European Commission issues consultation on EWCs Directive

The Commission has issued its long-awaited consultation of the EU social partners on the possible revision of the EWCs Directive. The consultation paper sets out the progress achieved by the Directive so far, highlights its weaknesses and analyses the current climate. It asks the social partners for their views on how to realise the potential of EWCs, the possible revision of the text and the role they envisage for themselves in this process. We review the main issues.

Background

The European Works Councils (EWCs) Directive (94/45/EC) was adopted on 22 September 1994, providing for the establishment of EWCs in Community-scale undertakings or groups of undertakings, defined as those with at least 1,000 employees and at least 150 employees in each of at least two European Economic Area member states. Article 13 of the Directive allowed organisations to conclude their own agreements prior to the coming into force of the Directive (on 22 September 1996), so long as they covered the entire workforce and provided for the transnational information and consultation of employees.

Thus, the two-year period between the adoption and the coming into force of the Directive saw the conclusion of a large number of voluntary, so-called "Article 13" agreements.

The Directive was amended by Directive 97/74/EC, which extended its scope to the UK following the UK's decision, taken in 1997, to "sign up" to the provisions contained in the social policy protocol attached to the Maastricht Treaty (EIRR 281).

Article 15 of the Directive provides for its review, stating that: "Not later than 22 September 1999, the Commission shall, in consultation with the member states and with management and labour at European level, review its operation and, in particular examine whether the workforce size thresholds are appropriate with a view to proposing suitable amendments to the Council, where necessary."

The Commission submitted in April 2000 a report on the legal and practical application of the Directive (EIRR 317), in which it assessed the national transposition of the Directive and highlighted a number of perceived practical problems. At that stage, however, it did not issue any recommendations for amendments to the Directive. The practical problems highlighted by the Commission included: a low level of transnational information and consultation rights included in some agreements; specific problems that arise from mergers, which are not addressed by the Directive as it does not require existing accords to contain a clause covering merger situations; a lack of post-Directive accords; concerns as to whether the Directive is clear enough in its requirement that information is provided and consultation takes place "within a reasonable time limit" and before a decision is made; better training for special negotiating body (SNB) and EWC members; and a need for information to flow easily between the different levels of worker representation within undertakings or groups of undertakings.

In September 2001, the European Parliament (EP) issued a Resolution on the Commission's report (EIRR 333). This acknowledged the positive impact of the Directive, but also identified a number of weaknesses and called on the Commission to submit a proposal to revise the Directive to address these. It highlighted, in particular, the challenges posed by industrial restructuring and the positive contribution that employee involvement through EWCs can make in these situations. For details, see the box below.

The Commission decided, however, that before it issued any formal consultation on the possible revision of the Directive, it would ask the European Economic and Social Committee (EESC) to draw up an opinion on the Directive, which was duly issued in September 2003 ( EESC opinion on EWCs Directive revision ). This opinion reviews the implementation of the Directive. However, it highlights a number of questions that need to be addressed, including: the issues of what it calls "useful effect" and "timeliness" in the area of information and consultation; the Directive's scope in terms of joint ventures and the concept of "undertaking"; the issue of representation on EWCs; the impact of EWCs on social dialogue in the company at national level; whether EWC representatives could visit establishments to communicate with workers; and the question of the relation between EWCs and the regulatory authorities, specifically whether to allow EWCs greater access to information.

The Commission's Communication

Having taken all this on board, on 20 April 2004 the Commission issued a Communication to the EU-level cross-sector and sectoral social partners ( Consultation of possible review of EWCs Directive ). This constitutes a first stage of consultations on the possible review of the Directive, following procedures set out in Article 138 of the Treaty establishing the European Community (TEC).

Numbers covered

The Communication notes that "significant progress has already been achieved" by the Directive: there are around 650 companies or groups covered by EWC agreements. The majority of these - around 400 - were adopted before the deadline for transposition of the Directive in 1996. Since then, the pace of adoption of new agreements has slowed, to an average of between 40 and 50 new agreements a year. Overall, of the 1,800 companies that fall within the scope of the Directive, less than 40% have an EWC agreement in place.

However, in terms of employee coverage, it is estimated that these agreements cover around 11 million employees, or around 65% of the 17 million employees that are estimated to fall within the Directive's scope. There are some 10,000 employee representatives directly involved in EWCs.

Reasons put forward for the low coverage of EWCs in terms of numbers of companies include the fact that more EWCs have been created in the larger companies - in smaller companies, transnational operations may be fewer and smaller, with the majority of operations located in one member state. In these cases, EWCs may be seen as being of less significance and interest to employees. Further, difficulties for employee representatives in initiating the procedure to establish an EWC have also been cited as an obstacle.

Thus, it notes, the basis has been laid for the development of "a genuine transnational social dialogue at the enterprise level". It states further that the Directive was a "completely novel development posing new challenges for both employers and employees" and praises all those involved, particularly the European-level trade unions and the European sectoral federations.

Success factors

The communication cites two aspects of the Directive that have been particularly successful. The first is the flexibility it provides to the social partners at enterprise level to agree solutions best suited to their own circumstances. Complete flexibility was provided for by Article 13 of the Directive (under which the parties were free to conclude their own arrangements, so long as they conformed to the standards of the Directive, before the Directive came into force in September 1996). However, the Directive itself has focused on achieving negotiated solutions - the subsidiary requirements, which are to be used if no agreement is reached, have hardly ever been applied.

The second is the fact that the Directive does not seek to influence the way in which EWC representatives are selected - this is determined by member states in accordance with national law and practice. Thus, it has been possible for the Directive to be integrated smoothly into the industrial relations system of member states.

Case law

There have to date been three European Court of Justice (ECJ) cases concerning the interpretation of the EWCs Directive (Cases C-62/99 Bofrost*; C-440/00 Kühne & Nagel; and C-349/01 ADS Anker GmbH). All of these concern the extent of the obligation on management to provide employee representatives with information necessary for the initiation of the process of establishing an EWC. The ECJ has ruled that the obligations on management in this area should be interpreted expansively.

There have also been cases at member state level, usually concerning breaches of the information and consultation requirements, procedures for appointing employee representatives and questions of legal jurisdiction. The Commission maintains, however, that "having regard to the novelty of the Directive, the number of occasions on which the parties have been obliged to have recourse to the courts has been relatively few."

Weaknesses of the Directive

The Commission acknowledges that, despite the progress made, there are a range of weaknesses that have been highlighted by the Commission's 2000 report and by the EP's 2001 Resolution. It cites the primary concern as ensuring the effectiveness of information and consultation procedures, particularly in restructuring situations, where employees feel most at risk and most in need of the security provided by being genuinely involved in the process. It states that: "there is an anxiety to ensure that the real advantages for both sides stemming from genuine engagement are realised in all situations. Much of the concern and criticism derives from instances where this has clearly, and sometimes dramatically, not been the case."

Other issues relate to: the rights of and facilities available to EWC members; the role played by trade unionists; facilitating more timely and more widespread creation of EWCs; and dealing with practical issues that have arisen in situations not explicitly provided for in the Directive.

The changing context

Over the past three years, three important new legal instruments in the field of employee involvement have been adopted. The first is the Directive on employee involvement in a European company (2001/86/EC), adopted on 8 October 2001 (European Company Statute adopted); the second is the Directive providing a general framework for information and consultation at national level (2002/14/EC), adopted on 11 March 2002 (New working time and consultation Directive in force ); and the third is the Directive on employee involvement in a European Cooperative Society (2003/72/EC), adopted on 22 July 2003 (EIRR 350). Some of the issues that have been addressed and dealt with in these Directives are relevant to the EWCs Directive. Further, the Commission notes that the deadlines for transposition of these new texts into national law fall into a two-year period beginning in October 2004, posing a "considerable challenge" to the social partners.

The economic and business environment has also changed over the past three years, largely due to corporate restructuring exercises. In this context, the Commission issued in January 2002 (Commission consults on restructuring ) a consultation to the social partners on managing change. This eventually led to the conclusion in June 2003 of the joint text entitled "Orientations for reference in managing change and its social consequences" (EIRR 361).

The role of the EU-level social partners is also changing - in its June 2002 Communication on the future development of the social dialogue (International: Socially responsible enterprise restructuring - part one), the Commission expressed a wish to stimulate a more autonomous dialogue of the social partners. In response, the social partners drew up and presented in November 2002 a joint multi-annual work programme covering 2003, 2004 and 2005 (Social partners set out three-year work programme ).

The challenges of enlargement

The Commission states that the enlargement of the EU, which took place on 1 May 2004, "presents a particular challenge for the application of the EWCs Directive and for the operation of EWCs in practice". All acceding countries had transposed the Directive into national law before joining the EU, although the Commission notes that this is only an initial step in the practical application of the Directive.

The inclusion of activities in the new member states will swell the number of undertakings or groups falling within the scope of the Directive. Companies headquartered in the existing member states and the new member states will be affected by this, and new EWCs may therefore be established.

Further, where companies in the new member states already have EWCs, these will need to be extended to ensure representatives of the newly-included subsidiaries.

Much work will need to be done to prepare representatives from the acceding countries to assume their new responsibilities under the Directive.

Aim of the consultation

Having set the scene, the Commission addresses three questions to the social partners. They are called to give their opinion on:

Reactions and next steps

The European Trade Union Confederation (ETUC) has been active over many years in putting together a list of amendments it would like to see to the text of the Directive. Three days after the release of the Commission's consultation document, the ETUC issued a statement in which it said that the revision of the Directive is four years overdue and that the ETUC would be putting its case for a revision of the text, which it states it has been saying is necessary and urgent for several years. It adds that the Directive "so far has had a positive impact, not just in terms of the number of European Works Councils set up, but also and especially in terms of acting as a benchmark and incitement to the spread and new development of rights, as well as information and consultation practices in companies and labour relations systems in member states and the new member countries. European Works Councils are the only company-level supranational trade union bodies in existence."

UNICE, the EU-level body that represents private-sector employers, had not made its views formally known at the time of writing this article. It is, however, engaged in the process of drafting a response to the Commission's text, and is expected to issue this in the coming weeks. Given the fact that UNICE was opposed to the opening of social partner negotiations for an EU-level agreement on the issue of national-level information and consultation in 1998 (the Commission eventually drafted a Directive that was adopted in March 2002), it is unlikely that UNICE will want to engage in negotiations on amendments to the text of the EWCs Directive.

However, UNICE is thought to be more inclined to enter into a process of dialogue with the ETUC in which case studies are examined and best practice is discussed. This could take place within the framework of the social partners' multi-annual work programme, which covers 2003, 2004 and 2005. Theoretically, talks of this kind could result in some sort of joint text, along the lines of the June 2003 orientations for reference in the case of restructuring. This would not have legally binding status, but would serve as a reference point for implementation and good practice.

Whether the ETUC would be happy with this approach is a moot point, given that it is lobbying for a significant number of changes to the text of the Directive (see the box below).

Certainly, the whole tone of the consultation paper gives the social partners a key role in deciding on what they would like to do about any revision of the Directive and allows them a free hand in going about this. However, it is clear that no discussions will be entered into until the "terms of engagement" have been set.