyond the company’s characterisation of their relationship with individuals. The majority of cases so far have ruled in favour of the individuals and classed them as workers. Such decisions have huge financial and legal ramifications for companies as workers have a number of statutory protections and entitlements to basic rights such as holidays and minimum working and rest time. A company has recently been given leave to appeal to the Supreme Court against a decision of the High Court which classified their drivers as workers. A decision on this case from the Supreme Court will be eagerly anticipated in 2019 to further clarify the status of individuals working in the gig economy.

The Government’s “Good Work Plan” has also responded to recommendations on employment status and modern working practice made by the Taylor Review and has proposed there will be legislation to improve the clarity of the employment status tests, a new right to request a stable contract and permitting a break of 4 weeks between contracts for the purposes of continuity of service.

New tax rules for contractors/Personal Services Companies

From 6 April 2020, private sector companies who engage self-employed contractors through a personal service company (“PSC”) will be responsible for determining whether the IR35 tax regime applies to the PSC. If IR35 applies, the company is responsible for deducting the income tax and national insurance contributions (“NICs”) from the fees. This shifts the responsibility and liability of paying the correct income tax and NICs from the PSC to the hiring company.

During 2019, companies would be well advised to start reviewing whether engagement of a PSC is efficient and cost effective and whether the terms of engagement with the PSC have effective indemnification terms regarding any repayment of income tax and NICs liabilities paid by the Company. Companies should also carry out a risk assessment of the contractors and consultants engaged by them and ensure they are properly characterised.

Brexit

Multinational companies with a presence in Europe or with an EU migrant workforce will be dealing with the impact of Brexit in 2019 and beyond. It is still unclear how Brexit will unfold on 29 March 2019. If the current form of the Withdrawal Agreement applies, there will little change to EU derived employment legislation and EU citizens will continue to have the right to work and live in the UK until 31 December 2020 and can apply for settled status under the EU Settled Status Scheme. In the case of a “no deal” Brexit, the European Union (Withdrawal) Act 2018 sets out complex provisions on how far EU law and decision will continue to apply post Brexit. EU citizens in the UK can protect their position and apply for settled status under the EU Settled Status Scheme from 29 March 2019, provided they were in the UK before Brexit or any applicable transitional period. A reciprocal protection for UK citizens living and working in the EU will apply under the withdrawal agreement but it is unclear what the position is if there is a “no deal” Brexit. Companies should carry out an audit of their EU migrant workforce in the UK and UK citizens working in their EU/EEA offices and support their employees/workers through this process.

The UK government will also need to decide on new immigration rules which are to apply after Brexit or at the end of any applicable transitional period. The current proposal is to have an uncapped highly skilled and intermediate skills based system applicable to EU and Non-EU migrants with a salary threshold of £30,000. There are transitional proposals for low skilled workers.

Brexit will also have an impact on European Works Council (“EWC”) established in the UK and UK law governed EWC agreements. Companies will need to consider whether they continue to meet the threshold to have a EWC, whether the UK company can continue to participate or whether they need to move their EWC to another EU jurisdiction or appoint a representative in an EU country to represent UK employees and senior management. Parliament has now approved the Employment Rights (Amendment) (EU Exit) Regulations 2019 (“Regulations”). These amend the UK’s EWC legislation in the event of a “no-deal” Brexit. The Regulations will:

end the right of employees to request information on whether their employer falls within the scope of the EWC Directive and, if so, request the establishment of a EWC; and
end the application of the UK’s EWC legislation to UK-based businesses or non-EU-based businesses that had designated a representative agent in the UK before Brexit.

The ending of the UK’s legal framework for operating EWCs and the UK’s withdrawal from the EU’s legal framework is likely to frustrate current UK law governed EWC agreements.

KEY DEVELOPMENTS FOR 2018

General Data Protection Regulation

The EU’s General Data Protection Regulation will take effect, replacing the current Data Protection Act 1998, on 25 May 2018. The GDPR seeks to introduce a single data protection framework applicable to data subjects across the EU, having extra territorial scope. Key changes, include: less reliance on consent as a means of processing employee data, more stringent rules on notices, greater individual rights, accountability obligations and data breach notification requirements. Potential fines for non-compliance are up to 4% of global annual turnover or EUR 20 million, whichever is greater.

Gender Pay Gap Reporting

All companies with more than 250 employees are required by law to report on their gender pay and bonus gap by 4 April 2018. Affected employers must publish the proportion of men and women across four pay bands, information on the employer’s gender bonus gap and the proportion of men and women who received a bonus. While there are currently no sanctions for non-compliance, companies are expected to be named and shamed where no results are published, and a consultation is underway for an enforcement policy which could include unlimited fines and convictions.

Brexit

Brexit continues to dominate the headlines, with an anticipated exit date of March 2019. The 3 key separation issues to be agreed upon include i) the ‘divorce’ bill for leaving, ii) rights of EU citizens in the UK and UK citizens in the EU, and iii) arrangements for the Northern Ireland border. With an estimated 3 million EU nationals currently residing in the UK, many employers are likely to be impacted by the changes to the current freedom of movement principles, and will need to closely follow developments relating to the consequential immigration discussions.

Holiday Pay

Holiday pay continues to be a hot topic, with further developments in case law. The most recent of which was Sash Windows Workshop Ltd v King, which held that where a worker (improperly classified as self-employed) is told they have no right to paid holiday, the employee will be able to carry forward untaken leave, potentially until termination. This case is likely to be of particular concern to those employers who engage (significant numbers of) ‘self-employed’ individuals in the Gig economy where there is an inherent risk of misclassification, and seemingly significant cost implications as a result of this case.

KEY DEVELOPMENTS FOR 2017

UK vote to exit the E.U. (“Brexit”)

On 23 June 2016, the U.K. voted to leave the European Union. The UK Government has now triggered Article 50 of the Treaty on European Union (the article to signify the withdrawal process). Therefore, the two year countdown to Britain’s exit has begun.

Prime Minister Theresa May has, however, confirmed that Brexit should be a ‘hard’ or complete Brexit, potentially meaning a full exit from the single market and the obligation to accept freedom of movement. So as to avoid a wholesale revocation of European law, the Prime Minister has confirmed the government’s intention to introduce the Great Repeal Bill. This would have the impact of repealing the European Communities Act 1972 (which provides legal authority for E.U. law to have effect as national law) and would transfer any E.U. laws in place immediately beforehand directly into U.K. law.

The intention is that this will allow for a ‘calm and orderly’ exit from the E.U. giving Parliament time to review, amend or scrap European derived laws over time and in the usual way, thus reducing uncertainty for businesses operating in the U.K.

Requirement to publish gender pay gap

Gender Pay Gap Regulations will come into force on 6 April 2017, and will require employers with 250 or more employees to collate and publish data on their gender pay gap. Employers will then have until 30 April 2018 to publish their first gender pay report.

Increases costs to employers

Draft regulations are due to come into force from 6 April 2017 requiring employers with a payroll bill (or expected payroll bill) in excess of £3 million to pay an apprenticeship levy of 0.5% of the employer’s total pay bill. All employers will have an annual allowance of £15,000 which will be set off against the levy. The draft regulations contain certain reporting obligations and rules in relation to connected employers, and the government has confirmed that funding for training will be accessible to all employers in England via the Digital Apprenticeships Service. Government top-ups will be available for those employers who have had to pay the levy.
In April 2016, the National Living Wage came into force at a rate of £7.20 per hour for those aged 25. This is set to increase to £7.50 per hour from April 2017, and the overall intention is for the National Living Wage to increase to £9 per hour by 2020.
More SME employers will reach their staging dates for auto enrolment purposes. This will require employers to enrol eligible jobholders into a qualifying pension scheme and make contributions on their behalf.

KEY DEVELOPMENTS FOR 2016

A series of new measures impacting the financial services sector

In January 2016, the new claw back powers came into effect. In March 2016, we saw the introduction of the new Senior Managers Regime with a new criminal offence of ‘reckless misconduct’, increased responsibilities, and personal liabilities for senior managers. This came at the same time as the new whistleblowing rules of the Financial Conduct Authority and the Prudential Regulation Authority which apply to larger financial services and insurance companies with asset of £250 million or more.

Regulation of zero hours contracts

In January 2016, we saw the introduction of regulations which give employees the right to claim unfair dismissal, and workers and employees the right to bring a detriment claim if they are dismissed or subject to a detriment for breaching an exclusivity clause.

New rules making it harder to strike

The Trade Union Bill 2015-16 contains changes to balloting rules to make it harder to strike by, amongst other things, increasing the percentage thresholds that the union must achieve to take industrial action.