EU: Commission proposes revised European Works Councils Directive
In July 2008, the European Commission published its long-awaited proposals for revision of the 1994 EU Directive on European Works Councils, aimed at making their information and consultation rights more effective.
On this page:
The Directive
Background
Rationale
General principles
Definitions
Management responsibility for information
Composition of the special negotiating body
Operation of the special negotiating body
EWC agreements
Role and protection of employee representatives
Links with other provisions
Existing agreements
Subsidiary requirements
Review
Reactions.
Key points
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The Directive
The 1994 EU Directive (94/45/EC) on European Works Councils (on the EUR-Lex website) provides for the establishment of EWCs (or transnational information and consultation procedures) to provide information and consultation to employees of "Community-scale" enterprises. These are undertakings or groups with at least 1,000 employees within the 30 European Economic Area (EEA) member states (the 27 EU countries, plus Iceland, Liechtenstein and Norway) and at least 150 employees in each of at least two member states.
Such enterprises must, at the written request of at least 100 employees or their representatives from a minimum of two member states, establish a special negotiating body (SNB) to negotiate with central management over the establishment of an EWC or procedure (management can also initiate such negotiations itself). The Directive (implemented by national legislation) specifies the composition, functioning and rights of the SNB.
The SNB negotiations may lead to an agreement on the establishment of an EWC (or procedure). Alternatively, the SNB may decide (by a two-thirds majority) not to open negotiations with management or to end negotiations already underway. A statutory EWC, based on the Directive's "subsidiary requirements", must be established if:
- management and the SNB so decide;
- management refuses to open negotiations within six months of being requested to do so; or
- an agreement is not reached within three years of a request to open negotiations.
The composition, functioning and rights of the statutory EWC are laid down by the Directive (as implemented by national legislation).
The 1994 Directive has since been amended by Directive 97/74/EC, which brought the UK within the Directive's scope; and by Directive 2006/109/EC, which took account of Bulgaria and Romania's EU accession.
Background
The 1994 Directive required the European Commission to review the Directive's operation by September 1999, in consultation with the member states and social partners, with a view to proposing suitable amendments to the council. No such review took place by the deadline, although the commission published a report on the Directive's application in 2000 and supported studies and seminars concerning its implementation.
Over the next eight years, trade unions persistently demanded revision and strengthening of the Directive, with support from quarters such as the European parliament, while employers' organisations, and notably BusinessEurope (the central European-level organisation for private sector employers) opposed such amendments. In 2004, the commission consulted EU-level social partners' organisations on how to enhance the effectiveness of EWCs, including possible revision of the Directive. The social partners held seminars to examine EWC "best practice" and in April 2005 agreed a document entitled "Lessons learned on European Works Councils", which identified a number of factors that help in the efficient functioning of EWCs and problems that can arise. The commission then launched a further consultation calling on the partners to "intensify ongoing work" and "start negotiations with a view to reaching an agreement" on promoting and monitoring EWC best practice.
The commission's attempt to persuade the social partners to go further than their "lessons learned" joint text and agree on its concrete application was unsuccessful and in its 2008 work programme the commission finally announced that it would propose a draft Directive revising the 1994 Directive.
In February 2008, the commission again consulted the social partners , setting out a number of proposals for revision of the Directive and encouraging them to reach an agreement on the issue. Under arts. 138 and 139 of the Treaty establishing the European Community, such an agreement would substitute for EU legislation on the topic in question.
The central EU-level employers' bodies - BusinessEurope, Ueapme (small and medium-sized enterprises) and Ceep (public sector) - indicated their willingness to negotiate. However, the European Trade Union Confederation (ETUC) turned down talks, arguing that they would be unrealistic given time constraints and what it saw as a lack of commitment by BusinessEurope to undertake serious negotiations on substantive amendments to the Directive.
The commission was therefore left with no option but to propose legislation. On 2 July 2008, as part of its "renewed social agenda" package, it issued a proposal for a European parliament and Council Directive on "the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees(Recast)" (PDF format, 152K) (on the European Commission website). If adopted, the Directive would repeal and replace the 1994 EWCs Directive (as amended).
Rationale
According to the commission, 14 years on from the adoption of the EWCs Directive, there are around 820 EWCs in operation, representing 14.5 million employees. These EWCs are "vital to the development of transnational industrial relations and help to reconcile economic and social objectives within the single market, particularly through the decisive role they play in anticipating and managing change responsibly".
However, the commission perceives a number of problems with the practical application of the Directive, as follows:
- the right to transnational information and consultation "lacks effectiveness", as EWCs are "not sufficiently informed and consulted in the case of restructuring";
- EWCs have been set up in only 36% of multinationals that fall within the scope of the Directive;
- there are legal uncertainties, particularly with regard to the relationship between the national and transnational levels of consultation, and in cases of mergers and acquisitions;
- the European Court of Justice (ECJ) has issued a number of rulings on the Directive's provisions governing communication of the information required to set up an EWC (see Management responsibility for information); and
- the "consistency and linkage" of the EWCs Directive and other Directives on the information and consultation of employees are insufficient.
EWCs "need to be up to the task of playing their full role in anticipating and managing change and building up a genuine transnational dialogue between management and labour". The draft Directive therefore seeks to:
- ensure that employees' transnational information and consultation rights are effective;
- increase the proportion of EWCs established;
- increase legal certainty; and
- ensure that the various Directives on information and consultation are better linked.
General principles
The present Directive states that an EWC (or an information and consultation procedure) should be established in all Community-scale undertakings and groups, where requested in line with the Directive's provisions, with the purpose of informing and consulting employees. The commission proposes adding further specifications to this basic objective, as follows:
- the arrangements for informing and consulting employees must be defined and implemented in such a way as to "ensure the effectiveness of the procedure" and to enable the multinational concerned to "take decisions effectively";
- information and consultation of employees must occur at "the relevant level of management and representation, according to the subject under discussion" (this is the "relevant level" principle established in Directive 2002/14/EC on national information and consultation rights) and therefore the competence of the EWC is limited to transnational issues; and
- "transnational" issues are those that concern the multinational as a whole, or at least two of its undertakings or establishments located in two different member states (this definition is currently found, in relation only to statutory EWCs, in the Directive's subsidiary requirements).
The first of these amendments seems to reflect the commission's stated aim (in the draft Directive's introductory "recitals") to "keep to a minimum the burden on undertakings or establishments while ensuring the effective exercise of the rights granted" by the Directive. The aim of the latter two amendments is to differentiate the competence and scope of action of EWCs from those of national employee representative bodies.
Definitions
The Directive does not define "information". The commission proposes adding the following definition: "transmission of data by the employer to the employees' representatives in order to enable them to acquaint themselves with the subject matter and to examine it; information shall take place at such time, in such fashion and with such content as are appropriate and which will enable employees' representatives, in particular, to carry out an appropriate examination and to prepare the consultation, where necessary".
The current definition of consultation is "the exchange of views and establishment of dialogue between employees' representatives and central management or any more appropriate level of management". The commission proposes changing this to "the establishment of dialogue and exchange of views between employees' representatives and central management or any more appropriate level of management, at such time, in such fashion and with such content that, on the basis of the information provided, enables employees' representatives to express an opinion to the competent organ of the Community-scale undertaking or Community-scale group of undertakings".
These changes would bring the EWCs Directive's definitions more in line with those found in recent Directives on information and consultation, notably those on national information and consultation rights (2002/14/EC); and employee involvement in the European Company (2001/86/EC). The commission's stated aims are to: reinforce "the effectiveness of the dialogue at transnational level"; permit "suitable linkage" between the national and transnational levels of dialogue; and ensure "legal certainty".
Management responsibility for information
Responsibility for "creating the conditions and means necessary" for setting up an EWC lies with the multinational's central management or, where central management is not located in an EU/EEA member state, a designated representative agent in a member state.
The draft proposes adding to the Directive's provisions in this area a stipulation that the management boards of all undertakings belonging to the multinational, along with the multinational's central management or "deemed" central management, are responsible for obtaining and transmitting to the parties concerned the information required for commencing negotiations over setting up an EWC. This relates in particular to information concerning the structure of the undertaking or group and its workforce, and the information on the number of employees required to determine whether the multinational is covered by the Directive's definition (ie whether it has a total of at least 1,000 employees in the member states and at least 150 employees in each of at least two member states).
This clarification of the responsibility of local management to provide the information allowing negotiations to be opened reflects three ECJ rulings in cases C-62/99 Bofrost, C-440/00 Kühne & Nagel and C-349/01 ADS Anker GmbH). These judgments established the principle that all information essential to the opening of negotiations for the creation of an EWC must be supplied to the employees' representatives by the managements concerned in the member states, regardless of the location of the group's headquarters or the opinion of the group's management concerning the applicability of the Directive. According to the commission, its proposed changes will help employees to determine whether or not the multinational they work in is covered by the Directive and to make the necessary contacts to draw up a request to commence negotiations.
Composition of the special negotiating body
The Directive states that SNBs must have a minimum of three members and a maximum number of members equal to the number of member states (currently 30). It must have an employee representative for each member state in which the multinational concerned has at least one establishment or undertaking, plus supplementary members in proportion to the number of employees in the various countries.
The commission proposes a new formula for the composition of SNBs. An SNB's membership would be in proportion to the number of employees in each member state, with each country where the multinational has at least 50 employees having one seat per 10%, or a fraction thereof, of the multinational's total workforce in the member states employed there.
This change seeks to simplify the composition of SNBs and address practical difficulties, notably the fact that multinationals employing workers in most member states cannot at present comply with both the maximum number of SNB members stipulated and the other representation rules. Countries with fewer than 50 employees would no longer have SNB representation.
Operation of the special negotiating body
At present, central and local management must be informed of the composition of the SNB. The commission proposes that "competent European workers' and employers' organisations" should also be informed of the SNB's composition, and that central and local management, along with these organisations, should also be informed about the start of the negotiations. Informing European-level trade union and employers' bodies would, the commission argues, enable them to monitor the establishment of new EWCs and promote best practice.
The SNB would be given an explicit right to meet, "using the necessary means for communication", without representatives of central management being present, before and after any meeting with central management. This reflects common practice in SNB negotiations.
For the purpose of negotiations, the SNB may be "assisted by experts of its choice". The draft rewords this as "may request assistance with its work from experts of its choice", Further, it adds that these experts may be "for example, representatives of appropriate Community-level trade union organisations" and that they may be present at negotiation meetings in an advisory capacity at the request of the SNB "where appropriate, to promote coherence and consistency at Community level". Again this mirrors common practice, and the commission states that it wants to recognise the role that trade union organisations can play in negotiating and renegotiating EWC agreements and providing support to employees' representatives.
EWC agreements
Agreements between SNBs and management to set up an EWC must, as a minimum, determine:
- the undertakings or establishments covered by the agreement;
- the EWC's composition, number of members, allocation of seats and term of office;
- the EWC's functions and the procedure for its information and consultation;
- the venue, frequency and duration of EWC meetings;
- the financial and material resources to be allocated to the EWC; and
- the duration of the agreement and the procedure for its renegotiation.
The commission proposes amending these requirements as follows:
- the agreement's provisions on the EWC's composition, number of members and allocation of seats would have to take into account where possible "the need for balanced representation of employees with regard to their activities, category and gender";
- the provisions on the EWC's functions and the information and consultation procedure would have to include arrangements for linking information and consultation of the EWC and of national employee representation bodies (in compliance with the "relevant level" principle);
- "where necessary", agreements would have to determine the composition, appointment procedure, functions and procedural rules of "the select committee set up within" the EWC (it is not entirely clear whether this would require a select committee, which acts as an EWC's executive, to be agreed - the draft Directive's recitals suggest that this is the intention); and
- as well as its duration and the procedure for its renegotiation, the agreement would have to stipulate the date of its entry into force, the arrangements for amending or terminating the agreement and the cases in which it should be renegotiated including, where necessary, when the structure of the multinational company changes.
Role and protection of employee representatives
The draft Directive would officially recognise EWCs as representatives of the employees of the multinational concerned (for example, in dealings with the public authorities or other external parties, or in legal disputes). It states that "without prejudice to the competence of other bodies or organisations in this respect" the EWC members "shall collectively represent the interests" of the multinational's employees and "have the means required to apply the rights stemming from this Directive".
Without prejudice to the Directive's confidentiality provisions, EWC members would be obliged to inform employee representatives at establishment or undertaking level - or, in the absence of representatives, the workforce as a whole - of the content and outcome of the EWC's information and consultation procedure (this requirement is currently found, in relation only to statutory EWCs, in the Directive's subsidiary requirements). According to the commission, this would help EWC members "play their representative role to the full" and ensure that the EWC is "useful".
Under the current Directive, members of SNBs and EWCs must, in the exercise of their functions, enjoy the same protection and guarantees provided for employee representatives by the national legislation and/or practice in force in their country of employment. This includes attendance at SNB or EWC meetings and paid time off necessary for the performance of their duties. The commission also proposes adding an entitlement to attend training without loss of wages, "in so far as this is necessary for the exercise of their representative duties in an international environment".
Links with other provisions
The Directive currently states that it is without prejudice to: national measures implementing the EU Directives on collective redundancies and on transfers of undertakings (both of which provide for the information and consultation of employee representatives); and employees' existing rights to information and consultation under national law.
The commission proposes updating the links to other Directives, stating that the EWCs Directive is without prejudice to:
- the information and consultation procedures based on Directive 2002/14/EC (the national information and consultation Directive); and
- the specific procedures referred to in Directives 98/59/EC (collective redundancies) and 2001/23/EC (transfers of undertakings).
The draft Directive would also establish in more detail the relationship between the EWC and national employee representation bodies, as follows:
- information and consultation of the EWC must be linked with that of national representation bodies, with due regard for the competences and areas of action of each and for the "relevant level" principle;
- the arrangements for the links between information and consultation of the EWC and of national bodies must be defined by the agreement establishing the EWC (see EWC agreements), which must comply with national legislation on information and consultation; and
- where no such arrangements have been defined by agreement, member states must ensure that the processes of informing and consulting the EWC and the national bodies start at the same time in cases where decisions likely to lead to substantial changes in work organisation, or contractual relations are envisaged.
Improved linkage between the various Directives and between the national and European levels aims to improve "effectiveness, consistency and legal certainty", according to the draft Directive's recitals.
Implementation of the revised Directive could not be sufficient grounds for "any regression in relation to the situation which already prevails in each member state and in relation to the general level of protection of workers in the areas to which it applies". In other words, if individual countries have to amend their legislation to transpose the amended Directive, for example to ensure that EWCs are informed and consulted at the same time as national bodies, this cannot be done by weakening current rules governing the information and consultation of national bodies.
Existing agreements
The Directive's obligations do not apply to multinationals which, by its implementation date (22 September 1996), already had in place an agreement covering the entire workforce, providing for the transnational information and consultation of employees. If these agreements expire, the parties involved may jointly decide to renew them: if not, the Directive's requirements apply. The draft clarifies that this exemption only applies to pre-September 1996 accords "in so far as such agreements are still in force".
With regard to agreements signed since 22 September 1996, the commission's proposed Directive would not "establish a general obligation to renegotiate" them. However, where the structure of a multinational changes significantly, and the existing EWC agreement does not contain provisions on dealing with the effects of such change on the EWC, or there is a conflict between the relevant provisions of two or more agreements (eg in the case of a company merger), central management should initiate negotiations over a new agreement, either of its own initiative or at the written request of at least 100 employees or their representatives. This would involve the creation of a new SNB, made up of employee representatives selected in line with the Directive's rules (see Composition of the SNB), plus at least three members of the existing EWC or of each of the existing EWCs.
During the negotiations, the existing EWC(s) would continue to operate, in accordance with arrangements agreed between the EWC members and central management. The aim of this requirement, according to the recitals, is to "permit the information and consultation of employees during the often decisive period when the structure is changed". When the new EWC is established and starts to operate, the old EWC(s) and the agreement(s) on which it is based would be dissolved.
Subsidiary requirements
The commission proposes a number of amendments to the Directive's annexed subsidiary requirements, which govern statutory EWCs set up in the absence of agreement between an SNB and management. According to the draft Directive's recitals, the aim is to "clarify the content" of the subsidiary requirements and "adapt them to developments in the needs and practices related to transnational information and consultation".
The Directive states that meetings between statutory EWCs and management (which must be held at least once a year) must relate in particular to:
- the company's structure, economic and financial situation;
- the probable development of the business and of production and sales; the situation and probable trend of employment; and investments;
- substantial changes concerning the organisation;
- the introduction of new working methods or production processes; transfers of production, mergers, cutbacks or closures of undertakings, establishments or important parts thereof; and
- collective redundancies.
The commission proposes distinguishing between the EWC's information rights and consultation rights. Information would cover the company's structure, economic and financial situation, probable development, production and sales. Information and consultation would cover:
- the situation and probable trend of employment;
- investments;
- substantial changes concerning the organisation;
- the introduction of new working methods or production processes;
- transfers of production, mergers, cutbacks or closures of undertakings, establishments or important parts thereof; and
- collective redundancies.
There would be a new requirement that consultation must be conducted in such a way that the employee representatives can meet central management and obtain a response, and the reasons for that response, to any opinion they might express.
The subsidiary requirements state that, where its size warrants it, a statutory EWC shall elect a select committee from among its members, comprising at most three members. The commission proposes dropping the EWC-size condition and instead providing that "to ensure that it can coordinate its activities", every statutory EWC shall elect a select committee. Further, the committee could have up to five members and would have to be provided with "conditions enabling it to exercise its activities on a regular basis".
Statutory EWCs have specific information and consultation rights in "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 proposed new Directive would add "and decisions" to the wording after "exceptional circumstances".
Where exceptional circumstances arise, the select committee - or, where none exists, the EWC - has the right to be informed and to meet, at its request, central management, or any other more appropriate level of management, to be informed and consulted. Where the meeting is with the select committee, those EWC members representing the establishments and/or undertakings directly concerned by the "measures" in question also have the right to participate in the meeting. The commission proposes changing "measures" to "circumstances or decisions".
The draft Directive would add to the provisions on exceptional circumstances/decisions a requirement that the information and consultation procedures must be carried out without prejudice to the Directive's confidentiality provisions, and the new requirement (see General principles) that arrangements for informing and consulting employees must be defined and implemented in such a way as to "ensure the effectiveness of the procedure" and to enable the multinational concerned to "take decisions effectively".
It is also proposed that:
- the competence of statutory EWCs would be the same as that of other EWCs (see above under General principles); and
- the new rules on the composition of SNBs (see above under Composition of the SNB) would also apply to statutory EWCs.
Review
Five years after the amended Directive comes into force, the commission would report to the European parliament, the Council of the EU and the European Economic and Social Committee on its implementation, making "appropriate proposals where necessary".
Reactions
The draft Directive is based on art.137 of the Treaty establishing the European Community and therefore subject to the co-decision procedure between the council and the European parliament. It has been passed to the European parliament for a first reading and to the council for initial discussions.
Presenting the proposal, Vladimír Špidla, the EU commissioner for employment, social affairs and equal opportunities, said: "We need to make sure European Works Councils can play their full role in managing the process of globalisation in a balanced way and help citizens benefit from the opportunities it offers. This is one of our priorities in the context of the renewed social agenda."
The ETUC stated that the draft Directive includes "some modest improvements" but "they are not enough". It argues that EWCs "need to be empowered to anticipate and manage changes, and the revised Directive is insufficient in this regard". It has called for a "more ambitious approach".
The draft Directive goes some way to meeting a number of the ETUC's long-standing demands, such as: stronger definitions of information and consultation; a greater recognition of the role of trade unions; training rights for EWC members; and rights for EWCs to hold meetings without management.
One key ETUC demand that has not been addressed is an extension of the Directive to smaller multinationals. The ETUC wants the Directive to apply to those with a total of at least 500 employees in the member states (rather than 1,000) and at least 100 employees in each of at least two member states (rather than 150). The review of its operation, required by the 1994 Directive, was to include an examination of whether its workforce-size thresholds are appropriate. The commission concluded that keeping the threshold at 1,000 employees would avoid "imposing administrative, financial and legal constraints in a way which would hold back the creation and development of small and medium-sized enterprises".
The ETUC has launched a campaign for stronger EWCs and will be lobbying intensively for the commission's proposal to be strengthened by the European parliament and the council.
BusinessEurope has reacted negatively to the commission's proposal, which it says "creates far-reaching difficulties for companies and does not facilitate social dialogue". It has written to the commission expressing strong concerns about the draft Directive. Its three major objections are that, in its view, the proposal:
- is biased in favour of trade unions, giving them "undue legal recognition and a major role that corresponds neither to their influence in Europe nor to the interests of workers themselves". Further, while BusinessEurope is in favour of reinforcing the means available to EWC members, notably through training, "their power should be confined within the company and not allow employee representatives to engage in outside lobbying on the basis of their EWC membership";
- raises serious challenges to existing agreements signed before 22 September 1996, which should retain their full current protection. Further, there should be similar protection for new agreements signed in the two years following the adoption of the new Directive; and
- "leaves the door open" to requiring EWC consultation to take place before a decision is taken, rather than between taking the decision and implementing it. This would "not only challenge the right of management to take decisions approved by shareholders, but also slow down operations".
This article was written by Mark Carley, editor of European Employment Review.
European Employment Review 415 (EER 415) contents
