EU: Recast Directive strengthens European Works Councils
We examine the contents of the "recast" EU Directive on European Works Councils (EWCs), which strengthens the role of EWCs, for example through enhanced information and consultation rights.
On this page:
Basic objective and procedure
General principles
Definitions
Management responsibility for information
Composition of the SNB
Operation of the SNB
EWC agreements
Role and protection of employee representatives
Links with other provisions
Adaptation to change
Existing agreements
Subsidiary requirements
Review.
Key points
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The EU Directive (94/45/EC) on European Works Councils (EWCs) (on the EUR-Lex website) was adopted in September 1994. Its scope was later amended by Directives: 97/74/EC, which brought the UK within the Directive's scope; and 2006/109/EC, which took account of Bulgaria and Romania's EU accession.
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 proposals were made at this stage, but in 2004 and 2005 the Commission consulted EU-level social partner organisations - the European Trade Union Confederation (ETUC), BusinessEurope (private sector employers), Ueapme (small and medium-sized enterprises) and Ceep (public sector employers) - on how to enhance the effectiveness of EWCs, including possible revision of the Directive. This process led the social partners to agree a document entitled Lessons learned on European Works Councils, which identified factors that help in the efficient functioning of EWCs and problems that can arise, but they were not able to reach any more concrete agreement on possible changes to the Directive.
In February 2008, the Commission again consulted the social partners , outlining 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. Although employers' bodies indicated a willingness to negotiate, the ETUC rejected talks. Its attempts to delegate the main responsibility for revising the Directive to the social partners having apparently failed, the Commission issued a proposal for a "recast" EWCs Directive in July 2008.
In August, the social partners took the unprecedented step of agreeing a "joint advice", setting out their common proposals for amendments to the Commission's proposed Directive. The Council of the EU, the European Parliament and the Commission then reached consensus on a version of the draft recast Directive that incorporated almost all of the social partners' recommendations, with a view to reaching rapid agreement at first-reading stage. Parliament duly approved the text on 16 December (with some relatively minor amendments of its own) and the Council reached a political agreement on the Directive on the following day.
The 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)" repeals and replaces the 1994 Directive and its amending Directives. It has not yet been formally adopted and published in the EU Official Journal and the analysis below is based on the text adopted by the European Parliament and submitted to the Council of the EU for agreement. No more than very minor linguistic changes can be expected when the Directive is published. The Directive enters into force 20 days after publication, and the member states will then have two years to implement it (whereupon the current Directives will be repealed).
Basic objective and procedure
The recast version does not amend the essential point of the Directive, which is to provide 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 at least 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 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 under way. 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.
General principles
The recast Directive, like the present Directive, states that an EWC (or 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. However, the recast version adds the following specifications:
- the arrangements for informing and consulting employees must be defined and implemented in such a way as to ensure their effectiveness and to enable the multinational to take decisions effectively (art.1(2) of the recast Directive);
- information and consultation must occur at the relevant level of management and representation, according to the subject under discussion (this "relevant level" principle already exists in Directive 2002/14/EC on national information and consultation rights). To achieve this and differentiate between the scope of EWCs and of national employee representation bodies, the competence of EWCs (and information and consultation procedures) is limited to transnational issues (art.1(3)); and
- matters are considered to be transnational where they concern the multinational as a whole, or at least two of its undertakings or establishments situated in two different member states (art.1(4)).
On this final point, the Directive's introductory recitals add some clarification. They state that the transnational character of a matter should be determined by taking account of both the scope of its potential effects and the level of management and representation that it involves. For this purpose, matters that concern the entire multinational, or at least two member states, are considered to be transnational. These include "matters which, regardless of the number of member states involved, are of importance for the European workforce in terms of the scope of their potential effects or which involve transfers of activities between member states."
Definitions
The recast Directive sets out (in art.2(1)(f)) a definition of "information", a concept that is not defined in the current Directive. Information is stated to be the "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". The information must be given "at such time, in such fashion and with such content as are appropriate" to enable employees' representatives to undertake an in-depth assessment of the possible impact and, where appropriate, prepare for consultations with the "competent organ" (presumably the relevant level of management) of the multinational.
The current Directive's 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 recast Directive changes this (in art.2 (1)(g)) 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 as enables employees' representatives to express an opinion on the basis of the information provided about the proposed measures to which the consultation is related, without prejudice to the responsibilities of the management, and within a reasonable time, which may be taken into account" within the multinational concerned.
These changes align the EWCs Directive's definitions more closely with those found in more 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).
Management responsibility for information
Both the current and recast Directives state that 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 EEA member state, a designated representative agent in a member state.
The recast Directive adds a stipulation (in art.4(4)) that the management 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 (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 Bofrost C-62/99 , Kühne & Nagel C-440/00 and ADS Anker GmbH C-349/01). These judgments established the principle that all information that is 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.
As a result of the addition of this specific rule on management responsibilities in this area, the recast Directive drops a provision in the current Directive that member states must ensure that the information on the number of employees required to determine whether the multinational is covered by the Directive is made available by undertakings at the request of the parties concerned by the Directive's application (art.11(2) of the current Directive).
Composition of the SNB
The current Directive provides that SNBs must have a minimum of three members and a maximum number of members equal to the number of member states (currently 30). There must be one 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 rules on the allocation of these supplementary members are those laid down in the legislation of the member state where the multinational has its central management.
The recast Directive introduces (in art.5(2)(b)) a new, simpler formula for the composition of SNBs, more closely linked to the size of the workforce in each country. An SNB's membership must be in proportion to the number of employees employed by the multinational in each member state, with each country having one seat per 10%, or fraction thereof, of the multinational's total workforce in the member states employed there. The Commission had originally proposed that only those countries with 50 or more employees would have SNB representation, but the idea of a threshold was dropped during the legislative process.
Operation of the SNB
Under the present Directive, central and local management must be informed of the composition of the SNB. The recast Directive adds (in art.5 (2)(c)) 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 be informed about the start of the negotiations.
The recast Directive (in art.5(4)) gives the SNB 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", according to the current Directive. The recast Directive rewords this (art.5 (4)) as "may request assistance with its work from experts of its choice". Further, it adds that these experts can include representatives of "competent recognised Community-level trade union organisations", and that the experts and trade union representatives may be present at negotiation meetings in an advisory capacity, at the request of the SNB. The current Directive does not mention trade unions at all, but in practice they often assist SNBs.
The Directive's recitals specify that "recognised" and "competent" European-level trade union and employers' organisations are those officially consulted by the European Commission under art.138 of the Treaty establishing the European Community. The Commission maintains an updated list (PDF format, 23K) (on the Commission website) of these organisations.
EWC agreements
Under the current Directive, 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 recast Directive amends these requirements as follows:
- the agreement's provisions on the EWC's composition, number of members and allocation of seats must take into account, where possible, "the need for balanced representation of employees with regard to their activities, category and gender" (art.6(2)(b));
- the provisions on the EWC's functions and the information and consultation procedure must include arrangements for linking information and consultation of the EWC and of national employee representation bodies (in compliance with the "relevant level" principle) (art.6(2)(c));
- "where necessary", agreements must determine the composition, appointment procedure, functions and procedural rules of the EWC's select committee (which acts as the EWC's executive) (art.6(2)(e)); and
- as well as its duration and the procedure for its renegotiation, the agreement must 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 (art.6(2)(g)).
Role and protection of employee representatives
The recast Directive introduces (in art.10(1)) a requirement that "without prejudice to the competence of other bodies or organisations in this respect", EWC members must have the "means required to apply the rights stemming from this Directive, to collectively represent the interests" of the multinational's employees. It also adds (in art.10(2)) that, without prejudice to the Directive's confidentiality provisions, EWC members must inform employee representatives at establishment or undertaking level - or, in the absence of representatives, the workforce as a whole - about the content and outcome of the EWC's information and consultation procedure.
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. The recast Directive amends this to state that the protection and guarantees must be "similar to" those provided for employee representatives by national legislation and/or practice (art.10(3)).
The rights of members of SNBs and EWCs under the present Directive include attendance at SNB or EWC meetings, or any other meetings provided for by agreements establishing EWCs, and paid time off necessary for the performance of their duties. The recast Directive adds that EWC and SNB members must be provided with training without loss of wages, "in so far as this is necessary for the exercise of their representative duties in an international environment" (art.10(4)).
Links with other provisions
The present Directive 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 recast version (in art.12(4)) updates 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 (establishing a general framework for informing and consulting employees in the European Community); and
- the specific procedures referred to in the Collective Redundancies Directive (98/59/EC) and the Acquired Rights Directive (2001/23/EC).
The recast Directive also defines 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 employee representation bodies, with due regard for the competences and areas of action of each and for the "relevant level" principle (art.12(1));
- the arrangements for the links between information and consultation of the EWC and of national employee representation bodies must be laid down by the agreement establishing the EWC (see above under EWC agreements) and must be without prejudice to national law and/or practice on information and consultation (art.12(2)); and
- where no such arrangements have been defined by agreement, the member states must ensure that information and consultation processes are conducted in both the EWC and national employee representation bodies, in cases where decisions likely to lead to substantial changes in work organisation or contractual relations are envisaged (the Commission had originally proposed that these processes should start at the same time) (art.12(3)).
The recast Directive states that its implementation shall not be sufficient grounds for any regression in relation to the situation that already prevails in each member state and in relation to the general level of protection of workers in the areas to which it applies (art.12(5)). The Directive's recitals indicate that this refers particularly to cases where national law and/or practice must be adapted to ensure that the EWC can, where applicable, receive information earlier, or at the same time, as national employee representation bodies.
Adaptation to change
The recast Directive adds (in art.13) a number of provisions on adapting EWCs to changes in the structure of the multinational concerned, an issue not dealt with in any detail by the current Directive.
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 must initiate negotiations over a new agreement, either on its own initiative or at the written request of at least 100 employees or their representatives in at least two undertakings or establishments in at least two different member states.
These negotiations require the creation of a new SNB, made up of employee representatives selected in line with the Directive's rules (see above under 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) should continue to operate, in accordance with any arrangements agreed between the EWC members and central management.
Existing agreements
The current 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 to them may jointly decide to renew them: if not, the Directive's requirements apply. Directive 97/74/EC provided similar protection to agreements concluded before 15 December 1999 in multinationals that came within the scope of the EWCs Directive because of its extension to the UK.
The obligations of the recast Directive do not apply to multinationals that have in place the above-mentioned pre-September 1996 or pre-December 1999 agreements, or where these agreements are adjusted because of changes in the structure of the multinational concerned (art.14(1)).
The recast Directive (according to its recitals) does not establish a general obligation to renegotiate agreements signed under the current Directive's rules since September 1996 (or December 1999 in the cases covered by Directive 97/74/EC). Further, the obligations of the recast Directive do not apply to multinationals that sign or revise an EWC agreement based on the current Directive's rules between now and two years after the recast Directive comes into force (this two-year "grace period" was not in the Commission's original proposal, but was recommended by the social partners). In these cases, the national law applicable to an agreement when it was signed or revised will continue to apply.
In all cases, the protection for existing EWC agreements is without prejudice to the application of the recast Directive's provisions on revising agreements where the structure of the multinational changes significantly (see Adaptation to change).
When protected agreements expire, the parties to them may decide jointly to renew or revise them (art.14(2)). Where this is not the case, the provisions of the recast Directive apply.
Subsidiary requirements
The Directive's subsidiary requirements, set out in an annex, govern statutory EWCs set up in the absence of agreement between an SNB and management. The recast Directive amends a number of these rules.
The present Directive limits the competence of statutory EWCs to information and consultation on matters that concern the multinational as a whole or at least two of its establishments or undertakings situated in different member states. The recast Directive (in point 1(a) of the annex) provides instead that the statutory EWC's competence "shall be determined in accordance with" the Directive's general rule (see above under General principles) that information and consultation must occur at the relevant level of management and representation, according to the subject under discussion, and that the competence of EWCs is limited to transnational issues.
The current 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; investments; substantial changes concerning 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 recast Directive distinguishes (in point 1(a) of the annex) between the statutory EWC's information rights and consultation rights. Information covers the company's structure, economic and financial situation, probable development, production and sales. Information and consultation cover: the situation and probable trend of employment; investments; substantial changes concerning 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 recast Directive also introduces 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 (point 1(a) of the annex).
Under the present Directive, statutory EWCs have between three and 30 members. As with SNBs, there must be one member 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 rules on the allocation of these supplementary members are those laid down in the legislation of the member state where the multinational has its central management. The recast Directive (in point 1(c) of the annex) abolishes the minimum and maximum size of statutory EWCs and applies the same formula for allocating seats as introduced for SNBs (see Composition of the SNB ). This means that membership must be in proportion to the number of employees employed by the multinational in each member state, with each country having one seat per 10%, or fraction thereof, of the multinational's total workforce in the member states employed in that country.
According to the current Directive, where its size so warrants, a statutory EWC shall elect a select committee from among its members, comprising at most three members. The recast Directive drops the EWC-size condition and instead provides that "to ensure that it can coordinate its activities", every statutory EWC shall elect a select committee (point 1(d)). Further, the committee may have up to five members and must be provided with "conditions enabling it to exercise its activities on a regular basis".
Statutory EWCs currently 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 recast Directive adds "and decisions" to "exceptional circumstances" (point 3).
Under the current Directive, when exceptional circumstances arise, the select committee - or, where none exists, the statutory 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 on measures significantly affecting employees' interests. The recast Directive deletes "on measures significantly affecting employees' interests" (point 3).
The present Directive provides that 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 recast Directive changes "measures" to "circumstances or decisions" (point 3).
The recast Directive adds 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 above under General principles) that arrangements for informing and consulting employees must be defined and implemented in such a way as to "ensure their effectiveness" and to enable the multinational concerned to "take decisions effectively" (point 3).
The current Directive provides that the members of statutory EWCs must inform the employee representatives in the multinational's establishments or undertakings - or, in their absence, the workforce as a whole - about the content and outcome of the EWC's information and consultation procedure. The recast Directive deletes this requirement.
Review
Five years after the recast Directive's implementation date (ie, two years after it enters into force), the Commission will 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".
This article was written by Mark Carley , editor of European Employment Review.
European Employment Review 422 (EER 422) contents
