European Works Councils - HR teams and in-house lawyers should prepare for the post-transition period

Out-Law News | 29 Oct 2020 | 1:38 pm |

Ben Brown tells HR News how EWCs will need to be rehomed from 1 January 2021 to remain valid for EU law purposes.
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    HR NEWS – TRANSCRIPT – 30 OCTOBER 2020

    European Works Councils – the law to change from 1 January 2021

    The government has updated its guidance on workplace rights in the UK with effect from 1 January 2021 when the transition period after Brexit comes to an end. The guidance covers a subject that has received relatively little attention, namely European Works Councils (EWCs), an important mechanism for any business involving senior managers providing information to and consulting with employee representatives across Europe. The government's message is that Brexit will affect UK-based EWCs so, with the clock ticking, now is the time to address this issue. The government spells out that from 1 January the UK will no longer be subject to EU law, in this context the European Work Council Directive, and instead will be subject to the UK's regulations which the government has amended to be ready for that deadline.  So UK-based EWC arrangements can continue to operate until the end of this year, but from 1 January they will need to be rehomed in another EU Member State in order to remain valid for EU law purposes, otherwise they will be deemed to be based in the Member State with the highest employee headcount. It follows that employers with UK arrangements need to consider carefully their choice of Member State and take steps to appoint their representative agent in that Member State before 2021. As you might expect we have a lot of multinational clients who will be caught by this and we are currently advising many of them on the best approach to take – there are of course important strategic considerations to take into account. One of our team advising on this Ben Brown who joined me by video-link from Leeds. He told me that when the UK's amended legislation takes effect there will be two important consequences:

    Ben Brown: “The first is where a multinational UK based business with European operations doesn't have the European Works Councils, which might be slightly unusual, but  in such a situation, the fact that the UK has left the EU and is no longer subject to those rules, and the amendment to the UK regulations means that actually employees might not necessarily have a right in the UK to request that the company starts negotiations on the establishment of an EWC. The second important consequence is for companies who have an existing European works Council and an existing agreement for European works Council. What happens to the continued operation of that now that the UK has left the EU, and that the more relevant context because the issue really is how does the UK central management provide for the continued operation of that, once the UK is no longer subject to the same EU rules and the answer to that question is that the UK central management needs to make provision for the appointment of a representative agent, i.e. a company within its group within an existing EU member state.

    So whether that's, for example, Ireland, or whether that's on the European continent, in order to appoint a representative Asian, there's a specific process to go through, and companies will need to look at their existing agreement to see what rights that they have, notwithstanding the fact that the appointment is a unilateral, right. However, amending existing EWC agreements, will need consent of representatives and the reason why this is important is because once the UK becomes a third country, as far as the EU is concerned, relating to its rules and regulations, the law applicable to EWCs will revert automatically to the country in which the group the company operates with the highest number of employees within that jurisdiction. So there is no say unless the company appoints representative agent about the law that will apply to the existing works council from the first of January 2021, unless the central management based in the UK has appointed a representative agent beforehand.

    So that's what the key changes and why it's important that companies consider their continued operation of the European Works Council and look to address the changes to the agreement that might be necessary to provide for the appointment of a representative agent and the continued representative representation of UK employees on that European Works Council from the first of January 2021, because that's not an automatic entitlement and a company is going to have to be really careful about ensuring that if they want to continue the EWC in its current form, that there is an express right for UK reps to retain the right to be on that Council. Having said that, there are a couple of things that aren't changing and those are the protections of incumbent and existing representatives on European Works Councils. So specifically, I'm talking about the right to time off, remuneration and protections against unfair dismissal and detriment. Now, those will continue to be in place in respect to the UK regulations from the first of January 2021. Those will still apply to existing representatives.”

    We will be coming back to this next week to get an Irish perspective - Ireland being one of the Member States that could be chosen for rehoming a UK-based EWC.