Changes to EWCs directive prompts review of UK reps

The Council of the EU and the European Parliament have reached a provisional agreement to revise the European Works Council Directive. It’s a significant development for multinational employers operating across Europe and one that HR and legal teams should be alive to. Although the UK is no longer part of the EWC regime, many businesses continue to include UK employee representatives in their European Works Councils on a voluntary basis which begs the question – does that need to change? We’ll ask an employment lawyer who is advising clients on that issue.

The proposed reforms would make it easier to set up a European Works Council, strengthen the rights of employee representatives, and introduce tougher compliance rules, including financial penalties for non-compliance. The changes are expected to increase the legal and operational burden for employers with EWCs in place.

Including UK reps in an EWC was a common and practical step in the years following Brexit, especially for companies with large UK operations and a desire to maintain consistency across the workforce. But the landscape is changing. The revised Directive will mean more cost, more regulation, and stronger enforcement across the EU. That’s prompted many multinational businesses to rethink whether they want to keep UK reps in the EWC at all, especially now that there is no legal obligation to do so.

So let’s get a view on that. Earlier I caught up with employment lawyer Ben Brown, who joined me by video link to discuss it:

Ben Brown: “The first port of call when you're looking at the situation is your agreement? What does your agreement currently say about the status of UK representatives? What I have typically seen is agreements that don't make any specific reference to UK reps, save for the fact that they're entitled to a certain number of seats on the council. The problem with that now is that an agreement requires express provision to allow UK representatives to sit on councils now that the UK is no longer a member state. The agreements that I typically tend to see make no reference to anything other than the European Economic Area, companies within the European Economic Area, and jurisdictions in member states whereas, actually, if that is what your agreement currently says, which is why I'm strongly recommending to all my clients that I know have European Works Councils that are conducting a review is that actually, in theory, UK representatives who are currently sitting on your council have no standing to be there if your agreement doesn't currently provide for them to, because  we are a third party country in the UK now, from a European Works Council perspective, and that needs to be reflected in your agreement. If it doesn't then, technically speaking, the UK representatives have no standing, as I've said, and that's one of the things that I've tried to kind of remedy when I'm looking at clients’ agreements and determining what their strategy needs to be. 

It’s looking at, firstly, whether they have rights under the agreement and, if not, what needs to be done to amend that but then secondly asking the question, do we want them still to have rights? Is it the right thing to do for this business given the potentially onerous and more expensive changes that are coming when the Directive is amended and transfers international law, albeit that might not be for two years, possibly three years. Now is the time to start determining whether, actually, there's a better form of employee engagement that we can involve the UK in. Does the UK need to be in your European Works Council given that, legally speaking, it doesn't have to be, subject to the terms of your agreement, and I think that is a question, firstly, that needs to be considered by the groups I previously mentioned, the legal team, the HR team, the management stakeholders, but then also, there's a question mark about consultation with the body itself, with the council itself, and certainly, when it comes to any amendments to the agreement, then agreement with the council is going to be necessary. So there's a question mark there around well, what is our strategy in terms of the consultation itself with the current members of the council and how do we explain to them, potentially, that the agreement that we currently have isn't fit for purpose for the reasons I've mentioned in terms of the UK representatives standing?”

Joe Glavina: “If a business thinks well, okay, given this change, let's pull our UK reps out of the EWC and look at an alternative forum. Is that alternative likely to be less legally risky and also cheaper?”

Ben Brown: “Yes, there are a couple of points just to that I want to make there. The first one is the case law in this area has developed at quite a steady pace, actually, post Brexit because of various multinational companies doing various things with their EWCs and there are a couple of different strands, and this is why it's kind of very important to take legal advice on the point. One issue that has arisen is companies are being perceived to be terminating and ending their existing agreements with European Works Councils and thereby creating potentially two obligations to have two different works councils, one representing European member states, one representing current UK representatives and that's the EasyJet case. So there is the risk there that if you are being perceived to be terminating your existing agreement, you are potentially creating a dual problem in sense that you've got dual obligations to consult and inform two different independent bodies under their own directive and UK regulation kind of legislation. So that's one potential issue. The second that I wanted to mention is agreements and this is why the wording of your agreement is so important, and why the review and strategy that goes behind it is important, because another strand of case law has determined that actually where your agreement isn't fit for purpose in that it doesn't provide for rights for UK representatives under it, legally speaking, there's no right and it's not enforceable for UK representatives under that agreement to enforce their position in the council. So actually, if it's done carefully and sensibly and the amendments, or the proposals that you are making, are simply intended to reflect the law and practice as it currently stands in terms of the UK's rights, then that's a completely different scenario to the EasyJet scenario where you've created two separate bodies simply reflecting laws by proposing amendments that reflect the current legislation and the current case law position creates less of a risk than potentially terminating the agreement and having to seek to renegotiate. So there are a number of different kind of pitfalls, if you will, and a number of different options and opportunities and that's why strategy and taking advice, I think, is really important.”

That EasyJet case Ben referred to involve the airline’s decision to move its European Works Council from the UK to another EU member state after Brexit. In doing so, it was found to have effectively terminated its original EWC agreement and triggered the obligation to establish a new EWC under EU law, while also remaining subject to UK domestic consultation rules. That created a situation where two separate EWCs were arguably required: one under UK law and one under EU law. The case serves as a cautionary tale, showing how changes to an EWC structure can unintentionally create duplicate obligations, increasing legal risk and complexity for employers.

A fortnight ago Ben talked to this programme in more general terms about what the revised EWC Directive will mean for employers, why the changes matter, and what steps businesses should be taking now to review their agreements. That’s ‘EU to make significant changes to European Works Councils’ and is available for viewing now from the Out-Law website. We’ve included a link to it in the transcript of this programme for you.

LINKS
- Link to HRNews programme: ‘EU to make significant changes to European Works Councils’