Brexit in short
Brexit refers to the UK’s departure from the European Union. Following a referendum in 2016, the UK left the EU on 31 January 2020.
On 24 December 2020, the EU and UK negotiators reached an (1,300-page) agreement on their future relationship following Brexit, the EU-UK Trade and Cooperation Agreement. This agreement sets out the rules on the new partnership between the EU and UK that apply as from 2021 (for an overview of the new EU-UK trading relationship, please see our publication of 12 January 2021). Although the European Parliament must still ratify the EU-UK Trade and Cooperation Agreement (the deadline for doing so has recently been extended to 30 April 2021), the European Council has already approved the provisional application of the agreement, which means that the new rules are already in force.
Brexit and your European Works Council
Brexit also has consequences for the organisation and functioning of European Works Councils (EWCs). EWCs are company-level institutions set up in multinational companies to enable the provision of information to and consultation of employees on transnational matters. With its scope being limited to the European Economic Area, multinational companies should consider the implications of Brexit for their (existing or future) EWC, if they have not done so already. In that regard, below we will answer two of the main questions multinational companies should consider (if applicable):
- What should happen to the UK base of your European Works Council?
- What should happen to the UK representation in your European Works Council?
1. What should happen to the UK base of your European Works Council?
As the UK is no longer an EU Member State, EWCs can no longer be legally based (housed) in the UK and must be relocated to an EU Member State. Employers should therefore consider their choice of EU Member State for housing and herewith governing their EWC (if not already done so).
Many employers have already elected to relocate their EWC to an EU Member State to continue operating under the EU Member State’s law post-transition. If no such election has been made, Article 3(6) of the EWC Directive (2009/38/EC) (the EWC Directive) states that, when the law governing the EWC is not that of an EU Member State (in this case: UK law), the applicable law will automatically be the law of the EU Member State where the representative agent, or in the absence of such a representative agent, the central management, is located. Two situations can occur:
- If your representative agent is appointed in the UK and no new representative agent has been appointed yet, the default representative agent (and thus the governing law) will be (that of) the EU Member State employing the greatest number of employees.
- If your representative agent is already located in an EU Member State, the applicable law automatically governing the EWC changes from UK law to the law of that EU Member State.
Consistent with the above, in its EU Withdrawal Notice (section 4), the European Commission confirms that “it is thus not necessary to amend [EWC-] agreements” to reflect the change in law although it recommends that they are amended for the sake of legal clarity and certainty (it obviously could cause confusion to leave in a different governing law).
2. What should happen to the UK representation in your European Works Council?
Whether UK employees and their representatives can continue to participate in EWCs depends on how your EWC agreement is drafted.
Existing EWC agreements should be reviewed to identify the impact on UK employees’ right to participate in the EWC and whether Brexit warrants triggering the structural change provision in the EWC agreement (if available). If, as a result of Brexit, the employer ceases to employ at least 1000 employees in EU Member States, it will cease to be subject to the EWC Directive even if a EWC is already established, although the EWC may continue to exist under domestic law. In terms of having UK representatives on the EWC, the EWC Directive and the Dutch implementing legislation allow for third-country employees to participate in EWCs by agreement. In that respect, it should be considered what has been agreed in the EWC agreement and as a result whether it is desirable to amend the EWC agreement. For example, if the EWC agreement stipulates that the rights to participate in the EWC are tied to the UK’s EU membership, then such participation rights could have fallen away at the end of the transition period. Article 13 of the EWC Directive provides for a procedure for amending the EWC agreement if the existing EWC agreement does not already make provision for this. Generally these so-called structural change provisions carry fairly high thresholds, in terms of contents and procedure, to accommodate amendment. Also, it is not uncommon for EWC agreements to accommodate composition changes of the EWC to fluctuate with a changing workforce within the European Economic Area. If so, such could accommodate a fairly straight-forward manner to adjust the EWC’s composition, typically effective as from the new term of office. Note that a decision to exclude UK workforce involvement in the EWC could have negative industrial relations consequences, particularly for employers with a material UK presence.
For on-going and future negotiations on setting up EWCs, UK employees no longer require representation in (and are thus not entitled to be represented in) a EWC and do not count towards the relevant employee thresholds for setting up a EWC (unless otherwise agreed).
More information?
For further Brexit related information, publications and guidance, please see our Brexit Law microsite: Brexit Law - the way ahead, including our latest UK publication Brexit – Post-transition Q&As for employers of 24 February 2021.
