Gig-economy rules are new Brexit flashpoint

9 February 2018 5:52pm
Flags in Wind

8 February 2018. By Matthew Holehouse and Lewis Crofts.

Fast-food couriers, warehouse workers and minicab drivers are the new Brexit flashpoint.

In the talks on the UK's EU withdrawal, two issues stand out as especially sensitive. One is the implementation of new EU law during a transition period after March 2019, when the UK will lack a vote in EU decision-making.

The other is the “level playing field” — the EU’s desire to bind the UK into common standards on state aid, labor law and environmental regulation to prevent British companies from undercutting rivals in the bloc.

British lawmakers see the issues coming to a head soon in the Working Conditions Directive, a proposed EU law to give workers in the so-called gig economy the right to more stable contracts.

While the UK is also beefing up its employment laws in this area, amid growing attention from courts and regulators at the working conditions in the casual labor market, the EU’s measures go much further. British ministers say they amount to an unreasonable and ill-considered restriction on employers’ flexibility.

Gig economy

The proposed directive, unveiled before Christmas, seeks to create new EU-wide minimum terms for people working precarious hours.

The EU measures will curtail the use of exclusivity clauses, which tie workers to one employer. In the UK, these are already banned for zero-hours contracts, where a worker is not guaranteed an income or fixed hours each week. The EU proposals would go further, covering most types of employment.

The EU legislation seeks to give workers more predictability in their working times by obliging employers to give “reasonable advance notice” of shifts. It also proposes capping a worker’s probation period at six months. This clause, the commission says, is aimed particularly at the UK and Ireland. Under UK law, the right to bring an unfair dismissal lawsuit only accrues after two years’ employment.

The EU argues that uneven national labor rules pose a competition problem. “There is a risk of a race to the bottom in standards applying to new forms of work where the regulatory framework is weaker and more patchy across member states,” the commission said in an impact assessment published on Dec. 21.

The rules are also part of a response by the EU's leadership to Brexit, reasoning that anti-EU parties are gaining support on the back of blue-collar workers' anger at declining pay and conditions.

UK concerns

Some provisions in the proposed EU package overlap with what the UK government set out in a feedback-seeking exercise this week to give working conditions more transparency. This followed recommendations in a government-sponsored report into growing levels of self-employment and casual contracts in the UK labor market, known as the Taylor report.

The UK, like the EU, wants to ensure all casual workers receive their employment terms in writing when they start a job. The UK is also proposing a new right for agency workers to request a permanent contract.

But while UK ministers say they support the EU’s objectives overall, they regard its approach as overly restrictive.

In a memo to the European Scrutiny Committee — a panel of UK lawmakers that examines proposed EU legislation — Andrew Griffiths, a business minister, said the government is concerned that the clauses on probation periods could unjustifiably interfere with UK rules on unfair dismissal.

The measures could also inadvertently “damage workers’ rights rather than enhance them,” the minister said. “The ability to extend a probationary period is an important tool for an employer to assess a worker's performance and, on some occasions, give them a 'second chance.' ”

A tighter regime on exclusivity contracts may also impact workers in full-time contracted employment who are not covered by the current UK ban, Griffiths said.


UK ministers have regularly sought to trim what they regard as heavy-handed or ill-considered EU employment laws. This isn’t out-of-the-ordinary behavior.

But the measures risk embarrassing the government as it pursues a Brexit transition period of around two years, during which it must implement new EU legislation.

Griffiths said it is too soon to say whether the UK would be obliged to implement the latest directive, given the uncertainty of the EU legislative timetable. His memo suggests the UK may see grounds to challenge the legal basis of the policy, forcing a unanimous vote of all EU states and therefore delay its implementation until after the UK has left the bloc.

But lawmakers on the European Scrutiny Committee issued a strongly-worded warning in a report on the proposed directive. “The implications of the transitional period for the political legitimacy of adding new EU legislation to the UK statute book present a particularly acute problem in political terms if the government was not supportive of the final legal text and had no meaningful influence over its contents, but had to implement it regardless,” said their report, released this week.

Level playing field

The issue takes on added piquancy as the EU mulls bespoke solutions to bind the UK into a “level playing field” on labor rights in a future trade deal.

A commission presentation to EU states this month warned that the UK could cut labor protection to increase competitiveness, thereby “undermining Europe as an area of high social protection.”

It’s too soon to say whether the provisions of the Working Conditions Directive will form part of the commission’s redlines for a deal.

A set of slides from the presentation suggest it is possible. In it, the commission said it is considering a deal with “substantive provisions anchored in EU law,” and a “non-regression clause” that would prevent the UK from backsliding on standards. Most trade agreements only refer to less prescriptive international standards.

Key areas of concern include whether the UK would strip back the rights of workers facing collective dismissal, or the right to collective bargaining. The UK could, the slides suggested, form “export processing zones” — designated areas with derogations from employment law usually seen in developing economies.

The UK may find itself trying to convince the commission that it can be trusted to maintain high domestic standards, while simultaneously attempting to shrug off legislation intended to tighten up a growing casual labor regime.

Brexit Special Report