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Brexit Breakout – the status of your EU employees

Nick Goldberg

There are estimated to be three million people in the United Kingdom whose right to live and work here currently depends on free movement. Many of these European citizens are concerned about what will happen when Britain leaves the EU in March 2019. Employers need to know what scenarios could apply and how to offer the most appropriate support. Article from Nick Goldberg, CEO UK & Ireland of Lee Hecht Harrison.

Now that the Brexit negotiations have begun, for senior leaders and HR directors the situation of your EU employees is becoming clearer. Both sides have published position papers on citizens’ rights, with the UK Government offering any current employee a route to ‘settled status’ in the United Kingdom. There is actually significant agreement between the Government and the European Commission. Nevertheless, major differences still need to be overcome and questions remain, not least about specific criteria. We explain what you need to know, allowing HR teams to have a clearer view of the months and years ahead. Staff retention is already a key issue, given recent surveys, and reassuring and engaging employees on some of the issues raised by Brexit is now critical.

The current system
In theory, freedom of movement allows EU citizens the right to travel to another EU country and:

The residency rights of nationals are covered by the EU’s Free Movement Directive from 2004, which also covers EEA and EFTA countries (Iceland, Liechtenstein, Norway and Switzerland). It is a feature of the single market, which is best understood as a zone applying EU regulations to all of its activities, under EU law.

The agreed basis for the Brexit negotiations involves withdrawal from the single market. Although commentators often assume that the UK could continue to be a member of the single market as a matter of choice, it has never been offered by the EU27 and is not a viable outcome of the current process. Unless the UK remains associated with the single market during a transitional period, the Free Movement Directive will cease to apply in 2019. It is currently implemented through the Immigration (European Economic Area) Regulations 2016.

1. Reside for up to three months without any conditions.

2. Reside for more than three months if working or self-employed, subject to conditions.

3. Permanently reside after five years of continuous residence, subject to conditions.

In practice, the UK views any restrictions after three months as unenforceable. For this reason, it has never imposed conditions on EU employees. Until the referendum, few bothered to apply for a Permanent Residence Certificate after five years, because they only needed one to apply for British citizenship. They started to bother in June 2016:

It is thought that some 100,000 permanent residence applications have been processed […] Some diplomats are said to be concerned about the “unnecessary bureaucratic hurdles” being raised by the UK against EU citizens. One of the problems is that the 85-page application was not designed for use by EU nationals, but was originally created to scrutinise non-EU spouses of EU citizens who were seeking residency rights in Britain.2

The Home Office has advised people not to apply, admitting it couldn’t cope with the volume of applications. Its officials are also rejecting many applications on technicalities, including gaps in evidence 3 and a little-known EU requirement to have held private healthcare insurance, despite qualifying for NHS treatment. The new UK proposals address these issues.

What do both sides agree on?
Both sides agree in principle about what the deal on citizens’ rights should cover and its basic features. From the perspective of UK employers, the areas where there is clarity and guidance can be given to employees are:

Domestic law – changes to UK law to clarify the legal status of EU citizens already living here at the point of withdrawal. Without legislation, employers would have difficulty knowing who has the right to work here.

Recognition – an administrative process for claiming UK residency rights, including an application system, criteria, evidence requirements and documentation. This could involve employers providing documentary evidence for former staff or contractors.

A cut-off date – people arriving after this specified date may find it harder to claim permanent residence after 5 years. Current employees are exempt, but it could affect new hires between now and 2019, depending on the date chosen. The actual date is an area of disagreement (the Government’s offer, set out below, means that employers shouldn’t experience a problem).

Reciprocity – equivalent protection for UK nationals living in the EU. The Commission accepts this, but without all of the guarantees it wants for EU27 citizens.

Access to services – reciprocal arrangements for settled EU and UK nationals on benefits, pensions, healthcare, social housing, access to education and university, etc. This would ensure that none of your current EU employees face changes to their personal circumstances.

Employment – ongoing mutual recognition of professional qualifications, at least for those nationals already in employment on that basis. Employers would need to continue recognising qualifications to practice from EU states, although this might not apply for new hires after 2019.

EEA/EFTA – a separate agreement to the withdrawal terms between the EU27 and the UK, extending the deal to EEA/EFTA nationals. Without this extension, employees from Iceland, Liechtenstein, Norway and Switzerland could lose their right to work here.

Common Travel Area – before freedom of movement, nationals from the UK and the Republic of Ireland could already live and work anywhere in the shared CTA. Recognising the Common Travel Area means no change (and no paperwork) for current or prospective Irish employees.

The outlines of a deal are clear. At this stage, the sides are only discussing rights and rules for people who move to the UK, or vice versa, before March 2019. What future immigration rules could involve is not part of the initial negotiations. That is an important ‘missing piece’ of the puzzle for employers and could feature in either the Withdrawal Agreement, or any transitional arrangements, or an eventual Free Trade Agreement. The longer the ‘missing piece’ remains, the more risk there is of the skilled EU talent pool looking for alternative employment outside the UK. Which may mean organisations in the UK may need to increase their retention and acquisition strategies to be deemed more attractive to this talent pool.

Points of dispute
These areas are not as directly relevant to employers, with the notable exception of how employees will qualify for immediate ‘settled status’. Rather, they are the potential deal-breakers. Failure to reach agreement on citizens’ rights, or reach it at an early stage in the process, would have indirect consequences for the workforce of every UK company.

Jurisdiction – the EU wants its own court, the Court of Justice of the European Union (known as the ECJ to most, but to lawyers as the CJEU), to enforce the terms of the agreement in the UK after Brexit. This would be grotesquely one-sided and is a red line for the Government. Media coverage of the working groups suggests that the Commission is preparing to back down, with British plans for international arbitration favoured.

Specified date – the UK has suggested the day Article 50 was triggered, namely 29 March 2017. The Commission has specified the date of withdrawal, two years hence.

Divergence – rather than treating EU citizens as equivalent, the Commission wants them to be protected for life against any change that a UK Government might make to the rights and entitlements of British nationals. This would create an increasing number of ‘super rights’ for EU employees, potentially extending to the workplace and the benefits system.

Super rights – there are some ‘super rights’ already, such as the ability of an EU citizen to bring a non-EU spouse to the UK without an income test, which the Government proposes to end when it withdraws. The Commission believes they must apply after Brexit.

EU law and future rights – these issues are related to jurisdiction, and involve the EU’s ability to move the goal posts on rights after the deal, as the interpretation of citizens’ rights in the remaining 27 states develops. This would be wholly unacceptable to the UK.

Qualification and evidence – the UK’s proposals do not specify all of the application criteria for settled status. This appears to be a deliberate negotiating stance, putting the onus on the Commission to express any preferences. The Government will not want basic operational matters to be complicated by the terms of the Withdrawal Agreement.

Benefits – the UK has conceded on benefit payments for family members who live abroad, which has been particularly contentious in relation to Child Benefit. This will help to secure the support of certain EU members. The Commission may still attempt further concessions and ‘super right’ guarantees, most of which would be politically impossible for the Government.

The apparent progress of the working groups established for the talks is encouraging, but there are significant issues to resolve. As the talks become more specific, disagreements are inevitable before any deal is reached. It is therefore essential for HR directors to continue to communicate with their employees to make sure any uncertainty can be managed and addressed on a case by case basis. This can be done with a strong leadership stance on the matter. A leadership team who demonstrate transparency and reassurance during these times will reap the benefits amongst a more engaged and confident workforce.

The Government’s offer
The proposals in the Command Paper, Safeguarding the Position of EU Citizens Living in the UK and UK Nationals Living in the EU, describe a new UK legal framework. After withdrawal, EU citizens and their families will have a two-year grace period in which to apply for a residence document. Employees will need to apply to maintain their right to work in the UK.

There will be two types of document, corresponding to:

1. Settled Status – EU citizens who have been continuously resident in the UK for five years will be allowed to stay indefinitely by applying for settled status, equivalent to Indefinite Leave to Remain in existing domestic law.

2. Temporary Status – EU citizens who arrived before the cut-off date, but haven’t lived continuously in the UK for five years, will be able to apply for permission to stay until they reach that point, equivalent to Leave to Remain in domestic law. When they reach five years’ of continuous residence, they will be able to apply for settled status.

When should employees apply?
The early application system will help to spread the three million anticipated applications across three years, but will probably be limited to settled-status applications to avoid unnecessary claims.

Based on the published information, employees who arrived in the UK:

Before 2014 – can apply for settled status at any point between 2018 and early 2021.

Before March 2016 – should wait until they have reached five years’ of continuous residence, and then apply for settled status before the end of the grace period.

After March 2016 – should apply for temporary status within the grace period, and then apply again for settled status when they reach five years’ of continuous residence.

After March 2017 – should apply for temporary status within the grace period, but may be subject to different rules when applying for settled status from 2022.

Regardless of the specified date, employees who arrive here before March 2019, and work for reputable companies, are unlikely to face any difficulty in repeatedly extending their leave to remain, or in obtaining settled status after five years. 6

Handling any uncertainty
Having active conversations about the development of these agreements is vital to keep all of your employees engaged. The unsettling nature of Brexit has impacted organisations and employees alike. Whilst agreements are being negotiated and the picture of the UK’s future is being painted, we are still a long way off March 2019. And the aftershock of this will undoubtedly bring years of further uncertainty.

Over the years, we have seen many organisations turn their employee’s anxiety and trepidation into confidence and productivity. By focusing on retention, engagement and developing leadership capabilities, organisations can minimise the risk of the uncertainty inherent in this unusual situation. With the second round of talks coming up, it is hoped it will be possible to share the details of any new employment status with staff. But regardless of the pace of the Brexit talks, developing your leaders should be a priority now to ensure everyone remains engaged and productive during such uncertain times. If you are looking for support on how to develop your leaders through such uncertainty you can get in touch on 020 7933 8333. If you want to know more about status of your EU employees see the Q&A’s below. status-of-eu-nationals-in-the-uk-what-you-need-to-know The second round of talks begins on 17 July 2017.