July 05, 2016
Employment Law Alert
Author(s): Jeffrey M. Tanenbaum
In this alert, we explore EU attorneys’ early perspectives on Brexit and how employers may be affected.
Commentary provided by guest attorneys Pascal Guinot (AgonLex; Paris, France), Karolina Schiffter (Raczkowski Paruch; Warsaw, Poland), Bram Van Melle (Everaert Advocaten; Amsterdam, The Netherlands), and Tommy Angermair (Kirk Larsen & Ascanius; Copenhagen, Denmark)
As a follow-up to our earlier alert on Brexit and U.S. employers (available here), we thought you might find it interesting to hear preliminary thoughts from some of our attorney colleagues in the EU:
This is the first time that the EU has had to face the departure of an EU member, and the EU therefore has no experience in, and the European Treaty does not have key rules for, organizing an exit. Specialists in European Affairs predict that it will take several months, even years to organize all of the details. Thus we are anticipating a lengthy and uncertain transition period.
EU members and the UK could also decide to organize their future relations through bilateral agreements. Such agreements currently exist, for example between the EU and Switzerland, with employment law rules facilitating the mobility of workers between the two nations. The UK could also decide to try to join another group of countries, for example the EFTA Group (Norway, Iceland, Liechtenstein and Switzerland). EFTA is not part of the EU but has privileged relations with the EU and applies some parts of EU legislation.
In some very specific areas of the employment law, if the UK does exit the EU, the UK will likely decide to back off or abandon some EU principles so as to take its own approach. This seems more likely in areas of employment law, which have been a source of controversy between the UK and the EU over the last years, such as working time legislation, posting of employers and immigration legislation.
As a consequence of a UK exit from the EU, it would seem no longer possible to apply EU social security and immigration legislation to the UK (such as payment of social security contributions in one EU country only where the employee is working in several EU countries or when the employee is working in one EU country and is living in another and EU citizen rights to live and to work in any other EU countries).
However, during the transition period, the status quo is likely to maintain, and we assume transitional rules will be defined in order to ensure that any EU citizens already in the UK will continue to have the right to live and work in the UK and the same for English people living and working elsewhere in the EU.
Interestingly, in the midst of this uncertainty, we are also already seeing competition developing between EU countries to take advantage of potential opportunities linked to Brexit with EU members trying to entice groups and companies to relocate their current UK operations to their own nations. France is on the starting line here and can tout business climate improvement thanks to several reforms undertaken over the last years. Some further reforms would be helpful such as tax reforms and reforms related to the Labor Code, but given the upcoming presidential election, next year, it is not the best political time to undertake large scale projects. However, as a French business newspaper recently wrote: “if we do not take advantage of that chance, other EU countries will do it.”
I agree that in the short-term we are not likely to see significant changes. On a longer time scale, Brexit could have a significant impact on employers and employees in Poland since there are a large number of Poles working in the UK. In the event the UK does not adopt any special arrangement with the EU with regard to free movement of workers, many of the Polish workers in the UK will acquire the same status as employees from third countries now, and will need work permits in order to continue working in the UK. Depending on how rigid the UK provisions in this respect will be, this may cause many of the Poles in UK to return to Poland—and such a significant influx of workforce back to Poland would definitely affect the Polish job market and may have political consequences (e.g., it may increase the political pressure on raising the minimum wage).
In The Netherlands, we have largely been taking a wait and see approach. And this seems sensible as much is undecided, even whether the UK will exit the EU at all. Indeed in recent days we have seen petitions in the UK to hold a new referendum and the emergence of #bregreters. Further, to even activate Article 50 and start the exit process, the UK has to first make a request to do so, and it appears this preliminary step may not even take place until after UK PM Cameron steps down.
Unless and until the UK effectively leaves the EU according to Article 50, the Brexit vote is not expected to have any significant impact on the Danish labor market, except for the fact that Danish companies are likely to be hesitant to post/second employees to the UK until the legal ramifications of the UK exit and the timing thereof are known. In terms of politics, certain right-wing politicians have called for a referendum deciding whether or not Denmark shall stay in the EU. For now, the Danish Prime Minister has clearly rejected the notion of any such referendum, and it does not appear likely that it will take place.
If the UK exit becomes reality it will potentially have several consequences for employers in Denmark—depending on the outcome of negotiations regarding cooperation between the EU and UK as well as any bilateral agreements with Denmark.
Denmark is very dependent on trade with the UK so in the event of a UK exit the Danish government is very likely to reach mutually beneficial bilateral agreements with the UK over time although Denmark’s ability to do so will obviously depend on the EU’s general stance toward the UK. It is expected that a UK exit will result in restrictions on the access of EU member state citizens to the UK labor market (and vice versa) and a departure from a number of the key directives governing the labor market, which will make it more difficult for Danish employers with activities in the UK to manage their workforces efficiently.
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