Brexit: Changes to contracts, employment law and settlement scheme

With the transition period for Brexit coming to an end on 31 December 2020, and no outcome to the ongoing deal negotiations yet, there is considerable uncertainty for businesses leading into the new year.

Regardless of whether a last-minute deal is struck or the UK leaves with a ‘no deal’, if you manage or own a business, it is important to consider the action points outlined in this article.

Impact on the supply chain

If you work with businesses outside of the UK, consider how a ‘no deal’ Brexit could affect your supply chain. Although we still do not know what will happen at the end of the transition period, it is likely that any new measures could cause supply chain disruption. For example, border delays, costs such as tariffs or charges, or additional compliance and licence requirements.

We advise that you consider the practical implications (if any) of your supply chain in a ‘no deal’ situation and consider how to overcome these. Your existing contracts, if well drafted, may already provide the necessary contractual protections or remedies required.

Check existing contracts

Once the potentially affected aspects of the business have been identified, check the relevant terms of any existing contracts that extend beyond the 31 December deadline. These will be different in each case. However, some examples of potential areas of concern include:

• Does the contract reference the EU in a manner which assumed that the UK would be included in that definition? For example, in the context of an area of operation or exclusivity.
• Does the contract specifically refer to EU legislation on the assumption that it would apply in the UK after 31 December 2020?
• If your business is expected to experience issues, such as delays or increased costs, with its continuing performance of its obligations post-31 December then it is also important to check price adjustment clauses, dispute resolution mechanisms and liability provisions to assess what contractual options are available. For example, there may be a ‘force majeure’ provision. This could be invoked if the performance of the contract is prevented by events outside of your control.

New contracts

You should also be aware of the implications of entering into new contracts with the end of the transition period fast approaching. Neither party will want to contract on uncertain terms, so the contract should ideally expressly address any foreseeable impacts of a ‘no deal’ Brexit.

How will employment law be affected by Brexit?

It is difficult to predict exactly what changes to existing employment laws will take place until an agreement between the UK and EU is reached (if any agreement is).

Currently EU employment legislation continues to apply during the transition period. However, this comes to an end on 31 December. Although much of UK employment law is taken from EU regulations, it is unlikely that there will be significant change in employment law within the UK, especially in the short term. This is due to the withdrawal agreement, which allows the conversion of current EU law into UK with the existing legal framework remaining in place.

How this affects employers

Those who employ EU nationals are likely to see the greatest change. This is due to the restricted movement of people set out by new immigration laws. The government have introduced the EU Settlement scheme for EU, non-EU, EEA and Swiss citizens (and eligible family members) who currently reside in the UK.

• The rules regarding EEA nationals will be replaced by the new EU Settlement Scheme that will help establish residence rights of EU citizens.
• Individuals who have been in continuous residence in the UK for five years or more can apply for settled status under this scheme.
• Individuals who have not reached the requisite period to attain settled status can apply for pre-settled status to remain a resident in the UK until they reached five years’ continuous residence to then apply for settled status.
• Under current guidance, employers can rely on an employee’s EEA passport or ID card as confirmation of their right to work in the UK until 30 June 2021. After this, proof of immigration status will be required.
• The main deadline for applications is 30 June 2021. If individuals haven’t obtained settled or pre-settled status by this date they will be considered illegal immigrants in the UK.
• Employers are not responsible for checking their employees have applied under the scheme. However, you may wish to ensure your employees know when the deadlines are.

Financing

Small and medium enterprises (SMEs) have been put under enormous strain as a result of the COVID-19 pandemic. Further to this, with the transition period coming to an end, if you own or manage a business, you will have to review all sources of funding and loans to prepare for the coming year.

Financial support for businesses

• On 5 September 2019 the Government confirmed £1.3 billion available to lenders would be backed by the government-owned British Business Bank.
• During the pandemic there have been multiple schemes available to struggling businesses. These include the Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme.
• There has been no confirmation regarding funding, post-transition period. However, calls have been made for a Brexit transition voucher to support struggling businesses. We will have to wait if the government consider implementing this.

Data regulation

• At present GDPR will continue to apply in the same manner until the end of the transition period.
• It is likely GDPR will be incorporated into UK legislation to form a new UK GDPR.
• The Data Protection Act 2018 currently supplements GDPR in UK law and will continue to apply post-transition period.
• Depending on negotiations between the UK and EU, data flow between the two might be affected. Therefore, if you have a presence in the EEA or have customers in the EEA, you will need to ensure compliance with both UK and EU data protection regulations after the transition period. This is to ensure that you remain compliant and can continue to operate. If no agreement is reached, this will largely depend on whether an adequacy decision is made by the EU in respect of the UK as a safe territory into which data can be transferred.

Brexit – further support

If you require further support on any of the issues covered in this article, we are happy to help.

• Advice on commercial contracts
• Employment law support
• Data protection guidance

This content is correct at time of publication