Wiggle room could be employers’ ‘Brexit’ win in working time law

Lewis Crofts

Few pieces of EU legislation are more maligned by UK businesses than the Working Time Directive.

Workers’ rights are deeply embedded in UK law and politicians could struggle to row back on those. So, while the directive may be a prominent target for Eurosceptics, its substance may survive a ‘Brexit’ and employers might win some wiggle room in the process. If the UK opts to leave the union, it is free to amend or scrap the British laws that implement EU directives; in this case, the Working Time Regulations of 1998.

But as with much labour legislation, any decision to roll back provisions would be politically tricky. It could be framed as curtailing bad Brussels law-making, but to many thousands of workers it would appear much graver: a worsening of their employment conditions.

Holiday pay calculations

Under the Working Time Directive, workers are given at least four weeks of holiday a year. But the UK law increases that to 5.6 weeks, showing Westminster went beyond the provisions of the EU legislation.

“What may change in the event of a Brexit is the way that holiday pay is calculated in the UK to reverse recent decisions requiring commission and overtime to be included in holiday pay,” UK law firm Shepherd and Wedderburn said in a note.

“The recent developments over calculation of holiday pay are only the latest in a long line of skirmishes which have also included rolled up holiday pay, holiday pay during long-term absence and the thorny issue of the opt-out on the maximum working week,” said Carl Richards, a partner at law firm King & Wood Mallesons.

“These four aspects of working time laws (at least) would likely be changed if the UK government had the option. Complete repeal is less likely, but not totally implausible.”

EU courts

As with many areas under dispute in the Brexit debate, ‘out’ campaigners point to the EU courts as having the last word over legislation. They say the judges’ powers should be curtailed. The Luxembourg-based court has ruled that time ‘on call’ counts towards the 48-hour week, and another judgement broadened the calculation of holiday pay to include commission payments and compulsory overtime.

The TUC calls these rulings ‘sympathetic’, but it is these kinds of decisions that many UK businesses see as authoritarian meddling. Employment tribunals in a post-­Brexit UK could be freed of that overarching jurisdiction. But this all depends on the future EU–UK relationship. If the UK remained inside Europe’s broader trading bloc – the European Economic Area – it would still be bound by EU employment laws. For example, Norway has to apply the Working Time Directive.

Neil Maclean, a partner at Shepherd and Wedderburn, said it was “difficult to see how the UK could expect to have a trade relationship with Europe without accepting the continued application of European employment law.”

“If we were not part of the EU, we would have no say over any new employment laws created by the institutions of the EU but might still be required to comply with them.”

Maclean said the UK government would be unlikely to remove the Working Time Regulations “in their entirety”, but that it might extend the chances for employers and employees to opt-out of parts of the laws, and it “might simplify the calculation of holiday pay.”

Professor Jason Heyes from the University of Sheffield predicts that a Conservative government post-Brexit might try to end the requirement for overtime pay to be included in the calculation of holiday pay, and ensure that on­call time not be counted as working time. It could also state that that travel time for mobile workers not be included as working time, and try to introduce greater flexibility over the timing and duration of rest breaks.

“I think much would depend on the balance of forces in the government and the amount of effective opposition to its proposals,” Heyes said. “However, it is highly likely that some dilution of the current statutory rights would occur.”

Whatever the new relationship, many existing employment contracts may reference the Working Time Directive, and so it could take a while before its effects are unwound, if ever.

Opting out

Despite the friction caused by the law and subsequent EU Court of Justice rulings, the CBI – which is in favour of EU membership – isn’t calling for an end to the law.

“Ultimately, we are in favour of the UK maintaining an opt­ out, but we are not in the camp for calling for it to be scrapped,” a CBI spokesperson told MLex.

“In many cases, the UK would be likely to regulate domestically in the absence of EU rules to maintain standards to which UK consumers and workers had been accustomed,” the CBI said in its report on EU membership.

“For example, a large proportion of the 2.6 billion pounds ($3.7 billion) per year gross cost to UK business of the Working Time Directive is the result of employees being entitled to paid annual leave. The Directive requires that workers be given at least 20 days’ paid annual leave, but the UK’s regulations that transpose the Directive go further, requiring at least 28 days.”

“With little domestic debate over reducing paid leave entitlements, a large proportion of this cost would remain if working­time rules were set domestically, rather than in Brussels.”

UK Prime Minister David Cameron originally planned to demand a full opt­out from the Working Time Directive when renegotiating with EU leaders over the UK’s membership. But that demand never materialised. Other EU states are unlikely to have swallowed any further demand in these areas. But perhaps Cameron realised that squeezing workers — even when business doesn’t demand it — makes you no friends.

Despite its bad reputation, the Working Time Directive could weather the Brexit storm without much damage. But there are plenty of other employment laws – concerning collective redundancies and temporary agency workers – which might not fare as well.

Lewis Crofts is Chief Correspondent at MLex, leaders in offering exclusive market insight, analysis and commentary