Brexit: On the way to the end

14 december 2020 / Sjef Stoop

The United Kingdom is no longer be a member of the EU from February 1 of this year. Because not everything was in place for an orderly departure, a transitional period was agreed in order to achieve a good departure deal. The UK will continue to follow all EU rules until the end of 2020, and perhaps a little longer if the negotiators agree on some respite. But after that, deal or no deal, it really will be over. Even if there is still no departure deal.
However, the consequences for an EWC do not depend on the negotiations on a deal or no-deal. The ‘Norway scenario’ is not on the table. It is therefore out of the question that the UK, in any compromise, would continue to participate in European arrangements as Norway does.

What does Brexit mean for the EWC?

Firstly, this depends on whether the EWC is concluded under UK law or not. If not, the only major change is that British EWC membership would no longer be an automatic right. Therefore, the agreement, or an addendum, must state that the UK will continue to participate in the EWC. This can best be done by extending the definition of the ‘scope’ of the EWC in the agreement to include the UK. This would ensure not only UK participation but also that the EWC will still be informed and consulted on UK aspects of transnational events. The participation of UK representatives in the EWC will still be possible, also because the UK government will maintain the legal rules governing the rights and obligations of UK representatives.

Another possible consequence could be that, in the remaining countries, the company would fall below the threshold of 1000 employees that requires setting up an EWC. It will depend on the specific provisions in the EWC agreement, whether the EWC can at least continue to exist for the duration of the agreement. Usually this will be the case.

EWCs under UK law

The situation is more difficult for EWCs established under British law. If the Central Management is based in the UK, it no longer complies with the obligations under the EU Directive and the company has to appoint a new representative agent within the EU. The company is free to make this choice. This is evidenced by a document published by the Commission in April (Notice to Stakeholders Withdrawal of the UK and EU Rules on European Works Councils, 21 April 2020). In it, the Commission states that ’there is therefore no need to amend agreements referring to UK law’.
However, the Commission ‘strongly recommends that such agreements should be amended and that, for the sake of clarity and legal certainty, the law of a Member State should be expressly mentioned’. It also states that the end of the Brexit transitional period could lead to a significant change in the structure of the company. In such a case, the directive requires negotiations to be opened with a view to adapting the agreement.

Chaos

However, on 1 December 2020, the UK government published a number of guidelines (Making an application or complaint from 1 January 2021 – GOV.UK (www.gov.uk)), which greatly complicate the matter. The UK EWC Regulations (TICER) remains in force for existing EWCs under UK law. The only thing that really changes is that no new request to establish a SNB can be made under the UK rules any more. But existing EWCs can remain to exist. Therefore, a company under UK law therefore does not seem to have the right to simply abolish its EWC under UK law. At the same time, the EU company has to designate a country within the EU to take over the central management’s obligations to the EWC arising from the directive. Consequently, we now have two systems of legislation that are not compatible with each other.

The result could be that the EWC will have to operate under two jurisdictions, the UK and an EU country. On the positive side: In the EWC under that UK jurisdiction there would be no need for an additional arrangement to maintain the UK delegation to the EWC. However, any legal conflicts would become almost inextricable, and very costly.

Thus, although under the EU Directive the EWC has no legal bargaining power if the management wishes to designate another country to take on the obligations of central management, the EWC does still have some bargaining power, if management at the same time wishes to remove its obligations under the UK EWC rules. This chaos brings negotiation opportunities. In exchange for the EWC agreeing to remove UK jurisdiction, the EWC can stipulate that at least the UK colleagues will remain in the EWC. Another EWC demand could be that the EU country which the company designates for the role of central management is one with robust EWC legislation (e.g. France, Germany or the Netherlands) rather than Ireland, for example, which has a lesser reputation in this area.

Sjef Stoop, EWC trainer and advisor