Matthew Leon, Associate in our Edinburgh office, and Heather Barc, Associate in our London office, comment: A significant consequence of June’s Brexit referendum result is that businesses are left operating in an uncertain environment. Employers now face a number of questions particularly in relation to immigration.  What happens to the status of EU member state nationals in the UK?  What can be done to ensure that businesses are able to continue resourcing their businesses effectively with the right skills?

The important thing to remember is that until the UK formally commences the Brexit process by triggering Article 50 of the Lisbon Treaty, there is no change to the status quo and it is very much business as usual.  Once Article 50 is triggered there will be a negotiation period, which is expected to last around two years.  The eventual implications of Brexit on employment law and free movement will depend largely on the negotiation process which will take place with other EU member states.

UP FOR NEGOTIATION

There are a number of potential outcomes of the post-Article 50 negotiations –

Option 1: UK leaves EU but remains in European Economic Area (EEA)

One possibility is the UK adopting a similar position to Iceland, Lichtenstein and Norway and remaining a member of the EEA after withdrawing from the EU. The EEA is a separate organisation and is not bound by the EU legal framework but still operates in accordance with the four freedoms: goods, capital, services and workers.

Because free movement is a prerequisite for membership of the EEA it is highly likely that if the UK remained part of this organisation it would be necessary to continue to allow EU nationals to live and work in the UK freely. Under this option UK employers could continue to employ EU citizens freely in their workforce as they currently do.  Another potential option would be to leave the EU and join the European Free Trade Area (EFTA) which operates under a separate legal structure to the EEA.  This option would replicate the Swiss position and would likely involve accepting free movement in exchange for access to the single market.

Option 2: UK leaves EU but applies an amnesty or cooling off period for EU nationals residing and working in the UK

Another possibility is the UK leaving the single market entirely, in which case EU nationals would not automatically have the right to live and work in the UK. In this eventuality the government could take a variety of approaches in relation to EU nationals who are already  in the UK.

Potential options available could be to allow all EU nationals currently in the UK to remain permanently, or to apply a residence or length of service requirement in order to be eligible to settle. The government has advised that it expects EU citizens working in the UK to be eligible to remain after Brexit, so employers with workforces comprising of a significant number of EU citizens can expect that arrangement to continue.  The government has recently released a statement confirming that all EU nationals with 5 years’ lawful residence in the UK will continue to qualify for indefinite leave to remain which may be a helpful indicator of the government’s position in negotiations.

Option 3: UK operates a points based system for EU citizens

The UK currently operates a points based system (“PBS”) for workers outside the EEA. This means that most individuals require sponsorship by a UK employer and must meet certain criteria before they are granted leave to enter and remain in the UK.  One option for the UK would be to leave the single market and apply the PBS system that currently applies to workers outside the EEA to all those workers seeking to work in the UK.

Under this model it is likely that employers would have to sponsor employees from the EU and go through a process to obtain a visa for the employee to allow them to work. This may have implications in terms of costs and management time and it is important that employers remain up to speed on the developments in the Brexit negotiations to ensure that they are properly prepared.

PRACTICAL STEPS FOR EMPLOYERS TO TAKE

Given the range of potential outcomes to the Brexit negotiations, what can employers do to manage their risk and ensure that the transition is as smooth as possible? There are a number of practical steps that can be taken now:

• Evaluate your current workforce – Although the result of the referendum has no immediate impact on the fundamental principle of free movement, significant changes are anticipated. You should ensure that you have a clear picture of the immigration status of your workforce so that you can identify any areas where you may be heavily reliant on migrant workers so that you can move quickly to put in place contingencies as the specific terms of the Brexit deal become clear.
• Consider applying for a sponsor licence or expanding the tiers of sponsorship under your existing sponsorship licence – Tier 2 of the PBS allows UK employers with a sponsorship licence to sponsor skilled workers subject to meeting certain criteria. It is a good time to review existing sponsorship arrangements and see if they remain fit for purpose. If you do not have a Tier 2 sponsorship licence, you should consider whether to apply for one. Equally, existing sponsors should review the scope of their licence. It is anticipated that employers may need to rely more heavily on workers from outside of the EU following Brexit and we expect that the UK Visas and Immigration Department (UKVI) will see an increase in their workload as a consequence. This may well lead to longer processing times for sponsor licence applications so it will help to anticipate and address sponsorship requirements ahead of time.
• Audit your compliance with the existing immigration rules – You should make sure that you are fully compliant with all the existing immigration rules (including conducting right to work checks).
• Review the status of EU citizens – It may be appropriate for EU nationals to consider their immigration status and, if eligible, to apply for British citizenship or indefinite leave to remain. This will ultimately be a personal decision dependant on individual circumstances and each individual will need seek advice on the personal implications of making an application. However, you may wish to discuss the options sensitively with key employees who may have an opportunity to secure their immigration status.
• Understand what business visitors can do in the UK – Given the increased media scrutiny over immigration, UKVI will be live to the use of business travel as a way to circumvent immigration rules and visa requirements. You should ensure that you are fully up to date with the latest rules on business visitors and that your international employees are aware of what they can and cannot do in the UK whilst here on business.
• Keep up to date – Immigration is likely to remain front and centre of the negotiations around Brexit so closely follow any developments. We are watching this space with interest and will issue further alerts as and when developments arise.