Brexit: The potential legal implications for UK and EU companies and their assignees

International businesses and expatriates in Britain and in EU states face a substantial degree of uncertainty regarding how the economy, trade tariffs and the free movement of people, goods and services will be affected by the exit deal eventually negotiated between the UK and the EU. In this first of two articles on Brexit, Sherrards Solicitors’ global mobility experts focus on the main risks to business continuity and provide guidance on how to prepare at this stage for the worst.

For many businesses, the main risk areas are as follows:

1. Cyber-attacks: Future cooperation between the UK and EU on this issue remains uncertain. No deal will have a knock-on effect on security. Businesses are concerned that we do not know what involvement with the UK organisations such as the European Cyber Crime Centre and the European Network and Information Security Agency will have

2. Workforce: The next big risk is the loss of employees (including key employees) who are no longer entitled to stay if there is no deal. The UK Government has made various proposals to ensure a long transition period for EU nationals living in the UK, and so far there has also been little progress regarding the situation for UK citizens living in the EU

3. Legal framework: The future legal framework relating to free movement, transport, taxation, medicine, the environment and health and safety remains uncertain. Inevitably, EU organisations will cease to apply to businesses working from or with the UK. This is likely to create a string of new regulations that companies will be required to adopt, possibly at short notice

4. Supply chain: The supply chain (with higher tariffs on both sides) is also likely to be affected with perhaps more issues on the UK side

5. Duration: If the period of uncertainty drags on, business, investment and trade will be affected

6. Other risks: Exchange volatility, travel restrictions, financial shocks and slow economic growth could also result.

Employment law

Much employment legislation applicable in the UK originated in Brussels. Following the decision to leave the EU, one concern was whether the Government might repeal some of this legislation. The Government published a white paper which proposes that there will be no regression in employment laws such as the Working Time Regulations, protection of employees’ rights on transfer of business undertakings, discrimination laws and the current collective consultation requirements. This position could change and likewise, once the UK leaves the EU, there may in the longer term be a growing divergence between UK and EU employment law.

Immigration

Some categories of person with EU free movement rights, and who have been resident in the UK, could be left without a right to reside and work in the UK. A wider concern is that EEA nationals will now be subject in whole or in part to the UK’s existing Points Based System which is identical to that for non-EEA nationals who require Sponsorship.

Worryingly, there are currently only 29,211 registered Sponsors in the UK vs. 5 million+ companies. Our advice is to obtain a Sponsorship licence if not in place already. Failure to do so now will increase Home Office scrutiny, cost and processing times.

Despite the uncertainties, Sherrards’ immigration practiceacts as liaison between the UK Home Office, Migration Advisory Committee and UK companies to address questions on post-Brexit immigration.

Getting prepared

With less than eight months until the exit, businesses (big or small) who work with the UK or operate from the UK should now have a detailed or final contingency plan. Below are tips on how to get prepared:

1. Manage and communicate with your workforce and refresh your knowledge of employment law and how to tackle diversity issues etc. For example, consider using natural staff turnover and recruiting who you need now rather than post Brexit. Consider how you have been recruiting your staff so far as well (students / self-initiated expatriates/company secondments) and the type of migrant workers you need. Manage your employees’ uncertainties (right to work, benefits, pension) by listening to them and communicating with them

2. Action the plan you may have had to set up in the UK or in the EU if it still makes sense for your business to operate on both side of the Channel. If there is a business requirement for it, it is more logical to consider completing it now than post Brexit, either by acquisition or joint venture or participation in a company or of course by setting up a branch or a company.

3. Understand how GDPR will work when the UK ceases to be a member state. Collect, clean and consolidate relevant data and people programmes. Review planned technology implementations to determine which should be postponed or accelerated. Determine if new technology could help support Brexit activity, e.g. workforce planning

4. Keep an eye on migration policies which governments are bound to put in place in the next few months. Seek legal advice and anticipate the changes and the delays it may cause. For example, you may wish to familiarise yourself with immigration rules that apply to non-EU citizens in the relevant jurisdiction

5. Keep an eye on other legal and regulatory aspects such as cybersecurity, employment law and competition law (tariffs)

6. Keep an eye on the terms of your relationship with your suppliers, clients and partners. Consider diversifying to maximise processes and reducing the risk of escalating costs. Review your commercial contracts accordingly (shortening/extending duration, exchange rates, price review, compliance with regulations)

7. Review your internal employment policies for termination of employment, recruitment, dealing with trips of your workforce in and out of the EU

8. Consider an action plan to reduce risk of increased costs in your chain of supply of goods and the need for warehouses. Consider whether EU regulations apply to the services that you provide cross border

9. Ensure that you have a contingency plan on cross border taxation or at least a plan which allows you to reduce your exposure and can be put into place at short notice.

For help and advice on getting your business ready for Brexit

Many of the international companies we act for have already sought help from our multidisciplinary team and asked us to review the legal side their systems to address the uncertainties caused by Brexit and prepare for it. If you need assistance, in the first instance, please contact Paul Marmor at Sherrards Solicitors.