The Retained EU Law Bill: No "bonfire" but plenty of subtle shifts ahead

Author: Darren Newman

As recent headlines have announced, the scope of the Retained EU Law (Revocation and Reform) Bill, which initially threatened a "bonfire" of EU laws, has been significantly narrowed. But there may still be major changes ahead for employers, says consultant editor Darren Newman.

The Government reverses its position

The Retained EU Law (Revocation and Reform) Bill is due to reach its report stage in the House of Lords on 15 May 2023. Since the Bill was introduced in October 2022 it has threatened the wholesale repeal of EU-based regulations relating to issues such as working time, business transfers, parental leave and agency workers.

But the Government's dramatic reversal of its position means that only specified pieces of retained EU law will now be repealed. Barring two technical measures relating to posted workers, EU-derived employment law will, for the time being, remain on the statute book.

Working time and record-keeping

At the same time the Government has published a policy paper setting out the changes that it does intend to make. These changes are not very dramatic. Some look important on paper but will make little difference in practice.

For example, the Government is proposing to remove retained EU case law that requires employers to record working hours for almost all members of the workforce.

The issue of record-keeping arose in Federación de Servicios de Comisiones Obreras (CCOO) v Deutsche Bank SAE [2019] IRLR 753 ECJ, in which the European Court of Justice (ECJ) ruled that employers must record the specific working hours worked by each worker in order to comply with the Working Time Directive (93/104/EC). That goes further than our Working Time Regulations (SI 1998/1833) where, on the face of it, the obligation is only that employers keep adequate records to show that they are complying with the maximum 48-hour week (in relation to workers who have not opted out).

A consultation has been announced on amending the record-keeping requirement to reverse the effect of this decision. The Government says that this will help save businesses "£1 billion per year while protecting the rights of workers".

But there is some sleight of hand here. Enforcement of the record-keeping requirement is left to the Health and Safety Executive, and I would be surprised if there have been any prosecutions at all in seeking to enforce the ECJ's interpretation. As a result, I don't think many employers do in fact record the specific working hours of their staff - except where that is necessary to calculate their pay. The £1 billion saving is entirely nominal.

Annual leave and holiday pay

Proposed changes to the law on annual leave and the calculation of holiday pay are perhaps more important. Rolled-up holiday pay - the practice of including a sum representing holiday pay in an enhanced hourly rate rather than continuing to pay workers as normal when they actually take their leave - will be made lawful.

The practice was ruled to be in breach of the Working Time Directive by the ECJ in Robinson-Steele v RD Retail Services Ltd and other cases [2006] IRLR 386 ECJ and that has caused some difficulty for employers working out the holiday entitlement for casual and short-term workers.

The challenge for the new rules will lie in ensuring that an employer cannot effectively dodge the obligation to provide paid annual leave by claiming that holiday pay is "included" in what is in practice the basic hourly rate. Ideally employers would have to show a breakdown of the additional amount paid for holiday pay on a workers' pay slip. Subject to that point, however, allowing rolled-up holiday pay is probably a good idea.

The other proposed change in respect of annual leave also seems sensible at first glance - the merger of annual leave and additional leave. The Working Time Regulations 1998 distinguish between the four weeks of annual leave required by the Working Time Directive and the 1.6 weeks' additional leave designed to cover the equivalent of the eight UK bank holidays. It makes good sense to have a single requirement for 5.6 weeks' annual leave - but this raises questions about the extent to which the current requirements on the taking of the four weeks' annual leave will continue to apply after December this year.

Removing the supremacy of EU law

The Retained EU Law (Revocation and Reform) Bill was always about more than the repeal of secondary legislation. The Bill also amends the European Union (Withdrawal) Act 2018 to remove the supremacy of EU law. As a result it would appear that, where there is a conflict between the provisions of domestic legislation and the requirements of an EU directive, the requirements of the directive will no longer take priority.

That is particularly important in relation to annual leave because successive Governments have dealt with rulings from the ECJ not by amending the Working Time Regulations 1998, but by leaving it to the courts to interpret them in line with those rulings.

So, for example, employers are used to the idea that an employee who is on long-term sickness absence still accrues holiday entitlement and can choose either to take paid leave while off sick or to carry that leave over to the next holiday year.

We know also that the calculations of holiday pay must include regular overtime, commission or other payments that make up a normal week's pay. But none of these principles is derived from the Working Time Regulations 1998 themselves. They all depend on the interpretation of the Working Time Directive by the ECJ. The danger is that from December this year all of these issues will need to be relitigated - a prospect that will horrify many employers.

So any new legislation that will deal with rolled-up holiday pay and the merger of annual leave and additional leave will have to go further. It will also need to set out the correct approach to dealing with sickness absence and the treatment of overtime, commission and other allowances.

A major revision

That all amounts to a major revision of the Working Time Regulations 1998 - and the clock is ticking. If the Retained EU Law (Revocation and Reform) Bill comes into force before these changes are properly and clearly addressed, employers in the UK will be plunged into a period of uncertainty about exactly what the entitlement to paid annual leave involves.

I have spent far too much time over the past 20 years grappling with difficult and complex annual leave case law. I would hate to have to start all over again.