Brexit makes some immediate changes, but will set the stage for significant changes in the years to come. Here, Adam Wysopal, Product Counsel, and Natasha Reynolds, Product Manager, highlight what employers should be aware of for the new year and what to keep an eye on.
As we reported on in the first part of this blog series, Brexit will impact how employers recruit and hire non-resident workers. But there is, not surprisingly, more for employers to consider as the new year begins. One topic that has been top of mind for many is what exactly, if anything, is changing with respect to workers’ rights. In this blog, we will touch on topics that many employers have been curious about, including whether workers’ rights are changing.
Worker rights during and after the transition period
Employers and employees may appreciate that there will be no major overhauls to workplace rights that come into force on 1 January 2021. This means that UK employees will start the new year with essentially the same statutory entitlements that they currently enjoy, such as annual holiday leave. Employers, likewise, will continue to manage their obligations in these areas.
But this does not mean that Brexit will not lead to substantive changes to employment law in the UK. The legal reality is that by leaving the EU, the UK is no longer bound by certain obligations such as the Working Time Directive. In addition, regulations were issued that expand the ability of UK courts to depart from prior decisions. In the past, UK courts had to follow the decisions of the European Court of Justice. This meant that legal opinions that were based on disputes between employees and employers in other member states could impact UK employers. In 2021 and beyond, UK courts could, given the opportunity, overturn decisions they made in the past. This is not something that would likely happen quickly but has the potential to significantly alter UK employment law over the coming years.
However, despite the legal right to make changes, the government has expressed a desire to entrench existing workers' rights in UK law, including aspects that are based directly on EU requirements such as annual leave. This is due, in part, to the UK and EU having committed to a framework under which they will work together to ensure high standards in areas such as anti-discrimination rights, collective bargaining, family leave, and working time rights.
There may be an important incentive for the UK to maintain a sense of equilibrium – it helps maintain a fair playing field among UK and EU employers. If the UK were to make changes that reduced employer obligations and costs, the EU could view that as unfair. This could complicate negotiations on various issues such as trade and generate lasting ill-will. That said, while no major changes are on the immediate horizon, employers should not assume that nothing will change beyond 2021. Regulations may be issued that clarify or amend particular rules – for instance, how annual leave pay is calculated – but the fundamental obligations will likely remain.
No new European Works Councils, but some continuity for existing employees
One of the legal changes that impacts employees and employers is in regard to European Works Councils. Because of Brexit, UK employees will no longer be able to ask their employers to establish an EWC starting from 1 January 2021. That said, a business may agree to allow current employee representatives to continue their involvement with an EWC from 1 January 2021. The government has expressed a commitment to ensure the enforcement framework for UK employees in EWCs are still available, to the extent that is legally permissible. UK employers with an existing EWC and applicable unions are being encouraged to review those arrangements before the new year.
In addition, employers may want to understand how pension or retirement benefits will operate for non-UK individuals who are working in the UK. The bottom line is that there are no major short-term changes to what employers will need to do with respect to pensions. The intent is to ensure the principle that an employer and employee pay contributions into one state program at a time. In general, there is existing law to support that when a worker is performing work in the UK, NICs are payable.
Changes are needed, however, for situations where a UK citizen is working abroad. There may be situations where an individual is subject to the legislation of more than one state at a time, requiring contributions into both state programs. Employers may also want to be aware that for UK or non-UK workers who have a UK pension and are living outside of the UK, they will continue to receive their pension payment because that is also permitted under current law. However, Brexit may result in banking changes that could change the method by which an individual living outside the UK receives their pension payment.
Deduction from Earnings Orders
An often overlooked, but important employer obligation, is withholding wages in specific situations such as when an employee is required to make child maintenance payments. In general, employers will receive a deduction from earnings order (DEO) from the Child Maintenance Service if the garnishment is for child maintenance. For other debts such as a country court judgment, a court may issue an attachment of earnings order (AEO) that would instruct an employer to withhold wages and remit them to the court. When determining the amount to deduct, employers need to follow applicable guidance as there are rules about what earnings are subject to the order. This blog is going to focus just on DEOs.
As part of its membership in the EU, the UK benefited from two legal frameworks that allowed individuals to seek a DEO in the UK to enforce a debt that originated outside the UK (for example, a divorce decree from Spain). First, EU member states are bound by the Maintenance Regulation, which establishes a framework under which obligations may be enforced with relative ease whenever both parties are residing in EU states. Member states have obligations to create access to courts and share information to enable this and make this process as seamless as possible.
By leaving the EU, the UK will no longer be part of the Maintenance Regulation. Second, EU members are participants to the 2007 Hague Convention on the recognition and enforcement of cross-border maintenance decisions, including child support. This framework that is used to enforce obligations where one party is not residing in an EU member state, such as the US. The UK was a participant to the Hague Convention by virtue of its membership in the EU, so that also is ending. Brexit has therefore removed the legal framework that had been used by persons to have DEOs issued in the UK to enforce a judgement that originated outside of the UK.
Fortunately, this issue was contemplated and has been addressed. Maintenance orders that result from cases commenced before 31 December 2020 will be governed by the Withdrawal Agreement. This means that the Maintenance Regulation applies to those cases or orders. In addition, the UK passed a statutory instrument to enable it to be a participant to the Hauge Convention. Thus, the UK will follow the 2007 Hauge Convention rules for cases that are not covered by the Withdrawal Agreement and generally for all cases commenced on or after 1 January 2021.
Ultimately, employers will continue to receive DEOs and will need to ensure it makes required withholdings and remittances. What is changing is the legal basis for a DEO to be issued with respect to a judgement entered outside the UK, and not the actual employer responsibilities.
Employers, especially those based in the UK with operations throughout the EU, will be navigating a lot of change in 2021 due to Brexit. Organisations will be addressing issues relating to corporate governance, taxes, and importing and exporting goods and services, among other issues. While UK employers won’t be navigating the same scale of changes with respect to workers’ rights, they should consider using this time to evaluate their own compliance programs and reliance on third parties and software solutions to help manage their obligations. How prepared would you be if there were significant changes to your requirements? If you are not confident in your ability to quickly adapt to new changes, it could be a good time to make a down payment on systems and partnerships that will help you pivot when needed.
Disclaimer: The information provided in this post is provided for informational purposes only and should not be relied upon or construed as legal advice and does not create an attorney-client relationship. You should review with your legal advisors how the laws identified in this post may apply to your specific situation.
Adam Wysopal is Compliance Counsel at Ceridian with years of experience advising organizations on regulatory obligations and internal compliance programs. Adam is passionate about technology, innovation, and collaboration. In his current role, Adam enjoys being able to support development teams in their continuous effort to ensure Ceridian’s HCM solutions keep up with evolving employment-related compliance needs.View Collection