Brexit and the consequences for employers and employees
28 February 2019
On 30 March 2019 the United Kingdom (UK) will in all likelihood no longer be part of the EU. In this article we will discuss a number of significant Brexit consequences for employers and employees. The focus will be on the right of British citizens to reside and work in the Netherlands.
Deal or no deal?
In spite of almost two years of intensive negotiations, the EU and the UK have not yet been able to conclude a definitive agreement concerning the conditions under which the UK will leave the EU. On 14 November 2018 the negotiators of the EU and the UK reached agreement about a draft withdrawal agreement. However, the British Parliament rejected that agreement on 15 January 2019. If the EU and the UK do not reach definitive agreement about a withdrawal agreement on or before 29 March 2019, and if they also do not decide to postpone the Brexit, the UK will leave the EU without any agreements having been made in respect thereof (the so-called “no-deal scenario” or “hard Brexit”).
Right of residence and right to work
The most important and most significant consequences of the Brexit for employers and employees appear to concern migration law. Approximately 45,000 Britons currently live in the Netherlands (with their family members). Of those 45,000, approximately 20,000 play an active role in the Dutch labour market as employees.
The draft withdrawal agreement
The draft withdrawal agreement provides for a transition period until 01 January 2021. During that period Union law will continue to apply as usual. British citizens (and their family members) will consequently retain the right to reside and work in EU States and the same will apply to EU citizens in the UK. Under the agreement citizens will, after the transition period has come to an end, be able to apply for a residence permit in the host State on the basis of the old (EU) conditions, as a result of which they will be able to continue to reside and work in the host State, even after the transition period. The agreement also states that citizens will be able to acquire a right of permanent residence after they have resided in the host State for a continuous period of five years. The scheme in the draft withdrawal agreement does not distinguish between citizens who already resided in the host State before the Brexit and citizens who arrived in the host State in the transition period (i.e. between 29 March 2019 and 01 January 2021). The agreement also contains a scheme for frontier workers, i.e. employees who work in a State other than their State of residence. The following applies to British frontier workers: after the transition period has come to an end, they will be able to continue to work in EU States subject to conditions. The same will apply to EU citizens working in the UK.
In the no-deal scenario, Britons (and their family members) will no longer be able to derive their residence status from EU citizenship from 30 March 2019 onwards. After all, after the Brexit they will no longer be able to make use of the free movement of persons in the EU. In addition, they will lose their free access to the European labour market. In order to cope with the resulting consequences for the Netherlands and the Britons residing here, the government has announced a transition scheme that will take effect in case of a no-deal scenario. The transition scheme will be in effect from 29 March 2019 until 01 July 2020. During that period, Britons (and their family members) who resided legally in the Netherlands before the Brexit will retain their right of residence and their rights to study and work. All Britons (and their family members) residing in the Netherlands will receive a temporary residence permit in the form of a letter from the Immigration and Naturalisation Service (IND) before 29 March 2019. Britons in the Netherlands would therefore be wise to make sure that they are listed correctly in the Personal Records Database (BRP) so that they will be able to prove how long they have resided in the Netherlands.
During the transition period (but no later than 31 March 2020), Britons and their family members will receive an invitation from the IND to submit a definitive residence permit application. Britons who have resided legally in the Netherlands for more than five years can acquire a permanent regular residence permit on the same conditions under which EU citizens can acquire a right of permanent residence. Britons who have resided in the Netherlands for less than five years qualify for a temporary regular residence permit. With these permits this group of Britons will also retain their free access to the labour market. Employers will therefore not need a work permit in order to employ or continue to employ those Britons. Those Britons will also be exempted from the obligation to participate in a civic integration programme.
Britons who do not yet reside in the Netherlands and who wish to take up residence in the Netherlands after 29 March 2019, will have to apply for a residence permit as a third-country national. The normal rules for non-EU citizens will apply to these Britons, subject to the proviso that they will be exempted from the Authorisation for Temporary Stay (MVV) requirement, so that they will be able to apply for a residence permit in the Netherlands, just like Americans, Canadians, Japanese and South Koreans, for example. Employers who wish to employ such Britons will have to apply for a work and residence permit (e.g. on the basis of the highly skilled migrant scheme) or a work permit for persons from outside the European Economic Area.
Under the draft withdrawal agreement the European Regulations concerning social security will continue to apply to the UK until 01 January 2021. If agreement is reached after all, during this transition period there will therefore be no changes in respect of the area of social security. Under the agreement a number of regulations will also continue to apply after 01 January 2021 in specific situations.
In the event of a hard Brexit, the European Regulations concerning social security will no longer apply to the UK from 30 March 2019 onwards. This can have far-reaching consequences for employers and persons entitled to benefits. In his letter of 07 January 2019, the Minister of Foreign Affairs informed the House of Representatives that he would ensure ‘a decent solution’. By letter of 15 February 2019, the Minister of Social Affairs and Employment subsequently informed the House of Representatives of a number of proposed measures. One of those measures is that the employment history that employees accrued in the UK prior to the Brexit will also count towards the weeks and employment history requirement for benefits under the Unemployment Insurance Act following the Brexit. The Minister’s draft decree is currently before the Council of State for its opinion.
On 29 January 2019 the House of Representatives also passed the Brexit Collective Act. This act gives the government the authority to take emergency measures in a number of areas, including social security, in order to cope with the consequences of the Brexit. Among other things, the act provides the option of taking measures by order in council to prevent disproportionate harm to persons in the Netherlands and the UK who are entitled to benefits. The European Commission is also currently working on an emergency regulation in order to cope with the social security consequences of the Brexit.
Under the General Data Protection Regulation (GDPR) personal data may only be transferred to organisations outside the EU subject to strict conditions. This also applies to sharing of personal data within a group of undertakings. The draft withdrawal agreement also includes a scheme on the basis of which sharing of personal data with organisations in the UK will remain possible even after the Brexit. In the event of a hard Brexit, an assessment will have to be made each time of whether or not the conditions of the GDPR for the transfer of data to third countries have been complied with.
The Brexit may also affect employers and employees in other areas. With respect to the tax consequences, which may be considerable, the State Secretary for Finance informed the House of Representatives by letter of 04 February 2019 that he wants to implement a transition scheme for a no-deal scenario. This transition scheme will also include measures pertaining to salaries and income tax.
In the event of a hard Brexit, the European Directives that are relevant for labour law practice, including the Posting of Workers Directive, the Transfers of Undertakings Directive, the Establishment of a European Works Council Directive and the Pensions Directive, will no longer apply to the UK with effect from 30 March 2019.
As far as the applicable law is concerned, the draft withdrawal agreement states that the Rome I Regulation will continue to apply in the UK in respect of agreements concluded before the end of the transition period. In the event of a no-deal scenario, the UK will no longer be bound by Rome I from 30 March 2019 onwards.
The Dutch version of this article has been published in the Journal of the Dutch Bar Association (het Advocatenblad).