The government has announced that the majority of retained EU laws will be “sunset” on 31 December 2023, enabling the UK “to create regulations tailor-made for its people”. Employers should expect a period of rapid change to the employment law landscape in the UK. We take a look at the proposed changes and answer some key questions.
Background
When the UK left the European Union at the end of the transition period on 31 December 2020, provisions were put in place to avoid the creation of a legal vacuum. With limited exceptions, a “snapshot” of EU law was taken at this date and transposed into domestic law, known as “retained EU law”. It was anticipated that Parliament and the courts would diverge from EU law where there was political appetite to do so, by enacting domestic legislation or by way of a judgment of the Supreme Court or Court of Appeal (and its equivalents in the devolved nations). Change was expected to be steady and measured.
The government introduced the proposed by the Retained EU Law (Revocation and Reform) Bill 2022-23 into Parliament on 22 September 2022. The overall purpose of the bill is to expedite the UK’s divergence from retained EU law by downgrading its status relative to domestic law.
Sun setting on retained EU law
A number of significant employment laws could be revoked at the end of 2023, unless the government takes positive action to preserve them. The bill gives the government the power to extend the revocation deadline of a specified piece of legislation (or certain of its provisions) beyond the end of 2023, provided that the deadline for revocation is no later than 23 June 2026.
Which employment laws could be revoked?
Most EU-derived subordinate legislation and retained direct EU legislation fall within the provisions of the bill. This includes statutory instruments made to implement EU directives (such as the Transfer of Undertakings (Protection of Employment) Regulations 2006 and the Agency Workers Regulations 2010), but only insofar as those regulations operate to implement EU law.
Which laws will not be affected?
Primary legislation (that is, Acts of Parliament), such as the Equality Act 2010, will not be revoked under the bill. Likewise, most EU law relating to financial services and EU law which applies to the UK under the Withdrawal Agreement will also be out of scope.
Which other rights may be impacted?
After 2023, individuals will no longer be able to rely on directly effective rights derived from EU provisions unless the government takes positive action to reproduce the effect of such rights in domestic legislation. These are rights in EU provisions that are sufficiently clear, precise and unconditional to confer rights directly on individuals and can be relied on in national courts without the need for national implementing measures, for example, the right to equal pay under the Treaty on the Functioning of the European Union.
What action is necessary to preserve in-scope laws?
The bill contains provisions for the government to maintain the status quo and preserve legislation (or certain provisions) by making statutory instruments. It is expected that the government will review all in-scope legislation before the end of 2023 to determine which legislation meets the government’s policy objectives and should, therefore, be preserved. All remaining in-scope legislation will be revoked at the end of 2023 unless the government exercises its power to postpone the revocation deadline in respect of certain legislation or provisions.
Will it be easier to amend retained EU law?
Currently, retained direct principal EU legislation, together with certain EU-derived rights, powers, liabilities and obligations, can only be amended by the passing of an Act of Parliament (with limited exceptions). The bill intends to make it easier for these categories of laws to be amended, including by the making of statutory instruments, which require a lower degree of parliamentary scrutiny. As such, although direct principal EU legislation falls outside the scope of the sunset provisions in the bill, it will be easier for the government to amend such legislation going forward.
What is the new order of priority for employment laws?
In most cases, retained direct EU legislation takes priority over conflicting domestic law passed or made before the end of the transition period. However, the bill provides that, after the end of 2023, this will no longer be the case. Where there is a conflict between domestic legislation and retained direct EU legislation, domestic legislation will take priority and any retained direct EU legislation must, so far as possible, be given effect in a way that is compatible with domestic legislation. The bill does provide that certain domestic legislation may be restated as being subject to retained direct EU legislation.
How will the courts interpret retained EU law?
At the moment, in England and Wales, only the Supreme Court and the Court of Appeal may depart from retained EU case law and only “when it appears right to do so”. Lower courts and tribunals are bound by decisions of the Court of Justice of the European Union (CJEU) that had effect before the end of the transition period. This includes the volume of CJEU decisions about holiday pay and accrual and also the application of the Acquired Rights Directive. The bill provides new tests for departure from retained EU and domestic case law which include a consideration of the extent to which the retained case law “restricts the proper development of domestic law”. The bill also provides a new procedure to enable lower courts and tribunals to refer points of law relating to retained case law to a relevant higher court. The effect of the bill will be to make it easier for UK courts and tribunals to depart from case law that has derived from the CJEU.
What should employers expect?
Firstly, the bill will need to progress through Parliament and be subject to the usual scrutiny and voting processes, before it is passed into law. Although the bill gives the government and courts significant powers to overturn established employment law that has derived from Europe, the UK is still restrained by the terms of the Trade and Cooperation Agreement entered into between the EU and UK, under which the UK committed to maintaining a level playing field in terms of "labour and social levels of protection", including in relation to fair working conditions and employment standards.
Also, although certain aspects of EU-derived employment law are unpopular, others are fully enshrined in domestic working practices and culture and the UK has, in some cases, enacted laws that have gone further than simply implementing European laws. It is, therefore, unlikely that we will see a wholesale repeal of EU-derived employment law; but we may well see changes to discrete elements, such as around holiday pay and agency workers. At the moment, the landscape is uncertain and there is very little that employers can be doing to prepare for impending change, until the government confirms its policy intentions.
Lloyd Davey
Sarah Taylor