Andrew Tobey
Posted on 11 Feb 2019

Break glass in the event of no-deal Brexit

Large employers have started to give up on waiting for the government to provide certainty on any 'deal outcome', and are now firmly pressing the button marked 'plan B in the event of no deal'. Businesses are no longer prepared to wait for a last minute political agreement to be plucked from the jaws of 'no deal'.

In the pragmatic world of business, plans have to be made on the basis of what may happen and not what organisations or their Boards wish would happen. Names as diverse as Bentley Cars, Dixons Carphone and Pets at Home are already stockpiling products to guard against supply interruptions and logistics delays post 29 March. We are already seeing numerous examples of large employers such as Sony moving their HQ to Europe, and P&O Ferries reflagging to Cyprus to ensure smooth ongoing operations with their EU trading counterparts should the UK 'fall out' of the EU on 29 March, with no deal and no transition period. 

However, amidst all the swirling political uncertainty and the ever more strident proclamations from large multi-national employers about the perils of 'no deal' (such as the recent bellicose warnings from Tom Enders of Airbus), it is helpful to focus on the legal certainties in relation to employment law and workplace legislation. These should serve as relative beacons of clarity in the maelstrom of Brexit to highlight what we know definitely will happen on 29 March, whether or not a 'deal' is in place.

So, let's identify some of those (few) certainties:-

First, the EU Withdrawal Act has 'frozen' into UK law all EU derived legislation including the relevant employment legislation as at 29 March, so there will be no legal vacuum as to what laws will apply in relation to workers' rights or otherwise. This will provide both employers and lawyers with a welcome degree of certainty on 30 March. 

Secondly, it has now been made clear through published government policy that all EU citizens presently living or working in the UK are entitled to apply for settled status, and if you have been living here for five years, you will obtain full UK residency rights immediately. If you (as an EU citizen) have been living here for less than five years on the date you apply you will qualify for interim residential status with protected rights of residency pending full residency qualification once you have completed your five years. If there is a deal and the transition period applies, the right to apply for settled status for EU resident workers will remain open until 30 June 2021, on condition that they were living in the UK by 31 December 2020. If there is no deal and no transition period, then the worker will need to be living in the UK by the 29 March 2019 exit date, and must apply for settled status by 31 December 2020. There is no basis for the exaggerated rumours of enforced repatriation for UK-based EU workers.

Thirdly, the Prime Minister has declared publicly that the Government has no intention of diluting existing workers' rights after the Brexit date. This should provide some comfort for those worried about the government embarking on a Singapore-style de-regulation of the economy resulting in the wholesale stripping away of workers' rights. 

These are three clear messages of certainty and reassurance that employers can communicate to anxious EU workers, to help steady their nerves and encourage them to stay. Nevertheless, we are hearing from many of our larger employer clients that the practical reality on the shop floor is much less clear-cut and rational. It cannot be denied that significant industry sectors throughout the UK (and particularly in the South West) such as health, construction, hospitality and agriculture rely on very large numbers of EU workers in order to function. 

We are receiving reports from our clients in these sectors that substantially greater numbers of EU workers are deciding to leave the UK than are being replaced by new arrivals. Pools of unskilled factory labour which were previously readily available to larger employers, and which were principally made up of EU nationals (particularly from the Eastern member states) are now not present in the numbers required, and British workers are not coming forward to fill the gaps. 

This situation is not likely to be alleviated by the government's indicated post-Brexit immigration policy, which will be skewed towards skilled workers being given preference. Another factor pulling EU workers back across the Channel to their motherlands is the increasingly bright economic outlook for countries such as Poland (currently experiencing high levels of GDP and wage growth), when set against the uncertainties surrounding the UK economy.

At the higher executive level, for many larger corporates such as Sony, moving their HQs out of the UK to the EU is far from being a simple balance sheet exercise. Under this scenario key senior staff have to be relocated physically from the UK to the new HQ location.  This can entail family moves which uproot children from established schools, often requiring senior executives to be 'incentivised' to transfer abroad through a substantially enhanced salary and benefits package. All of these factors add to the top line. Often delicate relocation negotiations also take time, which is something that all organisations are now short of in the run-up to 29 March. 

An added complication of moving staff to a new EU jurisdiction on a permanent basis is the extra burden of the employer becoming subject to the more highly-regulated labour laws of the majority of our EU neighbours (such as the substantially enhanced unfair dismissal protections that apply in France). Frequently, companies do not fully appreciate this issue until they are faced with an expensive termination claim in a foreign jurisdiction.

To sum up, these remain very uncertain times for employers trying to plan for a deal or no-deal outcome. In terms of supply chain interruptions, or working out how to fill EU worker staff shortages, it may well be that the best tactic for now is to focus on the few known legal certainties, such as the preservation of existing workers' rights and legislation. These, and reminding worried EU staff of their right to apply for settled status, may persuade workers to stay put.  At the same time, employers will need to put in place those essential staff moves to allow for a Plan B 'no-deal' exit should that come to pass. Keep calm and carry on.

 

If you would like more information on this topic, please contact Andrew Tobey, Partner and Head of Michelmores' Employment team.