European Works Councils continue to exist in a post-Brexit UK

In its first ever decision on European Works Councils, the Court of Appeal has confirmed that the EWCs of certain UK-based businesses continue to exist under UK law after the end of the Brexit transition period.

This case required the courts to grapple with “ill thought through” legislation, originally intended to cater for a no-deal Brexit. Each stage of the proceedings saw a different judicial interpretation, with the Court of Appeal acknowledging that its decision is likely to cause practical difficulties given the need to run two EWCs.

What is a European Works Council?

A European Works Council (EWC) is a standing body that facilitates the information and consultation of European employees on ‘transnational’ issues. Until the end of the Brexit transition period on 31 December 2020, during which the UK was treated as if it were still a member of the European Union, EWCs were composed of employees’ representatives from each country that was (or was treated as) a member of either or both of the European Union and the European Economic Area in which a business had employees, as well as any other country agreed to be in scope by a business and its employees’ representatives under the terms of an EWC agreement. They operate separately and with a different competence from national-level information and consultation bodies.

Brexit amendments

The concept of a EWC dates from 1994, and the key EU legislation is known as the EWC Directive. EWCs were introduced into UK law through the Transnational Information and Consultation of Employees Regulations 1999 (TICER). In March 2019, and in anticipation of a ‘no deal’ Brexit on 29 March 2019, the Employment Rights (Amendment) (EU Exit) Regulations 2019 were made. These would have amended TICER into Amended TICER later that month. The UK’s withdrawal from the EU was later delayed until 31 January 2020 and the UK ultimately did conclude a withdrawal agreement with the EU, thereby avoiding a ‘no deal’ Brexit. Nonetheless, TICER was still amended into Amended TICER by those Regulations with effect from the end of the Brexit transition period.

Amended TICER saw regulations 4 and 5, which act as the gateway provisions governing when the remainder of TICER applies, significantly amended.

Under the Amended TICER, regulation 4 continues to state that the remainder of TICER shall apply “only where, in accordance with regulation 5, the central management is situated in the United Kingdom.” Nonetheless, as part of the 2019 amendments to TICER, regulation 5(1)(a), which had stated that regulation 5 applies where “the central management is situated in the United Kingdom”, was repealed. This led to some employers, including easyJet plc, to understand that, as businesses whose central management is situated in the UK, the remainder of TICER no longer applied to them.

The easyJet litigation

easyJet plc is a major airline whose central management is situated in the United Kingdom. Prior to the end of the Brexit transition period, it had operated an EWC under the default legal rules contained in TICER, known as the ‘subsidiary requirements’. In anticipation of the end of the Brexit transition period and TICER amendments, and in accordance with guidance issued by the European Commission, it appointed a German representative agent to assume its EWC responsibilities. This was to take effect from the end of the Brexit transition period.

This arrangement was essential as a matter of EU law, which requires a corporate group’s responsibilities for operating an EWC to fall on the management of an undertaking or establishment situated within the EU. This is necessary to ensure that employees’ rights are protected by the courts of an EU member state and, ultimately, the Court of Justice of the European Union.

In early 2021, easyJet’s EWC made a complaint to the Central Arbitration Committee (CAC) in respect of alleged failures by easyJet plc properly to inform and consult it on its proposals to restructure its business during 2020 and to hold an annual meeting with it under UK law in early 2021.

In its response to the complaints, easyJet plc submitted that the CAC did not have jurisdiction to hear them because, as a result of the amendments to TICER, Amended TICER did not apply to it as its central management is situated in the UK. In short, Amended TICER meant that it was not obliged to continue to operate its UK EWC alongside its German representative agent operating an EWC under German law.

CAC and EAT decisions

In 2021, the CAC held that it did have jurisdiction to hear the EWC’s complaint. Whilst it accepted that the amendments to TICER were “poorly drafted” and agreed that they were “capable of being read in the way that the Employer contends”, it determined that the deletion of regulation 5(1)(a) of TICER was ‘irrelevant’ and that it was Parliament’s intention that Amended TICER apply to easyJet plc.

In 2022, the Employment Appeal Tribunal (EAT) dismissed easyJet plc’s appeal. Although the judge did not uphold the CAC’s dubious approach to interpreting Amended TICER, HHJ Taylor did conclude that the easyJet EWC continued to exist as a matter of UK law and that the CAC had jurisdiction to hear its complaints.

Court of Appeal decision

easyJet plc appealed to the Court of Appeal against the CAC’s and EAT’s decisions on the basis that they had erred in adopting a construction of Amended TICER that was contrary to both its ordinary meaning and Parliament’s intention. In particular, easyJet plc argued that the plain and unambiguous effect of the deletion of regulation 5(1)(a) was that the relevant provisions of Amended TICER did not apply to it, which it suggested was consistent with the overarching aims of Brexit. It also argued that it would be practically unworkable for it to have to operate an EWC under UK law in addition to its German representative agent operating an EWC under German law.

Practical difficulties include the fact that there is no national law in any EU member state on how to elect the members of an EWC operating under UK law. Also, a member of EWCs operating under two separate legal frameworks could also find themselves required to keep the same information confidential under one legal framework, or face imprisonment, and to disclose that same information to all employees under the other legal framework, or else breach a court order.

Nonetheless, the Court of Appeal dismissed easyJet plc’s appeal. It held that the CAC did have jurisdiction to hear the EWC’s complaints and that the EWCs of UK-based businesses which were established before the end of the Brexit transition period continue to exist. In particular, Lord Justice William Davis adopted yet another interpretation of TICER. He held that the amendments to regulation 5 merely had the effect of “changing its purpose to … a pure deeming provision” and that, as regulation 4(1) still refers to undertakings whose “central management is situated in the UK”, there is no question that TICER still applies to them.

The Court of Appeal’s decision means that the EWCs of UK-based businesses which were established in the UK before the end of the Brexit transition period under TICER’s subsidiary requirements continue to exist. This is despite it noting that Amended TICER is “possibly not the best thought through piece of legislation” and accepting easyJet plc’s submission that so deciding would cause significant “practical difficulties”. Further, it was noted that the EWC Directive is of little relevance to such EWCs, which are now governed by domestic UK law.

However, the Court of Appeal did not address wider issues, such as those arising from EWCs that were operating under TICER pursuant to an EWC agreement (as opposed to the subsidiary requirements) or on the basis of a non-EU/EEA parent company having had a UK representative agent for the purposes of the EWC Directive up until the end of the Brexit transition period. The status of these EWCs remain live issues before the EAT and the CAC in cases involving HSBC and Adecco.

What does this mean for employers?

easyJet plc has not sought permission to appeal to the Supreme Court. The UK Government has also indicated that it does not intend to repeal any part of Amended TICER as part of its proposed reforms to EU-derived employment legislation. It therefore follows that UK-based businesses which had an EWC before the end of the Brexit transition period that operated under the subsidiary requirements (or which were required to establish such an EWC under Brexit transitional provisions) are required somehow to operate two separate EWCs: one under the law of a member state of the EU and one under UK law. How this sits with the promised deregulatory ‘benefits’ of Brexit is an obvious question.

Such businesses now face a difficult conundrum: to try to abide by the letter of Amended TICER by grappling with the ‘practical difficulties’ recognised as existing by the Court of Appeal, or try to merge their two EWCs? Although it may be the pragmatic option, a formal merger is legally impossible and such an approach might become harder if the EWC Directive is soon revised to create further divergence between the UK’s and the EU’s separate frameworks for EWCs (see here for our recent article on the European Commission’s second-stage consultation on this).

easyJet PLC v easyJet European Works Council [2023] EWCA Civ 756 – judgment available here