Retained EU Law (Revocation and Reform) Bill – what is it likely to mean for employers?

What is the Bill about?

The Retained EU Law (Revocation and Reform) Bill is a proposed UK law that would repeal the European Communities Act 1972. This Act currently provides for the implementation of EU law in the UK. However when the UK left the European Union, the UK and the EU signed the 2018 European Union (Withdrawal) Act which gave the UK, legal authority to retain UK legislation that was derived from European legislation and case law.
If the Bill is passed, it would end the authority of EU law in the UK and give the UK Parliament the power to amend, repeal or revoke EU laws currently in force, including European case law. The impact of the Bill on employment is unclear at this stage, as it would depend on how the UK government decide to exercise its powers to amend, repeal or revoke EU laws.

In theory, the Bill has potential for significant changes to UK employment law, something the UK hasn’t seen in decades. However, the UK has a long-standing history of providing enhanced employment protections compared to other western world countries and it would be difficult to see how many of the UK’s employment protections that stem from European law would regress to prior to when the UK was in the EU. Furthermore, it is understood that the UK government does not intend to make significant changes to employment law because of it, although it is unclear what this means in practice.
Included in the Bill is a ‘sunset clause’ which is a provision within a Bill that gives an expiry date, one the Bill becomes law. In this case, section 1 of the Bill effectively states that all UK legislation that is derived from the UK’s relationship with the EU from over the last forty years will automatically cease to be law at 31 December 2023 unless the Government make a decision on each piece of legislation on whether to amend or reaffirm it as law. The Bill does allow for an extension to this sunset clause, but it cannot be later than 23 June 2026.

For context, there are believed to be 2,417 pieces of retained EU law across 300 policy areas, according to the UK Government’s dashboard, although there is potential for there being more. Not all of these relate to employment, for example, there are 588 which relate to the environment, 493 relating to agriculture, 58 related to Health and Safety etc. In the policy area of Business, Engergy and Industrial Strategy, the area where workers rights fall under, there are 337 pieces of retained EU law operating in the UK.
Latest position (3 May 2023)

Parliamentary process

The Bill is in the latter stages of the parliamentary process and is at the report stage of the House of Lords. This report stage will take place from 15 May 2023 and will be when a detailed examination of the Bill takes place, with any further amendments being put forward and voted on.

After this, the Bill is re-printed with any agreed amendments ready for a third and final reading. Assuming no further amendments, the Bill must then be agreed by the House of Lords and the House of Commons before being passed on to the Monarch to become law (i.e. be given Royal Assent).

Speculation

There is speculation in the media about changes to this Bill, as well as delays in its progress through parliament.
The issue of the UK leaving the European Union has been contentious and continues to be and with a General Election expected in Spring 2024, the speculation is around the date of the Sunset Clause. As it stands, if the Bill is passed, then the Government would have over 4,000 pieces of legislation to either retain, amend, or repeal by 31 December 2024. With the enormity of this challenge and the political ramifications, it is being reported that the Government could delay or remove the Sunset Clause.

The current version of the Bill does contain a clause that would allow the UK Government to move the sunset clause, but the new date cannot be later than 23 June 2026.

Many business groups and trade unions have been alarmed about the proposed timeframe for ending (or amending/keeping) EU derived legislation. The current Secretary for the Department for Business and Trade has allegedly hinted this week that the process in seeking to improve EU laws could not be rushed. A Government spokesperson told the Financial Times this week that the Government “remained committed to ensuring the Retained EU Law bill receives Royal Assent and that the supremacy of EU law ends with unnecessary and burdensome EU laws removed by the end of this year.”

UK Employment law underpinned by EU law
There are several pieces of UK employment legislation that derive from EU legislation and case law. We explore what these are below and provide a perspective on the likelihood of them being abolished or re-stated (which could be with or without amendments).

TUPE
TUPE stands for the ‘Transfer of Undertakings (Protection of Employment) Regulations 2006’ and has been a fundamental business tool for decades, going back to 1981. It would seem unlikely that this legislation would be abolished. There are though some areas that could be simplified or harmonised with other pieces of legislation which may see some changes occur. For example:
1. The legal requirement to consult under TUPE differs to the legal requirement to consult for Redundancy purposes. It would seem sensible for practical reasons, for there to be just one set of rules around consultation, after all, in both processes, the aim is the same – to engage with employees about proposed changes within the business.

2. Another area that has the potential to be amended is the current restriction to harmonise terms and conditions of employment following a TUPE transfer. This is an area that is challenging for businesses so to have clarity and improvements in this area is likely to be welcomed.

Working Time Regulations
The Working Time Regulations is UK legislation which stems from European law, the Working Time Directive. It sets out rules on working hours, rest breaks and annual leave, and is a piece of health and safety law as it is about having adequate rest periods and breaks from work.
It is extremely unlikely these would be abolished, given they are in place to protect the health and safety of workers, and to do so would be a significant step back in worker protection. However, with the UK having been impacted over the years by various European case rulings we could see some changes though as noted below.

Annual leave – Entitlement
The UK enhanced annual leave entitlements when adopting the EU Directive. Rather than workers being entitled to four paid weeks of annual leave, as the Directive stipulated, the UK award 5.6 weeks of paid annual leave. So, it is unlikely that there will be changes to this.

Annual leave – Pay
Holiday pay is an interesting one, and one that has caused confusion for many employers. Since the European case ruling of Lock v British Gas, UK employers have been legally required to calculate holiday pay based on actual earnings that include overtime, bonus etc and not just on basic pay.
We could see this ruling being revoked and the UK return to the position before which was to calculate holiday pay just on basic pay.

Harpur Trust v Brazel
Everyone will be familiar with the Hapur Trust v Brazel case which in 2022 confirmed that all part year and irregular hour workers must receive the full 5.6 weeks paid annual leave. This was a case that challenged the operation of the Working Time Regulations, which is UK domestic law and not the Working Time Directive, which is a piece of European legislation. This means that the Retained EU Law (Revocation and Reform) Bill cannot change this. Furthermore, what constitute’s a week’s pay for the purpose of calculating holiday pay is defined in the Employment Rights Act 1996 which is not European legislation.

Annual leave – carry over
This is another area of UK holiday law that has been impacted by European court judgements. In Schultz-Hoff v Deutsche Rentenversicherung Bund and Stringer and others v HMRC, the European Court of Justice held that the Working Time Directive (European legislation) allowed EU member states, (i.e., to include UK) to prevent workers from taking annual leave during periods of sickness provided that they were permitted to take the leave at some other time, i.e. carry over into the next holiday year. This could be another area where we may see change under the EU Reform Bill.

Rest breaks
In 2015, the European Court of Justice made a significant ruling on the interpretation of working time under the Working Time Directive.
In case ‘Federacion de Servicios Privados del sindicato Comisiones obreras v Tyco Integrated Security SL, Tyco Integrated Fire and Security Corporation Services SA’, the European Court of Justice ruled that for mobile workers (known as peripatetic workers where workers have no fixed base and travel to and from appointments during the course of their working day), time spent at the beginning and end of the day amounted to ‘working time’ because the employees were carrying out their duties over the full duration of the day.

Maximum 48 hour week
This is another area of the working time regulations that is seen as red tape to businesses, and in practice not necessarily managed. It currently requires a limit to the working week of no more than 48 hours, but which is calculated over averaging out hours worked over a 17 week reference period.
Given the bureaucracy around managing this, plus the need for the UK economy to recover post COVID-19, there is a reasonable chance that this could go.

Agency Workers
In 2008, the EU introduced the European Agency Workers Directive, which set out laws for non discrimination on the conditions of work and employment between temporary workers via an agency, and workers who are recruited by an employer. The principal was to ensure equal treatment to agency workers.
Consequently, the UK incorporated this Directive into UK domestic law in 2010 and the Agency Worker Regulations 2010 were formed. These Regulations give agency workers who have 12 weeks service with a hirer a legal entitlement to be paid the same basic working and employment conditions to those who are employed directly by the employer.

It has been reported previously of the desire to abolish these Regulations by the UK Government, and it is well known that they are unpopular within business. There is a strong chance that with the opportunity presented to Government to make decisions on UK law derived from EU law, that these could be abolished.

Discrimination
Our discrimination laws have come about over time either as a UK specific domestic law, such as sex, and race. Or has been introduced by the EU and therefore adopted by the UK into domestic law (age, religious belief). Regardless of this, it would seem very unlikely for the UK Government to remove any of these protections, especially as the UK has a long standing history of enhancing worker rights.

However, in discrimination cases, there is a cap in the amount of compensation awarded. In the past, it has previously been considered whether to have this capped, just like it is for a basic award in an unfair dismissal case. There is a possibility therefore that if there was to be a change to discrimination rules, then this could be an area where we see change.

There are other areas of discrimination law such as the Part Time Worker Regulations and Fixed Term Worker Regulations. Again, with the UK having high standards in discrimination laws it would be difficult for laws in these areas to be abolished.

Family Friendly
Again, many of our family friendly laws stem from EU Directives and it is difficult to see how these would be allowed to end after 31 December 2023.
However, equal pay for equal work is one of the founding principles of the Treaty on the Functioning of the European Union (TFUE) (Article 157). Currently, equal pay claims in the UK rely on this fundamental principal and in interpreting the Equality Act 2010, so it is possible there could be some clarity given moving forward in this area.