BEERG Perspective - UK EWCs post-Brexit - a...

The United Kingdom has left the European Union. Brexit is done. Nonetheless, its impact in the field of European Works Councils remains uncertain. This note provides an update on recent developments and a look ahead to 2023.

Introduction

The Brexit process is over. The United Kingdom left the European Union on 31 January 2020. The Brexit transition period ended on 31 December 2020.

For European Works Council purposes, the United Kingdom’s status is clear as a matter of European Union law. The United Kingdom is a third country. The European Commission confirmed this position in a Notice to Stakeholders following the United Kingdom leaving the European Union. It reconfirmed it in an answer to the European Parliament following the end of the Brexit transition period.

United Kingdom employees may be represented on European Works Councils under the terms of a negotiated European Works Council agreement in the same way as any other third country’s employees. It is therefore helpful that the United Kingdom has retained parts of its European Works Council legislation. 

For example, it is helpful for there to be “national law” on how to elect the United Kingdom member(s), as this is often stipulated in an agreement as the means by which members of a European Works Council should be elected or appointed. It is also sensible for them to retain protections, such as the enforceable right not to be dismissed for the proper performance of their duties.

However, since the end of the Brexit transition period, the United Kingdom’s European Works Council legislation has not only included sensible provisions. This is despite the relevant government minister admitting to Parliament that it was “an unavoidable and unfortunate truth” that United Kingdom employees would lose their existing rights to participate on European Works Councils, as they require the kind of cross-border legal co-operation that the United Kingdom wished to end. 

The legislation also includes highly problematic provisions. In particular, it maintains the concept of a European Works Council operating under United Kingdom law. This is despite the United Kingdom having withdrawn from the European Union’s common market and legal framework on cross-border co-operation that underpin the rationale behind and the legal effectiveness of European Works Councils. 

No new United Kingdom law European Works Councils

The good news is that relatively few BEERG members are likely to be affected by the concept of a European Works Council operating under United Kingdom law. The reforms to the United Kingdom’s legislation that took effect at the end of the Brexit transition period unambiguously removed the requirement ever to set about establishing a new European Works Council. As such, unless a BEERG member’s European Works Council or Special Negotiating Body operated under United Kingdom law on 31 December 2020, it is free from operating a European Works Council under the United Kingdom’s legislation.

United Kingdom businesses

In November, the United Kingdom’s Employment Appeal Tribunal delivered its decision in easyJet.

Although for different reasons than the Central Arbitration Committee, which had extraordinarily based its decision on Brexit legislation enacted by Parliament being “irrelevant”, the Employment Appeal Tribunal’s decision upheld that any United Kingdom business that operated a European Works Council under United Kingdom law before the end of the Brexit transition period must continue to do so.

Crucially, the decision confirms that this is the case even if a business has already begun operating a European Works Council under European Union law in light of Brexit. It was irrelevant that easyJet has operated a European Works Council under German law since the end of the Brexit transition period. It must still operate a second European Works Council under United Kingdom law.

Unsurprisingly, easyJet suggested that a requirement to operate two European Works Councils under different rules in different countries would cause practical difficulties. It also suggested that these would be exacerbated as the United Kingdom is no longer a member of the European Union, to the effect that European Union law does not recognise the concept of a European Works Council operating under United Kingdom law. 

The Employment Appeal Tribunal agreed. Nonetheless, it decided that easyJet must somehow still operate a second European Works Council despite these “significant practical difficulties”. Unhelpfully, it gave no guidance on how this could be done. As such, further court cases appear inevitable.

easyJet has already sought permission to appeal to the Court of Appeal. The uncertainty faced by United Kingdom businesses is therefore likely to persist for at least another year.

Other businesses

Businesses that are not United Kingdom businesses might take comfort that the easyJet decision does not affect them. These would include, for example, American businesses that operated a European Works Council under United Kingdom law prior to the end of the Brexit transition period.

However, an appeal against the Central Arbitration Committee’s decision in HSBC will be heard by the Employment Appeal Tribunal at some point in 2023. Crucially, this will determine whether the United Kingdom’s legislation continues to apply not only to United Kingdom businesses but also to those which had a representative agent in the United Kingdom at the end of the United Kingdom’s Brexit transition period. Widespread uncertainty will therefore persist for many businesses for the foreseeable future.

The practical significance of easyJet and HSBC

It is now almost three years since the United Kingdom left the European Union. The full consequences of Brexit are only now becoming clear.

Some of those who campaigned for Brexit did so because, as it was put by the RMT trade union, it was a “myth that the EU is in favour of workers”. Despite this, Brexit has led to the repeal of United Kingdom employees’ right to request representation on a European Works Council.

Others of those who campaigned for Brexit did so because it would reduce “red tape”. Despite this, the Employment Appeal Tribunal has ruled in easyJet that United Kingdom businesses must operate not one but two European Works Councils. HSBC might extend this obligation to even more businesses.

Some European Works Councils and their experts are already suggesting that a business’s two European Works Councils can somehow be combined. This is a superficially attractive suggestion. It is also legally flawed. Under European Union law, a European Works Council must be governed by the laws of a European Union member state. 

This ensures that it is subject to the ultimate oversight of the Court of Justice of the European Union. However, under United Kingdom law, any agreement providing for a European Works Council to be governed by the laws of a European Union member state would be void for purporting to contract out of the application of United Kingdom law.

In practice, it might be possible to operate a business’s two European Works Councils alongside each other. For example, their annual meetings could take place simultaneously or at around the same time. However, significant practical issues would remain. 

How do Irish employees elect or appoint members of a European Works Council operating under United Kingdom law in accordance with “national law” when there is no Irish “national law” on this? If a European Works Council operating under European Union law loses a court case in Germany, could its sister European Works Council operating under United Kingdom law bring an identical court case in the United Kingdom to seek a different result? If so, how would conflicting decisions be reconciled? At present, there are no clear answers to these kinds of questions.

What next?

Many businesses are likely to face at least another year of legal uncertainty whilst appeals in easyJet and HSBC are decided. However, a welcome end to this uncertainty might be in sight.

The United Kingdom government recently introduced draft legislation to remove all traces of the United Kingdom’s former membership of the European Union from its legal system. If enacted, it would introduce a “sunset clause” and repeal all regulations that gave effect to European Union law rules on 31 December 2023.

On the one hand, this might cause mayhem in the field of employment law, as rules ranging from employees’ rights to paid holiday to agency worker rules would disappear overnight, unless expressly saved by a government whose Secretary of State with responsibility for employment law has called many employment protections “crazy”.

On the other hand, and despite it containing some helpful provisions for all businesses, the complete disappearance of the United Kingdom’s European Works Council legislation would bring welcome legal certainty for those businesses with a European Works Council or a Special Negotiating Body operating under United Kingdom law before the end of the Brexit transition period.

Over six years on from the Brexit referendum, significant uncertainty continues to exist. As always, we will continue to update BEERG members as matters develop.

Nov 28, 2022