How the impending Brexit impacts the legal framework of doing business with the UK – the German perspective: Employment law

Possible employment-law consequences of Brexit could affect not only persons employed in the UK, but also companies from other EU member states and their employees.

Cross-border deployment of employees

This is particularly true with regard to cross-border deployment of employees - i.e. the posting of German workers to the UK on the one hand, and the employment of UK nationals in EU member states on the other hand. Given the free movement of workers and the free movement of services applicable in Europe, there are currently no restrictions on working throughout Europe. Free movement of workers enables all EU nationals to live in any EU member state, and to work under the same conditions of employment as nationals of the respective country. This will remain the case until such time as the UK actually leaves the EU. In view of the impending exit, companies must however adapt their contracts for postings from and to the UK, such that immediate recall is possible in the event of the posting becoming inadmissible. Whether postings to or from the UK after Brexit takes effect will require a visa, a work permit or other authorizations will depend on the results of the withdrawal negotiations.

Consequences for employee posting under social insurance law

The consequences of posting from a social insurance law perspective and what working conditions will apply in the UK after withdrawal from the EU, will then become clear. British trade unions are worried that the employee protection rights created under European law will no longer be retained at the same level after Brexit. However, as the European protection regulations, such as those on maternity leave, parental leave, equality and anti-discrimination, have been established in the UK for many years and have been implemented under national law, it is hardly conceivable that there will be any serious deviations to the detriment of employees in the near future.

Pension entitlements

Since 2004, an EU Regulation on mandatory pension payments has been applicable to employees working in different EU member states. This Regulation stipulates that mandatory pension payments should be bundled in one country if possible.

If the UK leaves the EU, the Regulation will no longer be applicable to the UK. There will then be a need for a number of bilateral regulations, if the pension payment entitlements of EU nationals working in the UK are to continue to be bundled. Conversely, this naturally also applies to UK nationals working abroad.

Co-determination

Brexit can also be of significance for corporate co-determination in groups of companies operating throughout Europe. A problem could result above all when filling specific cross-border employee bodies. The EU Works Council Directive and the EU SE Directive make it possible for British employees or their trade union representatives to participate in these cross-border bodies. Following the withdrawal of the UK from the EU, it will be necessary to create rulings to ensure that the participation rights of British employees in the SE bodies (Supervisory Board or SE Works Council) are retained. If no rulings are made, the rights of British employees to participate in such bodies will cease to exist in future.

The same applies to employee participation in a European Works Council formed under the European Works Council Directive. In the event of the EU not agreeing a new legal fundament with the UK, British employees would no longer be able to work on the European Works Council in future. The composition of the body would change. The other members of the European Works Council would have no entitlement to information and consultation concerning measures planned by the group management in the UK. The above does not apply to companies that have exercised the option of voluntary formation of European works council bodies prior to the coming into force of the European Works Council Directive and of their national implementing laws. The agreed rulings on the European Works Council will remain applicable in these companies, with the inclusion of the UK.

According to the disputed opinion of some German civil courts, employees of German corporations working in other EU countries count towards the threshold levels for the formation of co-determined Supervisory Boards, and are entitled to vote if applicable. Following completion of Brexit, it will no longer be possible to consider staff employed in the UK.

Transfer of undertakings or businesses to another employer

The UK has implemented the Transfer of Undertakings Directive into national law through the "Transfer of Undertakings Protection of Employment Regulations” (TUPE). The UK is free to deviate from these rulings following Brexit, as it will no longer be bound by the EU Directive. Following the UK's withdrawal from the EU, there is therefore the possibility of repeal or revision - unforeseeable from a content perspective - of British regulations on the transfer of ownership of an undertaking or business to another employer. Companies planning an asset deal in the UK must take account of this uncertainty.

Employee data

The smooth transfer of employee data to and from the UK will remain absolutely essential in future.

The Data Protection Directive, currently still applicable, that enables the transfer of employee data within the EU member states, would no longer be applicable to the UK in the event of a Brexit.

Following Brexit, the UK will initially be classified as an "unsafe third country" from a data protection perspective. In this case, the UK would have to demonstrate an appropriate level of data protection. Just how high the barriers to the transport and storage of personal data are in such cases, is demonstrated by the current discussions concerning the so-called "EU-US Privacy Shield" agreement with the USA. It may have come into effect, but it is anything but certain that the agreement will last and will not be declared null and void by the European Court of Justice, as was the case with its predecessor Safe Harbor. This is because there are only a few countries that are acknowledged by the EU as having a level of data protection comparable to its own. One example is Canada.

The transport and storage of personal data could therefore result in companies relocating their European business from the UK to the EU for data protection reasons. Vodafone, Barclays and Vi-sa have already expressed thoughts along these lines.