Brexit and What It Means for American Companies

On June 23, 2016 Britain voted to exit the EU, marking a historic and a changing pivot for the entire world. Here, on the other side of the Atlantic, Brexit has potential effects on the U.S. economy. Brexit triggered changes that will affect how U.S. companies operate in the UK and Europe as a whole.

A lot of U.S. companies invest in the UK as a gateway to the rest of Europe’s market; as it is the world’s fifth-largest economy and the U.S.’s largest trading partner. Companies like Rolls Royce and JPMorgan warned that leaving the EU would put those investments and jobs in the UK at risk.

Big companies and banks might move staff to Germany or other EU countries to avoid disruption to their EU businesses. This could trigger an increased unemployment in the UK, which could push the country into recession and as a result impact the U.S. economy.

Anticipated changes are mainly in regards to free trade, ease of travel and employment flexibility in terms of freedom of movement and the workforce stability.

Post-Brexit UK will now require a new trade deal with the EU, as a result the framework for exporting and importing goods will be negotiated. Customs procedures, passport controls for business travelers and regulations on issues such as environmental, health and safety standards are all to be determined.

The worst blow to the UK is that it will not be a part of the controversial Transatlantic Trade and Investment Partnership deal between the EU and the U.S.

U.S. based companies with operations in the EU should now consider how limits on the freedom of movement may impact their people and operations to and from the UK and vice versa. This will have a huge impact on staffing and recruiting. Post-Brexit changes could result in the UK offering new incentives to do business there. Some companies may then decrease staffing in EU countries in order to increase operations in the UK to benefit from those incentives.

U.S.-based companies with operations in the UK and the EU should also consider the potential application of UK and EU restructuring and redundancy laws. TUPE is the UK’s implementation of the European Union Business Transfers Directive. The TUPE Regulations preserve employee’s terms and conditions when a business is transferred to a new employer.

Post-Brexit UK will most likely repeal or reform TUPE. However, the wholesale repeal of TUPE is highly unlikely, since it has been a part of the legal landscape for over three decades and since the rationale for its existence is employee protection. It would be a bold government that eliminates the rights of employees, especially since special provision has already been made under TUPE for the transfer of distressed businesses.

Another post-Brexit impact might target the privacy and data protection laws, the EU’s Data Protection Directive establishes the framework for the collection, use and transfer of individually identifiable personal information about employees, including name, address, marital status and salary. Differences in how EU Member States implement the Directive have created complex inconsistencies, legal uncertainty and significant administrative costs and burdens. To address these issues, the EU created the General Data Protection Regulation “GDPR”, which went into effect on May 24, 2016. All EU Member States must comply with the GDPR by May 25, 2018.

The GDPR establishes a consistent data protection framework across the EU that is intended to make the rules for companies in the Digital Single Market more uniform and to strengthen citizen’s fundamental rights in the digital age. The GDPR should eliminate country-specific differences in data protection requirements that increase compliance burdens.

The GDPR prohibits the transfer of personal data outside the EU unless the recipient ensures an adequate level of protection for the personal data. Once the UK leaves the EU, it will no longer be required to comply with GDPR. However, it would be within its interest to do so to facilitate transfers of data between the EU and the UK.

U.S. based companies with operations in the UK should assess whether there are significant transfers of personal data from Member States to the UK. Companies should also watch for guidance from EU regulators regarding compliance with the GDPR and examine any existing model contracts and binding corporate rules addressing data transfers to assure compliance and accuracy.

However, the EU did not impact U.S. Immigration laws. UK citizens are still eligible for the E-2 Treaty Investor and E-1 Treaty Trader Visas. International companies with offices in the UK can still transfer employees from British offices to U.S. offices and establish U.S. offices under the L-1A and L-1B visas. Executives and managers of those offices are still eligible for EB-1 Green Card. British citizens may also still be employed, attend school or invest under the full arsenal of non-immigrant and immigrant US visas. The greater impact will be on British citizens waking in European nations and Europeans within the UK.

In conclusion, US based companies need to be aware of upcoming changes to employment laws and immigration-related issues in their workplaces within the United Kingdom, to better assess their current and future businesses in the UK, as well as the rest of the EU.

References

What would happen to TUPE if the UK left EUROPE? – By Dan Peyton on May 3rd, 2016
http://www.personneltoday.com/hr/happen-tupe-uk-left-europe/

Transatlantic Trade and Investment Partnership (T-TIP) https://ustr.gov/ttip#

5 reasons why Americans should care about Brexit – By Doug Criss, CNN June 24th, 2016 http://www.cnn.com/2016/06/24/politics/brexit-what-this-means-us/

How will Brexit affect Britain’s trade with Europe? – By Dan Milmo June 26th, 2016
https://www.theguardian.com/business/2016/jun/26/how-will-brexit-affect-britains-trade-with-europe

TUPE – A Guide to the Regulations – © TSSA 2012 https://www.tssa.org.uk/en/Your-union/your-workplace/employment-rights/tupe–a-guide-to-the-regulations.cfm

Brexit Fallout: Is the U.K. Facing a Brain Drain? – By Dave Heilbron July 29th, 2016
http://www.eremedia.com/tInt/brexit-fallout/

What Brexit May Mean For U.S. Companies With Overseas Workers – By Tahl Tyson, Dr. Thomas Griebe and Heather M. Peck July 29th, 2016
http://www.eremedia.com/tInt/what-brexit-may-mean-for-u-s-companies-with-overseas-workers/