EU: Commission consults on revision of EWCs Directive

According to figures cited by the commission, EWCs operate in 820 undertakings with some 14.5 million employees. The consultation document states that EWCs are vital to the development of transnational industrial relations and “help to reconcile economic and social objectives” within the EU single market. “All the European stakeholders emphasise the positive impact” of EWCs and “the decisive role they have to play in the anticipation and responsible management of change”, the commission claims.

However, the expectations of EWCs “have grown and are far from being satisfied” and “all too often, their potential remains unexploited” particularly in the event of international corporate restructuring.

The commission feels that EWCs must be in a position to “play their full part with regard to developments in undertakings, anticipating and accompanying change, and fostering genuine transnational social dialogue in a rapidly changing economic and social context. Sustainable competitiveness for large transnational undertakings and also for the network of small and medium-sized businesses with which they co-exist and which they support depends on this.”

The commission sees a need to adapt the Directive to: take account of “new economic and social necessities”, particularly in the light of an increase in the number and scale of transnational restructuring operations; address problems encountered in the practical application of the Directive, which prevent EWCs from functioning properly and cannot be resolved just by promoting best practice; rectify “gaps in legal certainty without creating new ones”; and foster coherence in EU legislation in the field of information and consultation of workers.

The main problems identified by the commission in implementing the Directive are:

• complexities encountered in linking different levels of information and consultation;
• uncertainties about what happens to EWCs in the event of mergers, acquisitions and other changes in company make-up;
• the absence of a role for European trade unions in the Directive, thus limiting the number of EWCs; and
• the absence of a “general response” to employee representatives’ training needs.

The commission considers that the causes of these problems are “found in the difficulties encountered by companies and their EWCs”, especially in the case of transnational restructuring operations. In addition to promoting best practice, the commission argues that a new EU initiative could meet the objectives of:

• ensuring the effectiveness of employees’ transnational information and consultation rights, “currently lacking in a significant proportion of situations”;
• resolving the problems identified in the practical application of the Directive and remedying the lack of legal certainty resulting from some of its provisions or the absence of certain provisions; and
• ensuring a better link between EU legislative instruments on employee information and consultation of employees.

This should help EWCs “play their full part in anticipating and accompanying change, develop a genuine transnational social dialogue and take on new momentum”, although “within a framework which limits the burdens imposed on undertakings to what is strictly necessary, while ensuring the effective exercising of employees’ information and consultation rights”.

In the light of the above objectives, the commission invites the EU-level social partners to express their opinions on a set of changes to the Directive that it is now considering - these are summarised below. While recognising the “divergence of opinions among the social partners” on a possible revision of the Directive, the commission believes that they are in the best position to express opinions on the envisaged changes to the Directive and to identify “operating procedures which are more consistent with the specific needs of the undertakings and employees they represent”.

Concepts of information and consultation

The EWCs Directive defines consultation as “the exchange of views and establishment of dialogue between employees’ representatives and central management or any more appropriate level of management”, while it contains no definition of information.

The Directive’s fall-back subsidiary requirements, which deal with the statutory form of EWC that must be established where no agreement is reached, have in practice been applied only in a very limited number of cases. However, the commission notes that the subsidiary requirements’ provisions on the rights of statutory EWCs play an important “benchmark role” in the negotiation or renegotiation of EWC agreements. In order to take account of developments in EWCs' “practices and needs” and to “reinforce their role and relevance”, the commission suggests the following amendments to the statutory requirements:

• a right for statutory EWCs to obtain a response, and the reasons for that response, to any opinions they express;
• a more precise definition of the “exceptional circumstances” in which EWCs must be informed and consulted, in order to “foster anticipation”. The Directive currently refers to “exceptional circumstances affecting the employees’ interests to a considerable extent, particularly in the event of relocations, the closure of establishments or undertakings or collective redundancies”;
• the possibility of a second meeting between management and the EWC to seek an agreement in the event of exceptional circumstances arising - the Directive currently requires a single information and consultation meeting;
• the possibility of adapting the number of ordinary EWC meetings, for example from one a year (as at present) to two, in certain circumstances; and
• adding new subjects on which statutory EWCs must be informed and consulted , in line with “practical developments”. These might include mobility, health and safety, work organisation, the environment and changes in responsibilities.

In order to allow employee representatives on EWCs to “perform their duties to the full”, the commission suggests:

• an obligation for EWC representatives to report to the workers they represent; and
• a right to training for representatives (as already exists in nearly half of all EWCs) and an “extension of the competence” of representatives, thus helping to “optimise the functioning” of EWCs and reduce the costs.

The commission argues that disputes relating to the operation of EWCs or the validity of the agreements establishing them are difficult to deal with owing to the “complexity of the circumstances from the legal, linguistic, financial and industrial relations points of view”. To ensure that the rights conferred by the Directive are implemented, it might therefore be useful for the Directive to reiterate explicitly the general EU legal principle that, in the event of infringement of a Directive’s provisions, sanctions must be “effective, proportionate and dissuasive” (the national information and consultation Directive includes such a provision).

According to the consultation document, EWCs are called upon with increasing frequency to represent the interests of employees across Europe in dealings with the public authorities or other external parties, and in disputes relating to competition law. The commission therefore thinks that it might be useful explicitly to recognise EWCs as the representatives of the employees of the multinational company concerned (although without prejudice to the competence of other bodies, in particular trade unions, in this respect).

Linking definitions

To differentiate between the spheres of competence of EWCs and of national information and consultation bodies, the consultation document states that it might be useful for the Directive to state that it establishes a right for employees to information and consultation on transnational issues. In line with the principle of dialogue “at the relevant level of management and representation, depending on the subject under discussion” (as laid down in the national information and consultation Directive), this transnational right could be defined as applying to issues going beyond the powers of decision-making bodies in a single member state. The ECS involvement Directive refers in this context to “questions which concern the [European Company] itself and any of its subsidiaries or establishments situated in another member state or which exceed the powers of the decision-making organs in a single member state”.

The commission identifies linking national and transnational levels of information and consultation levels as one of the difficulties in the practical application of the EWCs Directive. In cases of restructuring, along with the EWCs Directive, the Directive on national information and consultation applies, as do the Directives on collective redundancies (998/59/EC) and transfers of undertakings (2001/23/EC) where redundancies or transfers are envisaged. Cases brought before national courts concerning the relationship between the various items of legislation and the links between information and consultation levels have produced different responses as to which takes precedence.

To ensure legal certainty and the effectiveness of EU law, the commission wants to introduce a solution to these problems that is “in line with the diversity of situations” and allows “both an anticipatory approach and consideration of the employees potentially most affected by a decision”. This could be based on:

• maintaining the principle of “at the relevant level of management and representation, depending on the subject under discussion” and facilitating agreements between the parties in order to find a time-scale ensuring the effectiveness of information and consultation;
• giving priority to negotiations on procedures for linking information and consultation of the EWC and of national representative bodies, in compliance with the above principles; and
• introducing provisions applicable, in the absence of an agreement on the subject, in exceptional circumstances, which could allow a parallel start to the processes of informing and consulting the EWC and the national bodies.

The commission believes that EWCs that operate to the satisfaction of the parties involved should be able to continue.

In the consultation document, the commission requests the social partners:

• to forward to it an opinion or, where appropriate, a recommendation concerning the objectives and content of the envisaged proposal to revise the EWCs Directive, in accordance with art. 138(3) of the TEC; or
• where appropriate, to inform it of their wish to initiate a negotiation procedure on the basis of the proposals contained in the document, in accordance with arts. 138(4) and 139 of the TEC. If the social partners respond positively to this question, the commission is ready to organise a conference that would “involve all the companies concerned in a suitable way”. This conference would take place within the period allowed for the social partners to negotiate.

The commission would like the social partners’ opinions or recommendations, as appropriate, to contain an assessment of the impact of the measures outlined in the consultation document, and of any other solution that might be advocated.

Presenting the consultation document, Vladimír Špidla, the EU commissioner for employment, social affairs and equal opportunities, said: “EWCs have a key role in anticipating and managing the social dimension of change in large enterprises Europe-wide. They also contribute to improving corporate governance - a key factor in sustaining competitiveness. For the sake of both workers and companies, we need to make sure EWCs can play their full role during the restructuring process [as] the mechanisms for dialogue established at transnational levels. I consider the consultation paper to be balanced and to constitute an excellent basis on which the social partners could negotiate a revision of the Directive.”

The social partners had six weeks to respond to the second-stage consultation on revising the EWCs Directive - that is, until early April 2008. If they take up the commission's invitation to negotiate an agreement on the issue, they will have nine months to do so (although the social partners and the commission may jointly agree to extend this period).

The ETUC welcomed the consultation document. Its deputy general secretary, Reiner Hoffmann, commented: “We strongly support the opinion of the commission that EWCs must be in a position to play their full part with regard to development in undertakings, anticipating and accompanying change, and fostering genuine transnational social dialogue in a rapidly changing economic and social context.” The ETUC believes that the document “tackles a number of relevant issues” for revision of the Directive, but has added one further important demand: a significant reduction of the workforce-size threshold above which multinationals are covered by the Directive, currently set at a total of 1,000 employees across the EEA member states.

On 2 April, BusinessEurope, Ueapme and Ceep sent a joint letter to the European Commission to state their willingness to open negotiations on EWCs. They said: "Building upon an in-depth assessment of EWCs' practical experiences and needs, our main objective will be to agree on amendments to the EU legislative framework, which will help improve the functioning of EWCs in practice." Believing that "the European social partners are best placed to address this legislative review effectively", employers expressed the hope that the ETUC "will soon be able to take the same decision and allow a social dialogue solution" for EWCs.

Before the employers' announcement, trade unions had expressed some doubts as to whether BusinessEurope could negotiate constructively, given its consistent opposition to the revision of the Directive. For example, the European Federation of Public Service Unions (EPSU) was "concerned that the employers will enter into negotiations with no intention to reach an agreement to delay the revision and frustrate the proven need to improve the information and consultation rights of workers". At the time of writing (3 April), the ETUC, which has consulted its members on the issue, had not yet made a final decision on whether or not to open talks. In response to the employers' announcement, the ETUC "welcomed the readiness of European employers to negotiate on the revision of the EWCs Directive, which until now they have refused to do for a long time". Before entering formal talks, the ETUC is keen to ensure that the process will be rapid. The ETUC general secretary, John Monks, said: "Our main objective is to see action to revise the Directive during the lifetime of this European Commission and this [European] parliament. We are ready to negotiate but only on a basis which includes a tight timetable and a quick conclusion to the negotiations." The ETUC was planning to follow this up in early April in discussions with the employers' organisations and the commission.

The social partners have had a number of opportunities to negotiate on EWCs. They were consulted in 1993-94 before the Directive was proposed, and held exploratory talks over reaching an agreement, but these failed after a few weeks. They were again encouraged to negotiate by the commission over 2004-05, but without any success beyond their arguably rather inconclusive and insubstantial “Lessons learned on European Works Councils” document. If the partners do negotiate on this occasion and reach an agreement, it will mark a major step forward for the EU-level social dialogue. The prospects of agreement being reached are very uncertain however, given the current diametrically opposed positions of the ETUC and BusinessEurope. If BusinessEurope is not prepared to agree to amendments that are at least close to those mooted by the commission, it seems likely that the ETUC would call off the negotiations and let the commission propose a draft Directive, which would meet many if not all of the unions’ demands.