BEERG Newsletter - EWCs: Two EWCs instead of one? – a follow up

As a result of last week’s story on the UK’s easyJet decision in which it was held that easyJet had to run two parallel EWCs, one under UK law and the other under EU law we received a number of questions asking for further details. 

So, we asked David Hopper of Lewis Silkin, who was involved in the easyJet case, as well as many other EWC cases in the UK, for his comments on the matter.

What exactly does the amended law say?

The amended legislation now says that most provisions of the relevant set of regulations “shall apply in relation to a Community-scale undertaking or Community-scale group of undertakings only where, in accordance with regulation 5, the central management is situated in the United Kingdom”.

 How did the Court of Appeal judges in easyJet interpret this?

 The judges decided that, even though the wording refers to most provisions applying “only where, in accordance with regulation 5, the central management is situated in the United Kingdom”, it does not matter that easyJet’s central management is not situated in the UK “in accordance with regulation 5”. The fact that it is situated in the UK is sufficient, with the clear wording about regulation 5 being, in effect, superfluous and of no legal significance.

Did they offer any advice on how you run two European Works Councils, with one operating under UK law and one operating under EU law?

Unfortunately, no. When this case was first heard at the Central Arbitration Committee, the Panel suggested that a solution would be to merge the two bodies in due course. However, this overlooked that this is actually legally impossible: under UK law, the UK EWC must be governed by UK law, whilst under EU law, the EU EWC must be governed by the laws of a member state of the EU. The Employment Appeal Tribunal and the Court of Appeal have subsequently avoided providing any suggestions at all for how a business could sensibly run two EWCs, instead limiting their comments to recognising that their decisions cause ‘significant practical difficulties’ and ‘practical difficulties’ respectively, whilst leaving it to the parties to work out how these can be managed in practice.

Does this ruling only apply to UK headquartered companies?

Yes, the particular issue in this case was whether most provisions of the relevant set of regulations apply to a central management situated in the UK but which didn’t fall within the scope of regulation 5. It’s not therefore binding in respect of any other kind of business. Indeed, it’s not even clear exactly how this decision will apply to UK businesses that operated their EWC under the terms of an EWC agreement in advance of the end of the Brexit transition period, as opposed to under the default ‘subsidiary requirements’ contained in the relevant set of regulations (as easyJet did). This is a question currently before the Employment Appeal Tribunal in a case involving HSBC that will be decided next year.

Will this impact non-UK companies that had their EWCs based in the UK?

In line with usual practice, the Court of Appeal refrained from giving a wider decision that it had to in order to dispose of this particular case. It’s therefore of limited relevance to businesses headquartered outside of the UK. However, employee-side consultants will probably be bolstered from the Court of Appeal’s willingness to disregard the clear wording of the relevant regulation and, with it, the possibility that the courts might be willing to do the same in respect of other clear wording in the legislation which, on its face, means that non-UK companies that had their EWCs based in the UK before the end of the Brexit transition period should no longer have to operate a UK law EWC.

How would this sit with HPE in which it was held that a company is free to change its representative agent to another jurisdiction?

The crucial distinction is that, unlike HPE, easyJet is a UK company and so never had a representative agent in the UK. It therefore couldn’t and so didn’t try to change its representative agent in the lead up to the end of the Brexit transition period.

Is there a case in the courts on this? If so, when will it be heard?

Yes, this is one of the live issues that remains unresolved despite it now being nearly three years since the end of the Brexit transition period. However, this issue won’t be resolved until after the case involving HSBC (see question 4 above) has been resolved. This means that we’re looking at next year as the earliest that this issue might finally be resolved.

 As the amended regulations were adopted while the UK was still governed by EU law, could it be argued that this law is subject to review by the Court of Justice of the European Union?

 No, the amending regulations themselves were enacted whilst the UK was still an EU member state, but they didn’t come into force until after the end of the Brexit transition period. Further, with only very limited exceptions, with this case not falling into any of them, cases can no longer be referred by UK courts to the Court of Justice of the European Union. In any event, easyJet has decided not to appeal against the Court of Appeal’s decision and so this matter is now settled, at least in respect of UK businesses like it that were operating under the subsidiary requirements. 

The only way that that might change in future will be if the UK Parliament chooses to reform the regulations, perhaps after they’re shown as being unworkable. However, even that appears unlikely given that the Conservative Party has recently indicated that it isn’t looking to reform them and the Labour Party opposed even the limited sensible reforms that were made when the future amendments were set back in 2019 (such as the abolition of the establishment of new EWCs under UK law after Brexit).

BEERG COMMENT:

As can be seen from David’s comments, while it would appear that the easyJet decision may be of limited relevance this cannot be taken for granted. It is known that some EWC advisors are pushing for the ruling to be extended to all companies that had their EWCs under UK law prior to Brexit. They see this as one way of ensuring a continuing UK presence on EWCs. 

Could the situation change under a Labour government? Probably not as David indicates above. Just this week Labour has again ruled out rejoining the Single Market if it is returned to government in 2024, which means that the UK will not be going back in scope of the EWC Directive. But that does not mean that it might not try to build on the concept of “UK EWCs”, especially if pushed to do so by Unite, one of its major trade union backers.

We will discussing this development at next week’s BEERG Network Meeting in Brussels.

We will examine everything involving EWCs at our EWC Training program in Sitges, Oct 11 - 13. (course program)

Email [email protected] for more details