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Labor law issues of the Brexit

The separation of the United Kingdom from the EU has led to numerous uncertainties in labor law. Even the withdrawal agreement of 17.10.2019 and the Trade and Cooperation Agreement (TCA) have not resolved these uncertainties. Below, we will take a closer look at the labor law issues related to Brexit.

First of all, it can be stated that the withdrawal from the EU has resulted in the extinction of all previous rights and obligations between the EU and the UK. Accordingly, the EU’s labor law requirements for the UK are also null and void. Although there are new agreements between the two parties, they were written under considerable time pressure. As a result, they are extremely unstructured and difficult to understand.

Free movement of workers

After years of cooperation, many EU citizens have already settled in the UK and vice versa. But due to the Brexit this residence is no longer as easy as before. As of 01.01.2021, the free movement of workers has expired and residence permits are needed again.

To simplify matters, the withdrawal agreement stipulates that persons as well as their family members who have lived in the other territory on 31.12.2020 without their legal residence having already lasted uninterruptedly for five years can initially apply for a temporary right of residence (so-called “pre settled status”). As soon as their legal uninterrupted residence has then reached five years, these persons also acquire a permanent right of residence (Art. 16 Withdrawal Agreement). Whether a stay is interrupted in a relevant way is determined by further agreements present in the withdrawal agreement and guidelines. According to these, there is no interruption of residence as long as temporary absences do not exceed a total of six months in one year or are justified by military duties or are for important reasons such as pregnancy, childbirth, serious illness, study, vocational training or professional assignment and do not exceed twelve consecutive months. Once a permanent right of residence has been acquired, only an absence from the host country of more than five consecutive years will result in its loss.

Freedom to provide services

Like the free movement of employees, the freedom to provide services has also expired. In principle, therefore, the provision of services by EU citizens in the United Kingdom and vice versa is now only possible with authorization.

The Trade and Cooperation Agreement regulates exceptions to this authorization requirement.

Exceptions to the authorization requirement for the provision of services

The first exception applies to “business travelers arriving for a short period of time”. These are permitted, for example, to attend meetings, conduct contract negotiations for services/goods, and provide sales-related services. Three conditions must be met for this exception:

  • The business travelers may neither sell goods to the general public nor provide services to the general public
  • The business travelers must not receive remuneration from the host country (from a source there) on their own behalf.
  • May the business travelers not provide services under a contract between a legal entity not established in the host country and a consumer from the host country.

The maximum duration of stay of “business travelers entering for a short period of time” is up to 90 days in a six-month period.

The second exception is for the provision of services. This covers “business travelers entering for establishment purposes.” These are executives of a legal entity who are responsible in the host country for the establishment of an enterprise of the legal entity and who offer or provide you there only such services or perform other economic activities that are necessary for the establishment. Again, no compensation from a source in the host country and a maximum of up to 90 days in a six-month period.

Services to be enabled by the EU and the UK.

The PCA not only provides for exceptions to the requirement to authorize the provision of services. It also regulates certain services that the UK and EU must “enable.” The extent to which the parties and their member states require authorization for the provision of these services is left to their own discretion. However, as the PCA refers to regulations in which a time of “application”. Accordingly, it can be assumed that the parties to the agreement have at least assumed a need to apply in some way.

  1. a) UK and EU must allow “providers of contractual services” to enter and stay.
  • Contractual service providers, according to the PCA, are natural persons who are employed by a UK or EU legal person that is not established in the other territory and that has entered into a service contract with a maximum duration of twelve months that requires the temporary presence of its workers in the territory.
  • The workers must have been “offering” the services to be provided to the legal entity for at least one year prior to the date of their application for entry.
  • In addition, at that time, they must have at least three years of professional experience in the field of activity to which the service contract relates since they reached the age of majority, and they must have a university degree or a qualification that provides equivalent knowledge
  • Lastly, the employees, must hold the professional qualification required by law to perform the activity o, host country and may not receive remuneration from a source there.

In addition, the parties to the PCA must allow entry, stay and services of “contractual service providers” only for certain activities and industries. However, there are also back exceptions (SERVIN-4 No. 10, 12,13 to the PCA). For this purpose, the residence of the providers must be granted for the duration of the service contract of the legal entity and thus for a maximum of 12 months.

  1. b) The Parties and Member States must also allow the stay, entry and employment – and thus services – of so-called “intra-corporate transferees”.
  • According to the PCA, intra-corporate transferees are natural persons who, immediately prior to entry, have been employed by or have an interest in a legal entity in the UK or EU for at least one year as managers or specialists or for at least six months as trainees and are temporarily transferred to an enterprise of the legal entity in the other territory.
  • The natural persons must not already be resident in the other territory at the time of application.

The stay of “intra-corporate transferees” can last up to 3 years for managers and specialists and up to one year for trainees.

Social insurances

A serious consequence of the Brexit is that the European law on the coordination of social security has expired. However, the parties have initially agreed on an almost congruent adoption of the previous regulations.

The principle of compulsory social insurance according to the employee’s usual place of employment continues to apply.

The protocol to the PCA is, according to its Art. SSC.70 is initially valid for 15 years. No later than one year before the expiry of this period, the parties shall start negotiations to update this protocol.

 

Note for our clients: We will be happy to help you with the relevant applications and the implementation of the entry process. You are welcome to contact us on these topics at any time. We work in this field for our clients on a daily basis.

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