There’s been a lot of discussion about what the future of the UK’s relationship with Europe might look like, and how that might affect employment law. Whilst the UK’s new Prime Minister and her team decide how our future may look, we’re all becoming increasingly knowledgeable about the European Union, the European Economic Area, the Norwegian, Swiss and Canadian models, directives and regulations… or are we? This article is intended to summarise the current structure and to consider what some form of EEA membership (the Norwegian model) might mean for HR and employment law. You can read more about the potential impact on the UK’s legal system, including how EU law is made at present and further details of the different options, here.

An alphabet soup of European institutions

The Council of Europe was founded in 1949 (the UK was a founder member) and now has 47 member states. Crucially, it is nothing to do with the European Union – although, since the Council of Europe encouraged the then European Economic Community to adopt in 1985 the flag originally designed in 1955, some confusion may be inevitable. The ECHR (the European Convention on Human Rights and also the European Court of Human Rights, which rules on the European Convention on Human Rights) forms part of the Council of Europe.

The European Council, on the other hand, is one of the seven principal decision-making bodies of the EU – it the institution of the EU which compromises the heads of states of government of the member states, the President of the European Council, and the President of the European Commission. The other six are the European Commission, the European Parliament, the Court of Justice of the European Union (which itself consists of three separate courts – the [European] Court of Justice, the General Court and the Civil Service Tribunal), the European Central Bank, the European Court of Auditors, and the Council of the European Union (which is made up of the national ministers of each member state with responsibility for the relevant policy area being discussed – for example, all the agriculture ministers).

There is a lot of talk at the moment about becoming a member of the European Economic Area (theEEA). The UK is in fact already a member of the EEA: the EEA has two pillars – the EU and three of the four members of the European Free Trade Association, who together have signed the EEAAgreement. The aims of the EEA Agreement are:

  • To guarantee the free movement of persons, goods, service and capital
  • To provide equal conditions of competition
  • To abolish discrimination on grounds of nationality in all 31 EEA states

The members of EFTA are Liechtenstein, Iceland, Norway, and Switzerland. (However those countries might feel about a new, and much larger member joining their club if we join EFTA, ) However, only the first three are in the EEA. For clarity (if that’s the word) Liechtenstein, Iceland and Norway are therefore known as the EEA EFTA countries.

Switzerland’s relationship with EU’s single market is through treaties with the EU. This allows them to be part of the single market, and also part of the Schengen Area (the Schengen Agreement and the subsequent Schengen Convention were initially independent of the EU, but incorporated into EU law by the Amsterdam Treaty in 1999). The Schengen area is basically everyone in the EU except for Ireland and the UK, plus Liechtenstein, Switzerland, Norway and Iceland – that’s right, the EFTA countries again.

Unlike the EU member states, the EEA EFTA member states have not transferred any legislative competencies to the EEA institutions and they are not bound directly by decisions of the European Commission or the European Court of Justice. However, just as the European Commission monitors the EU member states, the (somewhat menacingly named) EFTA Surveillance Authority monitors the EFTA states party to the EEA Agreement with powers corresponding to that of the European Commission. The EFTA equivalent of the European Parliament is the Committee of MPs of the EFTA States. Unlike the EU, where decisions relating to EEA legislation can be taken by majority vote, the EEA EFTA states take decisions by consensus.

The EFTA Court has jurisdiction over the EEA EFTA countries which largely corresponds to that of the European Court of Justice over EU member states. It deals with infringement actions brought by the EFTA Surveillance Authority against an EFTA State with regard to the implementation, application or interpretation of EEA law rules, for giving advisory opinions to courts in EFTA States on the interpretation of EEA rules and for appeals concerning decisions taken by the EFTASurveillance Authority. The jurisdiction of the EFTA Court largely corresponds to the jurisdiction of the Court of Justice of the European Union over EU States. The proceedings before the EFTACourt consist of a written part and an oral part and all proceedings will be in English. In direct actions, the judgment is rendered in English only. Advisory opinions are rendered in English and in the language of the requesting court. At present the court has three judges and six ad-hoc judges, appointed by the EFTA EEA states, and it is likely that the UK would be allowed to appoint additional judges as a member. The EFTA court itself is based in Luxembourg (like the ECJ and the General Court).

Does EU law apply to the whole of the EEA?

One of the main principles of the EEA Agreement is that of homogeneity: the existence of common rules and equal conditions of competition throughout the EEA. Where an EU policy area falls within the four freedoms or other aims of the EEA Agreement (see above), then it is EEA-relevant.

As soon as EEA-relevant EU legislation has been adopted in the EU, a decision shall be taken to amend the EEA Agreement to permit simultaneous application of the legislation across the EU. A distinction must be drawn between “decision making” (which is for the EU), and “decision shaping”, the preparatory work of the European Commission. Article 99(1) of the EEA Agreement says that the Commission “shall informally seek advice from experts of the EFTA States” as well as experts from EU states, and EEA EFTA State representatives also have access to certain Commission committees during the policy-shaping phase.

Do ECJ decisions affect the whole of the EEA?

Not directly, but the EFTA Court has jurisdiction with regard to EEA EFTA States. According to the President of the EFTA Court, Carl Baudenbacher, “In order to create a level playing field for individuals and economic operators, i.e. to avoid a race to the bottom and forum shopping, the drafters of the EEA Agreement formulated homogeneity rules which essentially bind the EFTACourt to follow relevant ECJ case law. On the other hand, there is no written provision which would oblige the ECJ to take into account relevant EFTA Court case law.”

The case law of the EFTA Court itself is available here.

Which EU employment laws apply to the whole of the EEA?

This is a useful page to see what EU laws have been incorporated into the EEA Agreement. They include, for example:

  • Council Directive 2001/23/EC (employees’ rights on transfers of undertakings)
  • Directive 2003/88/EC (the Working Time Directive)
  • Council Directive 97/81/EC (the Part-Time Workers Directive)
  • Directive 2008/104/EC (the Agency Workers Directive)
  • Directive 96/71/EC (the Posted Workers Directive)

Some of these areas – in particular harmonisation of terms after TUPE transfers, the rules around holiday pay and accrual of annual leave whilst off sick, and the law on agency workers – have been identified as areas of EU law unpopular with the UK businesses which might be changed once the UK is no longer a member of the EU. However, if the UK joins the EEA EFTA States, it is unlikely that

They do not however include:

  • Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (the Equal Treatment Framework Directive)

Since the EU Equal Treatment Framework Directive does not apply to EFTA EEA countries, it is possible that the UK could choose to cap discrimination payments (except in respect of nationality discrimination), something that is not possible under EU law. This would bring discrimination claims in line with domestic unfair dismissal compensation.

Under scrutiny by EEA EFTA at present and of interest to employment lawyers are:

  • Directive (EU) 2016/943 (The Trade Secrets Directive)
  • Regulation (EU) 2016/679 (General Data Protection Regulation)

Conclusion

All of this – although it reflects the Norwegian, Icelandic and Liechtenstein reality – is of course somewhat hypothetical for the UK at present. Appropriately, given its Nordic membership, the UK is seeking a pick and mix deal from the EEA smorgasbord. In any case, the existing EFTA countries would need to allow us to join.

Nonetheless, it provides a view on what our future might be. The UK is likely to want an ongoing trade relationship with the EU, which is its biggest export market. The price of a free trade agreement with the EU may well be acceptance of EEA EFTA membership, with all that entails; Switzerland, through its bilateral agreements, is in a similar position. This is the case, for example, for the non-EU members of the European Economic Area (EEA), such as Norway. Such states are obliged to accept most of EU employment law without being part of the EU decision-making process. Switzerland, which has negotiated a series of agreements with the EU, is in a similar position. Meanwhile, the EFTA court (which interprets EEA rules) is also bound by ECJ decisions, albeit not across the full extent of EU law.