The UK is due to leave the European Union by 31st October 2019. If the EU-UK Withdrawal Agreement is approved, a transition period is expected to apply up to 31st December 2020, during which the vast majority of EU directives – including the European Works Council directive – will continue to apply to the UK (this is still subject to final agreement). UK legislation implementing the EWC directive will therefore have to remain in place until the end of the transition period.
After the transition period, the EWC directive will no longer apply to the UK – unless a post-Brexit trade deal between the UK and the EU applies the directive to the UK, which seems improbable. At that point, it will not be possible for a company to fulfil its legal obligations deriving from the directive by means of UK legislation. The same is true if the UK leaves the EU without a Withdrawal Agreement.
Once the EWC directive ceases to apply to the UK, there will be several implications, the main ones concerning:
- The requirement to have a European Works Council. Up to the end of any transition period, the UK would be treated like a member state, so UK employees must be counted when calculating the employee thresholds that determine whether a company is subject to the EWC legislation. Once the directive no longer applies to the UK, UK employees should not be counted for the purpose of the thresholds. The great majority of companies in scope of the directive are expected to still meet the thresholds, even when UK employees are excluded, so they would remain in scope. However, some companies may no longer meet the thresholds if their UK employees are excluded from the calculation – these companies would no longer have a statutory obligation to have a European Works Council. However, if an EWC is set up under an agreement, it may be necessary to check the wording of the agreement to establish whether there would be an on-going obligation to maintain the EWC.
- The position of UK representatives on the European Works Council. Up to the end of any transition period, any UK reps on the EWC will be entitled to stay on it, other things being equal. Once the directive no longer applies to the UK, UK representatives on an EWC would no longer have a statutory right to keep their seats. However, if an EWC is set up under an agreement, it would be necessary to check the wording of the agreement on this point – some agreements give seats on the EWC to a defined list of countries, rather than to member states of the EEA. It would also be open to management and EWCs to agree changes to the EWC agreement in order to allow UK reps to keep their seats – just as many EWC agreements give seats to Swiss reps.
- The governing law of the European Works Council. EWCs are established under the law of one of the EEA member states – whether the EWC is set up by an agreement or under the Subsidiary Requirements. The provisions of national law vary somewhat between different member states. The most important differences concern enforcement and penalties. Breaches of the law, or of an EWC agreement, are generally enforceable through the courts of the member state whose law governs the EWC. European Works Councils established under UK law are enforceable at the Central Arbitration Committee in London (or the Industrial Court in Northern Ireland). Up to the end of any transition period, it will still be possible to have an EWC established under UK law. Once the EWC directive no longer applies to the UK, it will no longer be possible to have an EWC established under UK law in order to comply with the directive. If an EWC is established under the Subsidiary Requirements, after 2020, these will be the Subsidiary Requirements of the EEA member state where the company has its central management. If the central management is in the UK, the company must designate a “representative agent” in one of the member states, and this state’s legislation would then be the governing law for the EWC. If a company fails to designate a representative agent, it defaults to the member state in which the group’s subsidiary with most employees is located. The position with regard to EWCs established under an agreement is more complicated, and EWCs or SNBs should seek advice.
UK EWC legislation in the event of a no-deal Bexit
The UK Parliament has passed legislation making changes to the UK EWC Regulations in the event that the UK leaves the EU with a Withdrawal Agreement. According to the Department for Business, Energy & Industrial Strategy, these changes are only technical. However, they would leave the legal position of European Works Councils that are governed by UK law extremely complicated, and confusing. Some companies may be required to operate two European Works Councils – one to comply with the EWC directive and another to comply with the UK legislation. This is not clear-cut though because of internal contradictions within the revised legislation. The legal position is particularly complicated for UK-governed EWC agreements that were signed or revised in the 2-year period before the “recast” EWC directive came into force in June 2011.
Please contact us if you would like advice on the Brexit implications for your European Works Council.