Brexit and labour standards
The United Kingdom (UK) left the EU on 31 January 2020, following a referendum in June 2016 in which 51.9% of British citizens voted to leave the EU. The UK government triggered the withdrawal procedure under Article 50 of the Treaty on European Union on 29 March 2017. The two parties then negotiated a withdrawal agreement, which allowed the UK to leave the Union ‘in an orderly fashion’ on 31 January 2020 (a process referred to as ‘Brexit’). On that date, a transition period began, which ended on 31 December 2020. During this period, the UK continued to comply with EU law, including on labour standards, and in return retained access to the internal market. This period was used to prepare for the implementation of the withdrawal agreement and to negotiate an agreement on the future relationship between the EU and the UK. These negotiations culminated on 24 December 2020 in the signing of the Trade and Cooperation Agreement.
- European Commission: EU-UK Trade and Cooperation Agreement
Fair competition to prevent social dumping
Under the new Trade and Cooperation Agreement, the UK is no longer obliged to implement EU legislation on employment. However, the UK and the EU have committed to maintaining a ‘level playing field for open and fair competition’ in relation to labour and social standards.
Some general provisions in Title XI of Part Two of the Trade and Cooperation Agreement, concerning this level playing field, aim to consolidate the objective, specified in the preamble to the agreement, of establishing ‘an ambitious, wide-ranging and balanced economic partnership’, ensuring ‘open and fair competition and sustainable development’. Within this framework, the parties commit to upholding their ‘respective high levels of protection in the areas of labour and social standards, environment, the fight against climate change, and taxation’.
Title XI responds directly to one of the priorities of the EU negotiators with regard to maintaining fair competition between the EU and the UK, namely preventing any temptation to engage in social dumping, which could give a competitive advantage to British companies.
Some flexibility is, however, allowed; the aim of this title is ‘not to harmonise the standards of the Parties’, and each is free to ‘set its policies and priorities in the areas covered by this Title, to determine the levels of protection it deems appropriate and to adopt or modify its law and policies in a manner consistent with each Party’s international commitments’.
Nevertheless, the agreement states that the UK and the EU ‘are determined to maintain and improve their respective high standards in the areas covered by’ Title XI, which introduces the idea of the non-regression clause – that is, the retention of UK legislation that has transposed EU legislation (sometimes referred to as the EU acquis). In addition to environmental standards, this concerns the social standards specified in Article 6.1 in Chapter 6 (‘Labour and social standards’) of Title XI:
- fundamental rights at work
- occupational health and safety standards
- fair working conditions and employment standards
- information and consultation rights at company level
- restructuring of undertakings
Article 6.2 paragraph 2 of Chapter 6, Title XI states that:
A Party shall not weaken or reduce, in a manner affecting trade or investment between the Parties, its labour and social levels of protection below the levels in place at the end of the transition period, including by failing to effectively enforce its laws and standards.
In other words, not only must the current standards in the five fields listed above be maintained (non-regression), but the UK must also undertake to enforce the application of these standards.
Article 6.2 paragraph 4 goes on to emphasise that ‘the Parties shall continue to strive to increase their respective labour and social levels of protection’.
Article 6.3 states that:
each Party shall have in place and maintain a system for effective domestic enforcement and, in particular, an effective system of labour inspections in accordance with its international commitments relating to working conditions and the protection of workers.
Furthermore, using the usual formulas included in EU directives on social matters, the same article states that:
each Party shall ... ensure that administrative and judicial proceedings are available that allow public authorities and individuals with standing to bring timely actions against violations of the labour law and social standards.
The aim is to provide ‘appropriate and effective remedies, including interim relief, as well as proportionate and dissuasive sanctions’. The application of the non-regression clause on levels of protection must respect the ‘role and autonomy of the social partners at a national level’.
Dispute resolution mechanisms
The settlement of disputes concerning a violation of these commitments will be carried out using procedures that derogate from those provided for in the Trade and Cooperation Agreement. Priority is given to ‘dialogue, consultation, exchange of information and cooperation’ (Article 6.4, paragraph 1). The agreement sets out two specific dispute resolution mechanisms that are relevant for labour standards. The first mechanism applies if the UK or the EU weakens its labour and social standards below those of the transition period ‘in a manner affecting trade or investment’. Either party can launch a resolution process in the event of a dispute of this nature. A panel of experts (from both the EU and the UK) will assess the appropriateness of any temporary measures. For more ‘significant divergences’ that have ‘material impacts on trade or investment’, either party may take ‘appropriate rebalancing measures’ (e.g. by implementing unilateral measures such as tariffs).