What (and why) should US employers know about Brexit?

BY MARIA DANAHER

On June 23, 2016, citizens of the United Kingdom (UK) voted to exit (or “Brexit”) the European Union (EU). While far-reaching, that decision wasn’t made in a vacuum, so it makes sense to understand some background of how the EU came about:

·         The precursor of the EU was established after World War II when, in the 1950’s, the European Coal and Steel Community (which became known as the “Common Market”), consisting of Belgium, France, Germany, Italy, Luxembourg and the Netherlands, began to work cooperatively with the goal of avoiding the chaos created by two consecutive world wars;

·         Through the 1970’s and ‘80’s, 6 additional members joined – including the UK – and the Single European Act was signed, creating a Single Market across member borders;

·         In the 1990’s, Austria, Finland and Sweden join the group (which by 1993 was being referred to as the European Union), and citizens of member countries gradually become able to travel without having their passports checked at the borders;

·         During the 2000’s, 12 additional countries joined, and EU countries came together to fight crime and work cooperatively on economic issues;

·         In 2012, the then 28-member European Union was awarded the Nobel Peace Prize;

·         The rise in religious extremism in the Middle East, and the ensuing refugee crisis, affected British public opinion related to the efficacy of the EU and, in February 2016, Prime Minister David Cameron set a referendum for June 23, 2016, allowing UK citizens to vote on whether to stay in the EU, or to leave (“Brexit”);

·         On June 23, nearly 17.5 Brits voted to sever ties with the EU, while just over 16 million voted to stay in that group; the decision resulted in the resignation of Prime Minister Cameron.

While the votes have been counted, the decision leaves many questions unanswered. Here are a few:

·         Why did so many UK citizens vote to “Brexit” the EU? Voters cited fear of being “overrun” by immigrants, and also pointed to the EU as a hindrance to market globalization.

·         What is the impact of the decision on other countries and on US companies? Scotland and Northern Ireland – each of which heavily supported remaining in the EU – could attempt to exit the United Kingdom. In addition, the vote may complicate transatlantic data transfer for US companies with locations in the UK, coming so soon after the demise of the Safe Harbor Framework. Third, the effect of immigration law for citizens of EU countries working in the UK remains to be seen.

·         Is Brexit a “done deal”? While the referendum is not legally binding, the voters have spoken, the Prime Minister has resigned, and a transition team has been established. However, the actual separation requires the UK to invoke Article 50, a provision of the EU’s governing treaty that would formalize the results of the vote. That action will be spearheaded by Cameron’s successor.

In the meantime, there have been several efforts toward reconsidering the referendum, including one proposal to topple the results if the voter turnout was less than 75%, and another suggesting thatLondon secede from the rest of the UK.

If Britain delays invoking Article 50, the current global economic uncertainty could continue. Employers with employees in the UK should remain in touch with developments, and should be in communication with their European legal advisors to stay ahead of the expected transition.

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