EU Commission confirms its views on EWCs and a “no-deal” Brexit

The EC’s Notice to Stakeholders  does not have any formal legal status, but will be persuasive in any dispute. It confirms the analysis in our recent article on the impact of Brexit on EWCs currently governed by UK law. In summary, the EC considers that a no-deal Brexit would have the following consequences:

• The EWC Directive will cease to apply to the UK.If a corporate group will cease to have 1,000 employees in EU member states then, even if a EWC is already established, the group will cease to be subject to the Directive (although the EWC may continue to exist under national law).

• UK employees may continue to be represented on a EWC if that is provided for in the EWC agreement.

• If a corporate group’s central management or representative agent is currently in the UK, the role of central management will be transferred to an EU member state. Unless central management’s ultimate parent company has designated a new representative agent in a member state, this role will be assumed by the establishment or group undertaking employing the greatest number of employees in a member state. This responsibility is transferred automatically and immediately as of the UK withdrawal date.

• The law applicable to a EWC agreement is that of the member state where the central management, deemed central management or central management’s representative agent is situated in the EU. So where UK law has applied to an existing EWC, as of the withdrawal date the law of a remaining member state will apply automatically and immediately. This is to ensure that the rights of employees in remaining member states remain enforceable.

The EC’s Notice therefore confirms that, even in the event of a no-deal Brexit, EWCs will continue to exist and operate so as to ensure that the rights of employees in remaining EU member states are not prejudiced. It also supports our advice that management should proactively designate a new representative agent in a remaining EU member state, in order to avoid governing law based solely on headcount numbers on an arbitrary date in the future.