As of 1st January 2021, the 1246 pages “Trade And Cooperation Agreement Between The European Union And The European Atomic Energy Community, Of The One Part, And The United Kingdom Of Great Britain And Northern Ireland, Of The Other Part” became operational. It covers all different matters where EU regulation previously applied, including trade, transport, law enforcement and judicial cooperation in criminal matters, and various protocols on cooperation and mutual assistance.
Concerning employment law, the agreement allowed to bypass the two red lines advanced respectively by the EU and the UK. The EU was not ready to accept an unfair competitive advantage for the UK labour market based on employment law, while UK wanted to maintain its sovereignty in regulating employment and working conditions.
Through the agreement, for the current regulations on employment, the UK committed not to reduce levels of labour and social protection of existing laws which may have a material impact on trade and investment.
For future changes to the employment law, any substantial divergency that has a material impact on trade and investment would not be in line with the agreement.
“If material impacts on trade or investment between the Parties are arising as a result of significant divergences between the Parties [...], either Party may take appropriate rebalancing measures to address the situation. [...]”. Consultations with the other Party must be started to find a mutually acceptable solution, otherwise an arbitration tribunal must deliver its ruling on the rebalancing measures that could include introducing tariffs on trade.
Among the provisions where UK employment law cannot be changed in the future, there are “fundamental rights at work, health and safety standards, fair working conditions, [...] information and consultation rights at company level and restructuring of undertakings”. It can change other employment provision such as the holiday pay provisions, for instance, in a way that would not affect trade and investment. This subject has already been discussed nationally and would modify the annual rest provisions that were introduced through the law implementing the EU Working Time Directive.
What remains unclear is how and to what extent the UK will implement the recently adopted Directives, namely the “Whistleblowing Directive”, “Transparent and Predictable Working Conditions Directive”, “Work-Life Balance for Parents and Carers Directive”, since it has already started to change its legislation accordingly.
It is also unclear as to the role played by the European Court of Justice on UK regulations implementing EU Directives. The UK is no longer required to respect and follow the European Court of Justice decisions. However, changes to previous employment legislation (or not alignment with EU Court of Justice decision) that have an impact on trade and investments may be subject to rebalancing measures.
With regard to social security, the Agreement contains a “Protocol on Social Security Coordination”. According to this Protocol, “crossborder workers and their employers are only liable to pay social security contributions in one state at a time. Generally, this will be in the country where work is undertaken, irrespective of whether the worker resides within the EU or the UK, or indeed whether the employer is based in the EU or the UK”. The rule on the place of work does not apply to detached workers, for work of a duration of less than two years and always if the EU country where the employee is temporarily detached has also decided to apply the detached workers rules. In this case the employee pays his/her social security contributions in the country where his/her employer is based.
“UK employees working in two or more EU countries or Switzerland should continue to only pay social security in the UK, provided they carry out more than 25% of their work in the UK”.
The changes to the principle of free movement of persons and the mutual recognition of professional qualifications will be dealt with in our February 2021 Newsletter.