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Brexit: Legal ImplicationsBack

MILSLogo2Following the seismic decision of the British people on 23rd June 2016 to leave the European Union, many in the motor industry are understandably asking what the legal implications are for them, both in the short and long term.

Short-term economic consequences

Most economists expect there to be a short period of economic instability. Clearly, this could lead to a period of restructuring in the motor industry.  As anyone following the referendum debate will know, just how the uncertainty affects the markets and how that may impact on our industry is far from certain at this stage but over the coming weeks and months will become clearer.

Short-term legal consequences

The first point to make is that leaving the EU will mean no immediate difference to the law in the UK.  That is because we have implemented EU Directives into UK law which remain binding UK Regulations.  Leaving the EU therefore, or applying to do so in itself, will not repeal or change any present legislation or case law.  Put simply, all the laws that existed on the 23rd June continue to exist 24th June onwards.

Medium/long term legal consequences

Leaving the EU will, in the long run, give the British Government more freedom to introduce legislation, if it wishes to do so, to change employment law.

It would be wrong, however, to expect that the UK will simply be able to remove itself from all EU derived law.  In the negotiations over the coming months and years on the terms of Britain’s exit, it is likely that the other EU members will insist upon the maintenance of certain EU laws as part of the negotiation for the terms upon which the UK will be able to enter into trade and other arrangements.  It is unlikely that the EU will allow the UK to undercut member states commercially by allowing businesses to either employ workers on less onerous terms or comply with substantially different product and safety regulations, consumer law protections or competition law controls.  Part of any free trade deals therefore are likely to involve a quid pro quo with the UK Government being required to maintain a minimum parity with the EU.

Medium/long term: which laws are likely to change?

Once the UK is sovereign, in the sense it has actually left the EU (and this could be several years yet most commentators believe) the next question is which UK laws are likely to be changed?

The first point to make here is that it obviously depends on the ideological construction of any future UK Government.

Employment Law

What cannot be denied is that the EU was a powerful force for regulation in employment law i.e. constricting the classic common law position of freedom to contract.  Leaving the EU does give a UK Government more freedom to deregulate than it would previously have enjoyed in the EU, as it was bound by EU decisions.

Many of the rights now enjoyed by workers and important areas of workers protection such as the basic protections offered under TUPE, much of the discrimination legislation and family friendly rights have in large part now been enshrined and accepted in consensus by both the left and the right as important protections that will remain.  It is difficult to see any Government significantly tampering with laws for example protecting women on sex discrimination or cutting family friendly rights, as even a far right Government would be constrained by the electorate.

It is also worth remembering that many of the employment laws in this country did not  derive from the EU.  The UK led the EU in respect of discrimination law and even under the EU has frequently “gold plated” and extended UK employment protection rights beyond EU requirements.  It was always a misnomer to believe the “man in the street” that all Regulation here derived from Brussels.  Unfair Dismissal for example has always been a British creation, and one which is unchanged by the vote on 23rd June. 

Areas which in the future could be subject to scrutiny

There is no crystal ball of course, particularly in these early days, but in our view the following areas are among those most likely to come under the microscope when the UK Government has freedom to repeal European laws.

  1. TUPE: A relaxation of some of the consultation provisions and the onerous informing and consulting required under TUPE. It is also likely that a future Conservative Government (and potentially a mainstream Labour Government) would look to amend the strict rules regarding post-transfer harmonisation of terms and conditions, an area which has always been a particular concern for businesses.
  1. Collective redundancy: Is an area likely to be amended. The fact that 20+ employees at any establishment triggers collective redundancy has never been popular, so expect some diminution of the procedures here.
  1. Working Time Regulations: As commented above, in our view and in return for access to the single market, it is likely that Working Time Regulations will remain and unlikely that paid holiday will be affected. Some of the ECJ rulings however which have been increasingly criticised in this area, such as the accrual of holiday whilst on sick leave and potentially some of the developments regarding Lock and Bear Scotland (commission and overtime to be included in holiday) could be vulnerable to change.  The UK Government has also never been a fan of the 48 hour working week as a maximum so that is likely to be abolished (albeit in practical reality in this country it is generally ignored anyway).
  1. Agency Regulations: The EU Directive which requires employers to give equal terms and benefits to agency workers once they have been working 12 weeks is almost universally unpopular in the UK. Business has never liked the Regulations, as they detract from the flexible labour market and some argue the very purpose of agency staff.  Even the Unions have never been particularly vocal on agency workers protection, given the low level of union membership amongst the agency workers.
  1. Discrimination awards: There has been some comment that compensation for discrimination could be capped in the future (much like it is now for Unfair Dismissal). It is unlikely that any of the key protections such as sex, race or disability discrimination will be affected, but it is more arguable that age discrimination law could be amended, some believing that age discrimination is a different concept (we all grow old) from other protected characteristics.

Consumer Protection and Distance Selling

The UK has only recently consolidated and updated consumer protections in the form of the Consumer Rights Act 2015 and the Consumer Contracts (Information Cancellation and Additional Charges) Regulations 2013. It is unlikely that this will be affected by Brexit and there is unlikely to be any change in consumer protections in the foreseeable future.

What is less clear is whether the UK will continue with the development of the consumer based digital market. Freedom of movement within the digital market is a current priority within Europe. The UK has started down this path with significant rights being included within the Consumer Rights Act 2015.  As Europe develops this area of law any UK government will have to consider how it will independently develop this area. Whilst the UK continues to access the common market for goods and services, the UK is unlikely to significantly deviate from the European position

Competition Law and Block Exemption

The UK’s competition law is heavily based on European directives and regulations. These have been incorporated into UK law and will continue unless or until they are removed from the statute books.

European Law will continue to apply to any agreements for goods and services within the EU. Within the UK the current position is that any block exemptions are automatically translated into UK law. This mechanism will have to be considered and addressed post Brexit. Where there is more scope for divergence will be within enforcement procedures and practices. The Commission will lose any jurisdiction and powers of investigation within the UK. This will free up the UK authorities to pursue a different enforcement approach, with the potential for parallel investigations by UK and EU competition authorities where any anti-competitive actions include UK and EU Commercial entities. Whilst the UK continues to access the common market for goods and services it is likely that our competition law, any exemptions and enforcement will continue to mirror those within the EU.

Health & Safety Regulations

The UK has a well developed regulatory framework. Many detailed H&S regulations have been developed within internationally defined standards such as ISO’s. Whilst the UK will be free to legislate such matters independently of the EU position, whilst it continues to access the common market for goods and services the UK is unlikely to significantly deviate from the European position.

It is unlikely that the current UK regulatory bodies will significantly change their approach to enforcement as a result of Brexit.

Conclusions

Nothing will change immediately, so there is no need for motor traders to panic.  Neither are there likely to be any immediate legislative changes to be hoped for which will make UK law any less onerous.

Interesting times lie ahead however.  Membership of the EU since 1975 has been a very major influence on the UK and, without its constraints, the political and ideological make up of future UK Governments will have a far greater impact on the direction of travel.  That direction however has also been set by the EU over the last 30 years, which has resulted in a large degree of consensus, and this in turn means that radical changes to most areas of UK law remain unlikely.

Henry Knill & Paul Carroll, Solicitor, Motor Industry Legal Services

 

Posted by Sue Robinson on 01/07/2016