Brexit: What multinational employers need to know

The United Kingdom was scheduled to leave the European Union on 29 March 2019, at the end of the two-year notice period, in accordance with Article 50 of the Treaty on the EU.

The Brexit process is still ongoing, more than three years after 17.4 million British citizens voted to leave the EU in 2016. Though representatives from the U.K. and EU governments reached an agreement over Brexit in November 2018, the U.K. parliament has been unable to agree on an EU exit structure. As a result, the U.K.’s departure date has been repeatedly extended. Under former Prime Minister Theresa May, the departure date was pushed first to 22 May 2019, and a second time to 31 October 2019. Parliament’s opposition to the alternative trade arrangement eventually led to May’s resignation. Despite negotiating a revised trade agreement, current Prime Minister Boris Johnson had to request another extension to 31 January 2020.

Uncertainty still remains around Brexit. It is unclear whether the U.K. parliament will opt for a “soft” Brexit with a close trading relationship with the EU or a "hard" Brexit without a trade agreement. If a “hard” Brexit occurs, Associates based in our U.K. entity, Lockton Companies LLP (LCLLP), may no longer be permitted to engage in business with EU-based clients due to regulatory restrictions and the U.K.'s loss of passport rights.

In response to this regulatory change, Lockton set up a new European entity, Lockton Insurance Brokers Ireland (LIBI), in mid-2018. LIBI will allow Lockton to continue business with our EU-based clients who are currently served by LCLLP and minimize client disruption.

Key details

Multinational companies with operations in the EU should consider the following issues as priority if the U.K. leaves the EU without an alternative trade agreement:

Citizens' rights: Existing EU nationals employed in the U.K. may qualify for "Settled Status" under the EU Settlement Scheme if they wish to continue working in the U.K. The U.K. government has confirmed that EU citizens would still have until 31 December 2020, to apply for Settled Status even if the U.K. leaves in a hard Brexit scenario.

However, given the uncertainty, employers should encourage their EU employees to apply prior to that deadline. In addition, support and assistance should be provided to EU employees working in the U.K., as the uncertainly may cause increased anxiety. The situation of partners and dependents of EU nationals working in the U.K., as well as U.K. nationals working in the EU, is still unclear.

Travel insurance: Without a Brexit agreement with the EU, U.K. citizens will be treated as third country nationals and will no longer be entitled to free medical treatment anywhere in the EU. Multinational employers should plan insurance arrangements for business travel to the EU post-Brexit.

Insurance purchasing: For U.S. - based multinational clients, a Brexit without an alternative trade agreement in place has the potential to materially impact coverage for Freedom of Service (FoS) and global programs issued out of the U.K. This is a common program structure for our U.S. clients with European exposures or those seeking to access Lloyd’s capacity. For companies currently purchasing a FoS or global policy out of the U.K., they should ensure they understand their insurer’s Brexit contingency plan so policy issuance, claims handling and service can be handled out of another EU country post-Brexit without any delay or complications.

Since benefits plans should be delivered to EU offices of multinational companies from an EU country, employers might want to review their EU insurance contracts to ensure EU offices are not covered by a policy issued in the U.K.

Employment law

Most U.K. employment law is EU-derived (holidays and holiday pay, parental and maternity leave, working time, data protections legislation, etc.). The government announced that EU-derived legislation will remain in force for the moment and released a draft law on Employment Rights and a series of notices in the event of a Brexit that occurs without an alternative trade agreement having been passed. The following areas may be affected by a hard Brexit in the near future:

European Works Council (EWC) EWCs are currently established in multinational companies with at least 1,000 employees in a minimum of two European Economic Area countries. If the U.K. leaves the EU without a replacement agreement in place, the EU EWC Directive will cease to apply to the U.K. Therefore, multinational companies operating in the EU should ensure immediately that (1) a representative agent in an EU member state is designated in the EWC management, and (2) U.K. employees continue to be represented by updating the EWC agreement./p>

EU directives and European Court of Justice (ECJ) case law Unlike the Transparent and Predictable Working Conditions Directive, the Work Life Balance Directive and the Whistleblower Protection Directive will not be implemented into the U.K. law. ECJ decisions rendered prior to Brexit will remain binding on most U.K. courts. However, the U.K. Supreme Court will no longer need to follow such decisions.

Data protection Multinational employers should continue to protect EU citizens’ data as the EU General Data Protection Regulation (GDPR) will still apply to them.

Should you have any concerns about the impact of Brexit on your insurance program, please contact your Lockton service team for assistance. Please note the Brexit situation is constantly changing and developments occur often. We will update this Alert if developments impact the areas of advice we have provided here.