How to establish a European Works Council

The UK may be on its way out of the EU, but many international companies could still be required to set up a representative body. Daniel Stander explains what organisations need to consider

With the advance of the government’s European Union (Withdrawal Agreement) Bill through parliament, the final form of Brexit has become more certain. In line with the withdrawal agreement, the UK’s legal framework for European Works Councils (EWC) will terminate at the end of the implementation period, on 31 December 2020. 

The UK has long been the destination of choice for many international companies given its renowned legal system, the English language and business-friendly environment. In light of Brexit, businesses with pre-existing EWC agreements have already begun making contingency plans by designating new representative agents within the EU to house their EWCs, while those that have received a valid request to establish an EWC are advised to carry out a comparative analysis for the best location to house an EWC once the UK has departed from the EU.

What is an EWC?

An EWC is a forum where a multinational business can inform and consult employee representatives on workplace changes with cross-border implications. EWC laws are provided by a 2009 EU directive. They apply to organisations that have:

  • 1,000-plus employees throughout the EEA; and
  • at least 150 employees in two separate EEA member states.

It is uncommon for companies to take the initiative; however, once a valid request is received from at least 100 employees in two or more countries, a process to establish an EWC or a more informal procedure for information and consultation must be initiated.

Where should it be located?

Identifying the best choice jurisdiction to house an EWC is a highly significant decision for an organisation to make. It will need to take into account a comparative analysis of several factors, including the local business footprint; cultural and legal tradition on employee dialogue (compromise-driven and pragmatic vs confrontational and tendency to strike); level of union interplay; level of know-how and maturity relating to EWC issues; and whether and how far the local jurisdiction diverges from the implemented EU directive. 

In the absence of a business choosing its own designated representative agent for central management, the EEA member state with the highest number of employees would be the default representative agent of central management. 

How do you set up an EWC?

Following a valid request, a business is required to inform the employees or its representatives that a request to establish an EWC has been made and that the election/appointment process for members of the Special Negotiating Body (SNB) will begin. The SNB is tasked with negotiating and agreeing a written EWC agreement with the central management.  

The SNB must comprise representatives of employees in all EEA member states in which the multinational operates. The employees shall be allocated one seat on the SNB for each one-tenth share, or part thereof, which they comprise of all employees of the company or group of companies in the member states. 

The EWC is negotiated against the backdrop of a default model EWC agreement, which applies where central management fails to establish an SNB within six months of a valid request or if no EWC has been agreed within three years of the request being made. The default provisions laid down by the EU directive are more onerous and inflexible than a negotiated agreement. It is therefore not recommended that companies fall into a default EWC scenario, but should instead conduct a diligent preparatory exercise to enable the business to agree the terms of a tailored EWC agreement that meets its information and consultation requirements in a more considered fashion.

The current Brexit landscape may spell the end of EWCs governed by UK law, but multinationals will still have a number of thorny issues to consider and competing interests to balance when taking action to establish an EWC.   

Daniel Stander is an employment lawyer at Vedder Price