EU: Commission looks at transnational bargaining framework

During 2006, the European Commission has been exploring the idea of establishing an "optional European framework for transnational collective bargaining". Such a framework could provide a channel for negotiating transnational collective agreements, with legally binding effect, at European sector level or within multinational companies.

The European Commission included a possible transnational collective bargaining framework among the employment law-related proposals and initiatives in its 2005-10 "social agenda", published in February 2005 (see European Union: Commissioner Spidla sets out social policy vision ). It argued that providing such a framework at company or sector level "could support companies and sectors to handle challenges dealing with issues such as work organisation, employment, working conditions, training". It added that this would give the social partners a "basis for increasing their capacity to act at transnational level" and "provide an innovative tool to adapt to changing circumstances, and provide cost-effective transnational responses". The commission announced plans to "adopt a proposal designed to make it possible for the social partners to formalise the nature and results of transnational collective bargaining. The existence of this resource is essential, but its use will remain optional and will depend entirely on the will of the social partners."

The commission has been taking a keen interest in the growing phenomenon of transnational bargaining at cross-industry, sector and company level - see box for the state of play with regard to such bargaining - and seems eager to support its development. It believes that there are a number of legal issues relating to such negotiations and agreements that need to be examined and resolved. Much European-level cross-industry bargaining has a relatively clear status, with the central social partners negotiating agreements that essentially replace EU legislation on various issues, on the basis of the procedure laid down in article 139 of the Treaty establishing the European Community (this is also true of a few European sectoral agreements). However, the status of much of the other transnational bargaining activity, and the resulting agreements, is seen as uncertain, with legal questions arising relating to: the entitlement of the parties to negotiate; the legal effect of agreements reached; the relationship of transnational agreements with agreements and laws at other levels; and the form, procedure and content of negotiations and their outcomes.

The concerns outlined above lie behind the commission's social agenda commitment to propose an optional European framework for transnational collective bargaining. As the first step in this initiative, itcommissioned (via a tender process) a legal study from a group of labour law academics coordinated by Professor Edoardo Ales of the University of Cassino, Italy. The report* was completed in February 2006 and was made publicly available recently. It focuses mainly on transnational bargaining at European sector and multinational company levels. The first part of the report assesses the existing situation, while the second part (on which we focus here) outlines reasons supporting the creation of an optional EU framework for transnational bargaining and makes proposals for such a framework.

Rationale

The report deals with agreements and other joint texts, signed on their own initiative by parties at European sector/cross-industry level or at multinational company level, that have no basis in any specific legal provision at EU or national level. Such texts agreed at European sector level are not binding in themselves and rely for their implementation on action by the national member organisations of the signatory European trade union and employers' organisations, or on ad hoc intervention by EU institutions. The European-level social partners lack a "legally binding and thus effective instrument at their disposal" in the event that they conclude any transnational agreement.

With regard to transnational joint texts signed in multinational companies, the study outlines a number of problems related to the effect of such agreements and the capacity of the bargaining parties. For example, with regard to joint texts signed by European Works Councils (EWCs), it points out that the EU Directive (94/45/EC) on EWCs does not recognise any competence for these bodies in the field of collective bargaining, while a "major problem is that the EWC is not a trade union body, whereas collective bargaining is in many member states reserved to trade unions". Unions are not mentioned in the Directive and their involvement in an EWC depends on both the relevant national legislation transposing the Directive and on the content of the agreement upon which the particular EWC is based.

According to the report, the lack of formal recognition of a trade union role within EWCs is likely to affect unions' willingness to cede bargaining powers to EWCs. This perceived lack of legitimacy is "reinforced by the fact that EWC agreements do not always guarantee a composition of the EWC proportional to the workers represented". In short, EWCs lack "formal legitimacy to enter collective bargaining", which raises questions about their "genuine counterpart role in respect to management", the legal status of agreements reached and their enforceability.

As for transnational company agreements signed by international trade union organisations, "their consideration as collective agreements as defined by labour law in EU member states may be questionable because parties in the negotiation process are situated at different levels: whilst representatives of management are at the company level, those of the employees are at the sectoral level." Further, international union bodies do not always have an explicit mandate to negotiate collective agreements for their members and may "suffer from a lack of experience in collective bargaining and of means to monitor the implementation of the agreements". One way of adding legitimacy to such agreements is to have them co-signed by national trade unions in all countries where the company has a subsidiary, but this would complicate negotiations considerably.

The report concludes from the above that there is a need for a general legal framework for transnational collective bargaining in order to clarify the procedure, the negotiating agents and the conditions for achieving a binding effect for agreements concluded. The lack of such a framework is likely to "hamper further developments of the transnational dimension" of bargaining in terms of: giving it an autonomous role in relation to national bargaining or the intervention of EU institutions; and guaranteeing a "direct and homogeneous impact" for agreements signed at transnational level.

Another argument in favour of a transnational bargaining framework cited by the report is that there are a number of EU employment law Directives within which "a transnational dimension of collective bargaining could be developed". The authors state that the Directives on collective redundancies (98/59/EC), business transfers (2001/23/EC) and national information and consultation (2002/14/EC) all provide for the information and consultation of employee representatives over company restructuring, with a view to reaching an agreement. While the details of information, consultation and bargaining procedures are defined by national legislation and the workers' representatives involved are identified by national law, the collective redundancies and business transfers Directives provide that their prescribed obligations must be fulfilled independently of whether the decision regarding the restructuring in question is taken by the national employer or by a controlling company located in another country. Further, the information and consultation Directive provides that consultation should take place "at the relevant level of management and representation, depending on the subject under discussion". For the authors, this opens the possibility of transnational discussions and negotiations if the level of management involved in the decision is located in another EU member state or if the decision could have implications in more than one country. So these three Directives might lead to a transnational collective negotiation process if there were a suitable framework in place for such bargaining.

The report also notes that a number of other Directives - notably that on working time (2003/88/EC) - allow for collective agreements to deviate from their provisions (for example, the working time Directive's provisions on rest periods, breaks and night work) and argues that in some cases transnational agreements might be the appropriate way of regulating this issue.

The lack of an EU framework for transnational bargaining is said to represent "a missing opportunity of developing, by collective bargaining, a reliable and uniform regulation of relevant social issues at the appropriate level" - the transnational level. Topics such as restructuring, working time, equal treatment and information and consultation could be "fruitfully dealt with in transnational agreements stimulated by existing EC Directives".

Directive proposed

On the basis of these arguments, the report proposes a Directive that provides an optional framework for an EU transnational collective bargaining (EU-TCB) system, within which EU transnational collective agreements (EU-TCAs) with legally binding effects could be concluded. The suggested legal base is article 94 of the EC Treaty, which allows the adoption of Directives that seek to approximate those national laws and regulations that directly affect the establishment or functioning of the common market. This article is used as the basis for Directives aimed at avoiding distortions of competition and the report argues that its suggested Directive would pursue this objective by helping to bring national social standards closer together and harmonise collective procedures.

In order to make an EU-TCB system both effective and "acceptable" to the social partners, the Directive should ensure that EU-TCB is complementary to national collective bargaining systems, acting as an additional level of bargaining that should neither interfere with existing national levels nor diminish the current function of existing transnational agreements and joint texts at sector and company level. Further, the "bargaining agents" that can have access to and activate the optional framework should be clearly specified by the proposed Directive.

Access to a transnational bargaining system

The study highlights a need to avoid confusing EU-TCB with the operation of worker involvement in multinational companies (essentially through EWCs). However, it is a fact that a form of transnational negotiation has been pursued by some EWCs, albeit usually assisted by trade unions. The report argues that EU-TCB should be allowed to "spring" from EWCs, but that this should develop within a legal framework that clearly avoids confusion between worker involvement and collective bargaining "tools" and aims.

For these reasons, it is suggested that the optional framework provided by the proposed Directive could be accessed and activated in the following three main ways:

1. The initiative could be taken jointly and voluntarily by European trade union and employers' organisations at sector or cross-industry level.

2. The initiative could be taken jointly by European trade union and employers' organisations at sector or cross-industry level, at the request of: (a) at least two national trade unions and employers' organisations at "the same or comparable sectoral level", each from a different EU member state; (b) an EWC (or the "representative body" in the case of a European Company, or SE, based on the European Company Statute - see European Company Statute adopted ) and the management of a multinational company, if they want to develop a (sectoral) bargaining process on issues subject to information and consultation; or (c) an EWC that wants to include issues subject to information and consultation on the bargaining agenda of European trade union and employers' organisations at sector level.

3. The initiative could be taken unilaterally by European trade union organisations at sector or cross-industry level: (a) at the joint request of an EWC (or representative body in SEs) and the management of a relevant multinational, where they want to develop a bargaining process on one or more issues subject to information and consultation; or (b) at the request of the management of a multinational company.

Cases 1 and 2 refer to bargaining over transnational sectoral agreements, and case 3 refers to bargaining over transnational company agreements.

Transnational negotiating bodies

The proposed Directive would make provision for the establishment of new European-level negotiating bodies, in a variety of formats, within which EU-TCAs could be concluded.

The report argues that the variety of potential bargaining agents and the unclear relationships among various levels of decision-making necessitate a precise definition of EU-TCB bargaining agents and procedures, to avoid a "race to the bottom" within the proposed system. It identifies a risk that multinational companies might be attracted by the possibility of reaching transnational company agreements that enable them to set employment conditions that are below minimum standards fixed by agreements at European sector level, or below the standards laid down at national level.

To avoid such difficulties emerging in the relationship between bargaining levels, coordination should be encouraged, primarily to avoid competition among transnational collective agreements concluded by different parties in the same sector, but without excluding multinational companies from access to EU-TCB. This means the allocation of a crucial role to European-level social partner organisations at sector or cross-industry level, and at least one sectoral organisation from the union or employer side would always be involved in the proposed bargaining procedure. This, it is hoped, would avoid the need to regulate conflicts arising from the existence of competing sector- and company-level EU-TCAs.

Where European trade union and employers' organisations at sector or cross-industry level jointly seek to use the EU-TCB system, either at their own initiative (case 1 in the list above) or at the request of national social partner organisations, EWCs and management in a particular multinational, or an EWC alone (case 2, above), these organisations would negotiate the constitution of a "joint negotiating body at sectoral level" (JNB-SL) composed of their own representatives. They would have to conclude in writing a "basic agreement" establishing the JNB-SL and defining its operation, at least with reference to the decision-making procedure. Sectoral or cross-industry EU-TCAs could be negotiated and agreed within JNB-SLs. If an EWC and/or management in a multinational company made the initial request, they could be involved in the work of the JNB-SL if approved by the latter's employee or employer side, respectively.

Where European trade union organisations at sector or cross-industry level unilaterally seek to use the EU-TCB system, at the joint request of the EWC and management of a particular multinational company, or at the request of the management alone (case 3, above), they would negotiate with the management of the relevant multinational over the constitution of a "joint negotiating body at company level" (JNB-CL). This body would be made up of the European trade union organisations concerned and the management of the multinational, plus - in cases where the initial request was made jointly by management and the EWC - the EWC, but only in a "consultative" role. As with JNB-SLs, the parties would have to conclude in writing a "basic agreement" establishing the JNB-CL and defining its operation, at least with reference to the decision-making procedure. Company-level EU-TCAs could be negotiated and agreed within JNB-CLs.

Implementation and enforcement

Under the system proposed by the report, EU-TCAs would not themselves have a legally binding effect, but would "acquire such an effect indirectly" through their implementation by "managerial decisions". A sectoral/cross-industry agreement would be put into effect by such managerial decisions taken in each company in the sector or sectors concerned that is affiliated to the signatory European employers' organisations. A company-level agreement would be applied by management decisions in the multinational concerned and its subsidiaries. These managerial decisions should be recognised as legally binding in each EU member state, according to national law or practice.

The suggested Directive would lay down minimum requirements for a bipartite monitoring system to oversee compliance with EU-TCAs. The relevant JNB-SL or JNB-CL would monitor the transposition of an EU-TCA into managerial decisions in each company within the agreement's scope of application, and management's compliance with these decisions. With the aim of guaranteeing a uniform interpretation of EU-TCAs, the Directive would provide for any disputes over interpretation to be referred to the relevant JNB-SL or JNB-CL, either jointly or by one party. The Directive would also include an adequate enforcement procedure in the event of non-compliance, and lay down that member states must provide for adequate protection of individual and collective rights deriving from the managerial decisions.

All EU-TCAs (including the "basic agreements" constituting JNB-SLs and JNB-CLs) would have to be in writing and a copy sent to the European Commission for publication on a dedicated website.

Social partner perspectives

The European Trade Union Confederation (ETUC) and the Union of Industrial and Employers' Confederations of Europe (Unice) were consulted by the group that drew up the report. According to the document, the ETUC stressed the necessity of taking into account in any initiative the issues of: the parties who could negotiate a transnational collective agreement (given that trade unions are often present as "experts" supporting EWCs); the relationship between agreements concluded at different levels (national and transnational); and the degree of representativeness required for the employee side to sign an agreement - for example, requiring a quorum calculated on the basis of the total workforce covered by the agreement, or requiring all the unions in the countries involved to give their consent.

By contrast to the ETUC's apparent interest, Unice reportedly stated its opposition to any new framework for transnational collective bargaining, even an optional one. It feels there is no need for an additional layer of EU collective bargaining on top of the existing ones, and sees the existing system of European social dialogue as sufficient and functioning satisfactorily. For Unice, if there is any need for an extension of negotiations, the social partners will develop new forms by themselves and there is no need for intervention by the European Commission. It has to be left to the social partners to develop the social dialogue in a way they prefer. Unice emphasises the autonomy of the social partners and the completely voluntary basis of any commitments they make at cross-industry, sector and company level. It rejects giving legally binding effect to agreements at European sector or company level.

Continuing debate

The legal study from the group led by Professor Ales was commissioned to provide a basis for analysis and discussions on the transnational bargaining framework issue - the group was not an official expert group set up by the commission, and its document is not a commission report. The commission itself has collected and analysed transnational texts concluded at company level. These and other studies will provide the groundwork for an "opendebate with the stakeholders" on the questions raised. As part of this debate, the commission organised a seminar for practitioners, policy-makers and researchers on 17 May 2006. The overall picture to emerge from this meeting was that the thinking of most participants is at a relatively early stage, although the position of some trade unions may be somewhat more advanced. The abovementioned differences of opinion between unions and employers' organisations were, however, underlined. The commission plans a further seminar, focusing on case studies.

A formal consultation of the social partners will be initiated in future, "depending on the progress of reflections and preliminary studies". However, it seems the commission will not be able to move too fast on this issue, given the undeveloped nature of the debate and the differing views of the parties.

* Transnational collective bargaining: past, present and future (PDF format, 382K) , Final report, E Ales et al, European Commission, February 2006.