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Possible hard Brexit: Prepare to rehome your UK EWC

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Sarah Henchoz

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Robbie Sinclair

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Felicity Gemson

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01 March 2019

It is possible that the UK will leave the EU without a deal on 12 April – a so-called “hard Brexit” – if the Government is unable to gain Parliamentary support for its withdrawal agreement or another solution.

In light of recent EU guidance, you should take preparatory steps to rehome any UK law-governed EWC, if and when a hard Brexit is confirmed, in order for
it to operate validly post-Brexit.

What is the issue?

In an updated Withdrawal Notice, the European Commission confirms that, as a matter of EU law, an EWC’s central management or its representative agent must be situated in the EU. If situated in the UK, companies must designate new representative agents to assume this role from exit day. Otherwise, the establishment or group undertaking with the most employees in a Member State will become the “deemed central management”, and the EWC agreement will be governed by that country’s law.

As a result, it is clear that, in the event of a hard Brexit, UK EWCs must be rehomed in a remaining EU Member State in order to remain valid for EU law purposes. This is at odds with finalised UK regulations (The Employment Rights (Amendment)(EU Exit) Regulations 2019) that are intended to amend UK EWC legislation on a hard Brexit. The Regulations preserve parts of the UK legislation for EWCs whose central management is situated in the UK (ie whose representative agents or deemed central management are in the UK), suggesting that companies could keep their EWCs in the UK. It is likely that the regulations will now have to be amended to reflect the EU law position.