The Retained EU Law (Revocation and Reform) Act 2023 (the “Act”) has become law, seeking to redefine how EU-based laws should be treated in the UK post-Brexit. But unravelling decades of laws that have grown together is not straightforward, and the long-term impact of the Act is likely to be significant. We examine what the future looks like for employers.
What are REULs?
Post-Brexit, to ease the transition and given the amount of work required to untangle UK laws from EU laws, a new category of UK domestic law called “retained EU Law” (or REUL for short) was created. Essentially, legislation took a snapshot of EU law in force in the UK on December 31, 2020 and provided guidance on its interpretation to ensure legal certainty.
It has since been possible to remove and amend retained EU laws, but some have considered this too slow. The Act is designed to speed up the departure of UK law from retained EU law and to end its special status in the UK. As the government explained here, retained EU Law was only an intermediate measure and was “never intended to sit on the statute book indefinitely.”
How does the Act work?
We have been monitoring the Act’s path to becoming law on June 29, 2023 (see here and here) and consider the key mechanisms and impacts below:
1. Certain listed retained EU laws will be deleted at the end of 2023
The government first proposed that most retained EU laws (including those impacting employers, such as laws on working time or business transfers (TUPE)) would be deleted using a “sunset clause” at the end of 2023, unless restated or replaced. Now, only a defined schedule of just under 600 retained EU laws will be deleted at the end of 2023, with the rest remaining on the UK statute books. No key retained EU employment laws are going though, providing some immediate certainty for employers.
2. The government has wide powers to reform retained EU laws
Although no key employment laws will be deleted at the end of 2023 as discussed above, the Act gives the government wide powers to reform retained EU laws and makes removing or changing them easier, with parliamentary scrutiny considerably reduced. Employers will need to keep on top of any proposed changes.
As we reported here, the government has confirmed its immediate employment law reform priorities, subject to the outcome of its consultation (now closed). Current proposals are limited to reforms to working time records, rules regarding holiday entitlement and holiday pay, consultation requirements under business transfer legislation (TUPE) and limiting the length of post-employment non-competes. These reforms are not a “bonfire” of employment laws and, although not yet in final form, are aimed at removing some of the red tape for businesses.
It is uncertain whether there will be any more reforms in the future. A recent government policy paper, outlined that developments will focus on de-regulation, to rid “the statute book of unnecessary and burdensome retained EU laws through a process of revoke and reform…” The government also confirmed in its consultation that it is not intending “abandoning our strong record on workers’ rights…” and that retained EU employment law will be preserved in areas where it is “not either consulting on reforms or revoking legislation that is now irrelevant.” So, it is a case of watching and waiting to see what other reforms are forthcoming.
3. From the end of 2023, EU laws will no longer take priority over UK laws and key interpretative principles will fall away
Significantly, the supremacy of EU law over domestic legislation will end, all directly effective EU rights currently preserved will be removed and the general principles of EU law according to which laws are interpreted (such as proportionality) will be abolished at the end of 2023.
Removing these foundations will cause legal uncertainty from January 2024 for both employers and employees, as these EU principles have been routinely used by the courts for decades to help interpret EU-derived employment laws. For example, courts used these interpretive tools to help employers understand how holiday pay should be calculated and when annual leave can be carried over. From 2024, we could see increased litigation as employers and employees grapple with how to interpret UK laws without this framework. It could take years for some issues to reach a conclusion upon which employers can rely.
4. Courts will be encouraged to depart from retained EU case law
Although the date for when this comes into force is to be confirmed, the UK courts will be encouraged to depart more easily from retained EU case law (including decisions of the European Courts or decisions of the UK courts that applied EU law). The Act includes reference processes for the lower courts and tribunals to refer up points of law to higher courts and new tests on when the higher courts may depart from retained EU case law.
What points of law get considered first and when, will simply depend on when and what matters are brought before the courts and tribunals. The courts may, however, be reluctant to depart from previous retained EU case law particularly if they consider that it would legislate “by the back door.” Alternatively, they could make new interpretations given that EU law will no longer take priority over UK law.
5. Retained EU law will become “assimilated law” at the end of 2023 to reflect its new status
What does this mean for employers?
In the short term, nothing will change for employers, given no retained EU employment laws are disappearing at the end of the year. Also, there should be time for employers to plan before implementation of current reform proposals, as we await the precise details of anticipated changes.
However, the prevailing long-term outlook for employers is legal uncertainty. The Act enables EU-derived employment laws to be amended, changed, replaced, and interpreted differently. The future is unpredictable, with matters either being resolved through legislation reform (as with current proposed reforms to holiday pay and entitlement as mentioned above) or via litigation through the courts using the new tests and procedures. Given how UK and EU employment rights and obligations have become intertwined over decades, it will be a challenge for the government and the courts to disentangle and reshape domestic law, even with these broad new powers. Employers and employees may be in the position of simply trying to “predict” their legal rights and obligations without real certainty until issues are finally settled.
We will continue to monitor any reform proposals and case law and how it impacts employers.
