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Employment Rights following The Trade and Cooperation Agreement

Brexit EU UK divide

This article considers the implications for UK employment law of the Trade and Cooperation Agreement (TCA) between the European Union and the United Kingdom.

Whilst no immediate changes have been made, there are three factors that will now shape the relationship between UK employment law and our former EU partners.

The Level Playing Field Commitment

As part of the TCA, the UK has committed to a promise that it will not diminish the employment rights that were in existence in the UK as at 31 December 2020. However, this promise is intended to prevent unfair competitive advantage and it only extends to changes in employment rights (or their enforcement) that materially impact trade or investment.

If the EU believes that a material change has been made, a process is triggered under the TCA that will seek to resolve the dispute.  If not resolved, it could ultimately lead to the imposition of what are termed “rebalancing measures”, which could include tariffs or other trade barriers.

The concept of a “material impact on trade or investment” is extremely vague.  Arguably, a reduction in working time rights, or minimum wage standards, or health and safety protection could be said to impact trade and investment by making the UK a less rigorous environment for businesses.  However, whether any change or series of changes has a material impact on trade or investment would almost certainly have to be determined under the dispute resolution mechanism.

Nevertheless, this does impose some degree of constraint on the ability of UK governments to introduce changes to employment rights.

Retained Law

The EU derived employment legislation which was incorporated into UK legislation prior to 31 December 2020 (such as elements of the Equality Act, the Working Time Regulations and TUPE), remain in full force and unchanged.

A technical point is that whilst EU Directives no longer have to be implemented in the UK, decisions of the European Court of Justice about EU law will in some circumstances continue to be relevant.  Employment Tribunals and the EAT must continue to take into account pre-31 December 2020 decisions – only the Court of Appeal or Supreme Court may choose to depart from them.  Whilst not a principle that has great day to day impact on employers, it may affect the approach that their legal advisers take to the advice that they give or the course that Tribunal disputes take.

In some cases, post 31 December 2020 decisions of the European Court of Justice will remain relevant, but whether or not that applies will be have to be argued in the courts and tribunals.


We may see divergence from established principles of EU law over time in two ways.

First, in making decisions about areas of UK law that derived from EU law, the senior UK courts may choose to depart from EU law if they consider it right to do so.  It is difficult to predict the extent to which they may do so and indeed such freedom may be of limited value since the EU employment rights which have already been implemented into domestic legislation must still be interpreted in accordance with EU law (notwithstanding the fact that the power of the EU to legally challenge any failure to do so has been diluted by Brexit).

Whilst the UK courts and Tribunals may not be bound by future ECJ decisions, we expect they will be inclined to follow ECJ decisions in the short-term until there is more certainty and guidance in respect of the principle of divergence.  In particular, tribunals and lower courts may err on the side of caution on the basis that a failure to conform to ECJ decisions could give rise to appeals and protracted litigation.

Second, with regard to any future legislation on employment rights, the UK will no longer be required to implement or follow EU directives, regulations and decisions concerning employment rights. However, if the UK diverges significantly from the EU’s principles of employment protection and trade or investment is materially impacted as a consequence, the provisions of the TCA described above would apply.

It seems inevitable that there will be future disagreements and tensions between the UK and EU as to what constitutes a significant divergence and the subsequent impact of such changes on trade and investment. It will therefore be interesting to see how far the UK is prepared to test the limits in respect of employment law changes and how quickly employment law evolves in the future.

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