BEERG Newsletter - EWCs: Two EWCs for US Companies (Instead of One)?

There is a very real prospect that US companies that had their EWC based in the UK immediately before Brexit could be forced to run two EWCs in parallel, one under EU law and the other under UK law. How this could be made to work in practice is not something on which the UK government has issued any guidance. How UK law could be made to work beyond UK borders is definitely an unknown unknown. 

In an analysis of the decision of the UK Court of Appeal in easyJet, David Hopper and William Brown of Lewis Silkin, say that the Court “has confirmed that the EWCs of certain UK-based businesses continue to exist under UK law after the end of the Brexit transition period”.

They say that the 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.”

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. David and William write:

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).

While the easyJet decision only applies to companies that are headquartered in the UK, another case currently before the courts seeks to extend the ruling to all companies that had their EWCs based on UK law. While the Central Arbitration Committee (CAC) ruled in HPE that a company that had based its “representative agent” in the UK was free to move that agent to another jurisdiction, Ireland in the case of HPE, that judgement was delivered before TICER was amended. Given the wording in TICER, as amended, it cannot be ruled out that the UK courts could hold that there is a continuing obligation on non-UK headquartered companies to keep a UK-based EWC running, in parallel with an EU-based EWC.

It will be sometime in 2024 before the UK courts deliver a definitive ruling on the matter, with the possibility that whatever decision is handed down could be appealed to the UK Supreme Court. Because of Brexit, the European Court will have no say in the matter.