Five Brexit risks employers should plan for

Theresa May arrives for the most recent EU summit in Brussels
Olivier Matthys/AP/REX/Shutterstock

With Brexit headlines seeming to contradict each other every day, employers lack certainty around workforce planning. Dan Peyton from law firm McGuireWoods looks at five areas where organisations can begin to make plans.

A Brexit transition period has now been agreed, to last from the day the UK formally leaves the EU on 29 March 2019 until 31 December 2020, while the parties negotiate the terms of the UK’s post-Brexit relationship with the EU.

In the meantime, we have become accustomed to speaking of the uncertainties surrounding Brexit, which has encouraged a “wait and see” approach for many employers.

It is difficult to justify making difficult and costly changes in circumstances where it is not yet clear whether these will be necessary.

However, despite this uncertainty, employers that leave their planning too long risk finding themselves in serious difficulty.

Below, we identify five areas of particular employment-related risk and identify some steps that employers and HR should consider taking now.

1. Free movement of workers

It is highly likely that the UK’s immigration regime will change following Brexit. This may leave businesses at risk as a result of losing workers, either by virtue of the number of affected workers or because they occupy key roles.

Therefore, employers should take steps now to identify which of their staff who are EU nationals resident and working in the UK have accumulated rights to remain in the UK/EU and those who could be vulnerable. The same exercise should apply to UK nationals living and working in the EU.

An assessment will then be necessary to establish who of these potentially affected workers occupy key positions by virtue of seniority, revenue generation or unique skill sets.

This exercise will at least enable employers to identify areas of risk and to consider contingency plans to retain or replace key affected workers if this proves necessary following Brexit.

2. Jumping the gun

A natural solution for employers who identify risks arising from possible immigration changes would be to start replacing likely affected workers and to cease recruiting EU nationals to work in the UK and vice versa.

This approach might be objectively justified in some cases. However, until March 2019, and likely through the transitional period to 31 December 2020, the UK will remain subject to applicable EU and current domestic laws and such an approach runs the risk of giving rise to discrimination claims.

3. Upskilling and relocating workers

A related risk is that of a developing skills deficit, either as EU workers anticipate developments and choose to leave or are forced to do so once the UK leaves the EU.

The fact that potential replacements will have notice periods and may have post-termination restrictions, let alone any shortage of home grown talent, may delay the hiring of replacements.

Therefore, employers should now identify key skills likely to be affected and begin planning how to provide the training and experience to plug the skills gap.

Equally, it may be clear that some workers simply cannot be replaced in this way. In these circumstances, businesses should begin planning to ensure the retention, and facilitate possible relocation of, such workers.

The timeline for such steps should be taken into account now as this will involve considering commercial, practical and legal issues under UK employment law and the local employment and other laws of any destination jurisdiction.

4. Relocating services

Employers may face difficulties if certain aspects of their business are organised across different jurisdictions. For example, some businesses have centralised aspects of their internal services outside the UK, such as accounting, IT and some HR and legal services, involving the provision of services and the transfer of data in and out of the UK.

There is a risk that aspects of these shared services may be affected by the terms on which the UK leaves the EU and any subsequent divergence between UK legislation and the current EU legal standards.

Therefore, employers should consider contingencies in respect of these services. They need to examine whether the IT infrastructure and personnel are in place to service UK needs locally if necessary and to what extent it will be necessary to recruit and train UK-based employees to provide certain services locally.

5. Protection of business assets

It’s also important to think about the future enforceability of contractual protections, notably post-termination restrictions.

Enforcing such protections across borders is complicated by the fact that some jurisdictions treat such provisions as being matters of domestic public policy and either enforce them narrowly or not at all in accordance with their own laws, especially where injunctions are sought.

However, it is currently relatively straightforward to enforce judgments of the UK courts across the EU and vice versa, especially in relation to monetary judgments.

While there may be little immediate practical change in the enforcement of judgments across the EU once the UK leaves, employers would be wise to assess the protections they currently need and those they have in place.

It is important to understand the nature and scope of current protections and the extent to which they are likely to survive any possible business changes that may be necessary following Brexit.

Dan Peyton

About Dan Peyton

Dan Peyton is an employment lawyer and the managing partner of international firm, McGuireWoods
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