International: Socially responsible enterprise restructuring in Europe - part one
In the first part of a comparative feature looking at the topic of socially responsible enterprise restructuring, we examine why this issue has become a focus of debate at EU level and in individual countries throughout Europe. We look at initiatives taken by the European Commission and investigate the situation in four individual countries. An overview of the situation in the remaining countries will follow in subsequent issues of EIRR.
Introduction
The issue of enterprise restructuring, and to what extent employers should behave in a socially responsible way when engaging in this process, has been a focus of debate in Europe over the past few years. As global competition increases, restructuring would appear to be essential if organisations are to keep up with market demands. In this context, the debate among social policy makers and commentators has focused on how to ensure that restructuring is carried out in a way that has as little negative impact as possible on an organisation's key stakeholders and surroundings: its employees; its subcontractors and suppliers; its shareholders; the region in which it operates; and the environment.
Looking specifically on the impact on an organisation's workforce, restructuring is often synonymous with job cuts and loss of employment security. Efforts to relieve this insecurity have largely focused on trying to ensure that the workforce is actively involved in an employer's restructuring plans.
The European legislative framework
Policy makers and social partners have primarily been trying to ensure that employers comply with existing European Directives governing the right of the workforce to be informed and consulted in good time about restructuring plans affecting employment levels. These are essentially:
- the collective redundancies Directive, originally dating from 1975 but updated in 1998 (Directive 98/59/EC). It contains: a requirement for companies of 20 employees or more to inform employee representatives in writing of any intention to make redundancies; a requirement to consult employee representatives "with a view to reaching an agreement" on ways and means of avoiding collective redundancies or reducing the number of workers affected and mitigating the consequences; and a requirement to wait 30 days from notification before making the redundancies;
- the transfer of undertakings Directive (2001/23/EC), which requires employee representatives in both the acquiring and the transferred company to be informed and consulted before the transfer takes place;
- the European Works Councils Directive (94/45/EC), which applies to companies of 1,000 or more employees with at least 150 employees in each of two member states. It gives the European Works Council (EWC) the right to be informed and consulted about transnational questions that significantly affect workers' interests. Guidance about what these issues could be is given in the subsidiary requirements annexed to the Directive. These include: the situation and probable trends of employment, investments and substantial changes concerning the organisation; transfers of production, mergers, cut-backs or closures of undertakings, establishments or important parts thereof; and collective redundancies. The EWC also has the right to be informed about any exceptional circumstances, such as closures, relocations, or collective redundancies. This means that workers should be informed about any significant company restructuring plans before they are made public; and
- the new Directive on the information and consultation of workers (2002/12/EC), which must be implemented into national legislation by March 2005. It requires undertakings with at least 50 employees, or establishments with at least 20 employees to: inform on the recent and probable development of activities and the business's economic situation; inform and consult on the employment situation and any anticipatory measures envisaged, particularly whether there is a threat to employment; and inform and consult on decisions likely to lead to substantial changes in work organisation or in contractual relations, including collective redundancies and transfers of undertakings. Most member states' legislation already goes some way to complying with this legislation.
Thus, there is a substantial framework of legislation governing the right of the workforce to be involved in a company's decision to restructure, by being informed and consulted about the plans before the final decision. For an overview of member states' legislation on the issue of information and consultation, see Information and consultation of workers across Europe: part one, Information and consultation of workers across Europe: part two and Information and consultation of workers across Europe: part three.
Influence of the Renault affair
Despite the existence of this legislative framework governing prior information and consultation of the workforce, there have been a number of high-profile cases of restructuring in which the workforce only learnt about their employer's plans after they were broadcast in local or national media. The most famous of these cases was the decision of the French motor manufacturer Renault to close its Belgian plant at Vilvoorde, with substantial job losses, in February 1997. The company did not inform and consult employee representatives beforehand, even though it was obliged to do so under Belgian and French law.
What came to be known as the "Renault affair" was single-handedly responsible for a subsequent overhaul of Belgian legislation on workforce rights in a collective redundancy situation (see below) and also gave an impetus to EU social policy in the area of industrial change. A few months afterwards, in June 1997, the European Commission issued the first formal consultation of the EU-level social partners on the subject of a Directive on national-level information and consultation procedures. This was the first step in the process that eventually led to the adoption of the above-mentioned 2002 Directive (2002/12/EC). This Directive will have a significant impact on the legislative framework in countries that do not have an existing generalised system for informing and consulting workers (principally Ireland and the UK) when implemented into national legislation. For details of this Directive, see EC: New working time and consultation Directives in force .
Socially responsible restructuring at EU level
The Renault development also sparked a wider debate at EU level on the issues of socially responsible enterprise restructuring and corporate social responsibility (CSR). At the beginning of 1998, the Commission convened a high-level group to look into the economic and social implications of industrial change. The group, chaired by Pehr Gyllenhammar, former executive chair of Swedish car manufacturer Volvo, issued its final report at the end of 1998, making a number of recommendations. One of these was to create an observatory to gather and disseminate information on industrial change. Accordingly, the European Monitoring Centre on Change was established to fulfil this brief. Its activities include organising seminars on the subject of change, collecting data on restucturing and publishing a quarterly report on restructuring activities around the EU. The centre's website is at: www.emcc.eurofound.eu.int.
In January 2002, the Commission issued a first formal consultation of the EU-level social partners, with the aim of stimulating dialogue about establishing the principles governing "socially intelligent restructuring". The eventual outcome of this consultation was that the EU-level social partners agreed a joint text on "orientations for reference in managing change and its social consequences". A draft text was concluded in June 2003 (Social partners: Joint text on restructuring ) and the accord was formally submitted to the Commission at the end of October 2003. The text draws a number of lessons from case studies examined and three joint seminars organised between October 2002 and July 2003. It contains guidelines to be followed to ensure successful change management, dealing with issues such as transparency, good-quality communications and information and consultation at different levels. It also lists the possible alternatives to dismissal that should be explored, including, as a last resort, early retirement. For more details on this text, see the box below.
Corporate social responsibility initiatives
In addition to these actions on socially responsible restructuring, a number of initiatives have been undertaken by the Commission in recent years on the specific issue of CSR. These include a Green Paper promoting the establishment of a European framework for CSR, issued in July 2001 (Green Paper on corporate social responsibility), a Communication on CSR, issued in July 2002 (Commission: New strategy on corporate social responsibility), and the establishment of a multi-stakeholder taskforce on CSR in October 2002 (Commission: Launch of CSR forum ) on a recommendation contained in the Commission's July 2002 Communication.
The situation in individual countries
The rest of this feature looks at restructuring and the issue of social responsibility in individual European countries. We look at topics such as whether there is an agreed definition of what constitutes socially responsible restructuring and whether any figures are collected showing the number of restructuring events and/or the number of jobs lost to restructuring.
As the whole issue of social responsibility is linked closely to the involvement of the workforce, or at least to prior information and consultation before the event is finalised, we also review the statutory, or collectively agreed, provisions in place obliging employers to inform. All EU member states have implemented the relevant provisions of the EU Directives in this area and some go further, obliging employers to negotiate with employee representatives on their plans. This is the case in Finland and Sweden, where negotiations often reduce the number of redundancies initially planned.
The right for employees to veto management decisions is rare, although they can in many countries delay the process through legal challenge. In countries such as Austria, the works council has co-determination rights over the content of the plan containing social measures to accompany redundancies. The agreement of the works council for redundancies is also required in the Netherlands.
Avoiding redundancies and offering alternatives to redundancy where job losses are inevitable are key elements of social responsibility. In some countries, such as France, employers with 50 or more staff are obliged by law to draw up a plan detailing the ways in which they intend to mitigate the social effects of restructuring.
Early retirement
Special mention needs to be made of the trend towards encouraging workers to take early retirement. This is seen by many employers as a non-traumatic way of reducing the workforce when job cuts are needed. Similarly, many employees are willing to retire a few years early on pensions that are, in many cases, only slightly reduced from a full pension. However, this practice is now perceived to be a problem in many member states for a variety of reasons.
From a labour market point of view, EU member states are concentrating their efforts on increasing average labour market participation rates in order to achieve EU employment targets of an average overall participation rate of 70%, a female participation rate of 60% and a 50% participation rate for older workers by 2010. Many countries are finding these targets, and in particular the target for older workers, difficult to reach. The widespread use of early retirement, taking workers in their 50s out of the labour market, is therefore problematic.
This development is also putting pressure on social security systems in many countries - more people are reliant on benefits and fewer people are in work to pay into the systems that pay out the benefits. This situation is only likely to worsen in the context of an ageing population and falling birthrates, and so there have been efforts in some countries, such as Belgium, Denmark and Spain, to curb this trend.
Monitoring
Many countries have set up observatories and other institutions dedicated to monitoring the economic situation in specific companies, sectors or geographical regions, with the aim of helping those organisations likely to run into difficulties. It is hoped that, if companies can be helped to restructure early enough, redundancies and employment trauma can be reduced.
Initiatives undertaken in individual member states include the establishment of an interministerial committee on economic change in France, the setting up of regional initiatives in Belgium, a number of fora in Finland, sectoral initiatives in Germany, regional initiatives in Italy - concentrated in the south of the country - initiatives designed to protect employment in the public sector in Sweden and a permanent monitoring network in Scotland.
The debate
The topic of restructuring is a high-profile one in many European countries, with trade unions and employee representatives active, to a greater or lesser extent, to ensure that employers comply with obligations to inform and consult their workforce about any plans to restructure, prior to the restructuring taking place. Trade unions in many countries have been active in demanding that employers seriously consider alternatives to redundancies and actively help their workers to find alternative employment.
It does not look as though the current wave of restructuring around Europe will abate in the near future - the European Monitoring Centre on Change, looking at the third quarter of 2003, registered 166 cases of company restructuring in the European Union, entailing job losses of 66,151. Two restructuring activities actually created jobs: 100 in France (at the mining and metallurgical group Eramet); and 750 in Ireland (at Mace).
The rest of this first part of our feature on social responsibility and restructuring looks at the situation in Austria, Belgium, Denmark and Finland. The situation in other countries will be examined in future issues. The length of the individual country contributions varies, mainly reflecting the fact that the debate is more active and the number of initiatives more prevalent in some countries than in others.
AUSTRIA
Definitions and statistics
There is no statutory definition of socially responsible restructuring, although the government has expressed an opinion on what it considers to be the main elements of social responsibility. There is an Austrian corporate governance code, dating from 2002, aimed at companies quoted on the stock market. Further, at the beginning of 2004, the country's two employers' organisations, the Federal Economic Chamber and the Federation of Austrian Industry, together with the labour and economic minister, set out CSR guidelines for Austrian companies.
There are no statistics available in Austria that document the number of jobs lost as a consequence of restructuring.
Informing and consulting
The relevant EU Directives dealing with employer obligations to inform and consult employees have been transposed into Austrian legislation. For example, the business transfers Directive is implemented through legislation on the contract of employment, which came into force in 1993. The collective redundancies Directive is implemented through labour market legislation, which, in part, goes beyond the requirements of this Directive. For example, there are special provisions relating to employees over the age of 50. EU Directives are generally implemented by means of legislation in Austria, rather than collective agreements.
Negotiating with employee representatives
Employees and/or their representatives have a statutory right to be consulted in a range of areas, as enshrined in the labour constitution Act (Arbeitsverfassungsgesetz - ArbVG). This includes the right of the works council to be consulted in writing, and in good time, if an employer is planning a restructuring exercise. If the planned restructuring is taking place in a company employing 20 or more employees and is likely to result in significant negative consequences for all or for considerable parts of the workforce, and the management and the works council cannot reach an agreement on this issue, the labour ministry may be called in to establish a conciliation board to "prevent, remove or mitigate" the negative consequences of the restructuring. The decision of the conciliation board is binding. Article 109 of the ArbVG obliges the employer to set up a social plan aimed at mitigating the effects of restructuring (see below).
In companies with at least 200 employees, the works council has the right to object to restructuring plans that will have negative consequences for the workforce (Article 111 of the ArbVG). Although this right is in theory stronger than the rights under Article 109 of this law, in practice it is largely without effect, as it normally has no binding character (except where a plant is to be closed). Under this Article, both the employer and the works council have the right to call in a conciliation board comprising social partner representatives. However, this type of conciliation board can only make a binding determination if both parties indicate in writing beforehand that they will accept its ruling.
Finally, under Article 112 of the ArbVG, the works council in a company of 400 employees or more has the right to call in a state economic commission, headed by a government minister or representative and consisting of representatives of the Federal Economic Chamber and the Chamber of Labour (up to 50% on either side). However, the determinations of these commissions are not binding and in practice they are rarely called upon.
Alternatives to redundancy
A range of alternatives to redundancy are contained in social plans, which are negotiated at establishment level during a restructuring situation. Social plans can also be negotiated at multi-company level.
Alternatives to redundancy are also the focus of so-called re-employment schemes (Arbeitsstiftungen). These schemes are financed by unemployment insurance funds, the employers concerned and the employees affected by restructuring. Regional authorities often contribute additional funding. The schemes aim to find alternative employment for employees threatened with redundancy and offer a range of services, including training and retraining, outplacement, help with starting a business and general careers guidance. These schemes often form part of social plans.
Sectoral schemes also exist: for example, in 1995, schemes were set up in the groceries industry and the freight forwarding sector in order to deal with the workforce downsizing associated with Austria's accession to the EU. At organisation level, a re-employment scheme for employees of the steelmaker Voest-Alpine resulted in 79% of employees made redundant finding a new job, 45% of which managed this within six months.The average length of time needed for finding a new job was around 18 months.
In 1993, for the first time, a group of companies jointly founded a re-employment scheme in the region of Steyrmark (Offene Arbeitsstiftung Steyr). The aim of this was to create employment in the area and set up a pool of labour for the firms involved. By 2000, around 500 people were reported to have used this scheme, all of whom found a job.
Collective bargaining
There are usually few formal negotiations on job security at establishment level, although in a restructuring situation, the works council and the union try to prevent redundancies by a range of means, including temporary cuts in pay and working time reductions. In exchange, the employer agrees to employment guarantees. The works council and the union usually work closely together during a restructuring situation.
The theme of socially responsible restructuring is, however, not a central theme for those engaged in collective bargaining. Nevertheless, trade unions do occasionally get involved in restructuring discussions. A recent example of this was the restructuring announced in 2003 at Austrian Airlines (AUA). The company was attempting to improve its financial results by reducing its personnel costs and its staff, a move that provoked protests from the airline's pilots. The conflict was resolved after intervention from the president of the confederation of Austrian trade unions (ÖGB) and the president of the Austrian Federal Economic Chamber.
Monitoring
There are no structures at national or at regional level specifically set up to look out for companies in difficulties, although any planned redundancies must be notified to the labour market services. In Vienna, the city authorities have created a fund offering outplacement services to employees who are about to lose their jobs. The idea is that alternative employment can be found before the redundancy actually happens. If companies wish to offer this scheme to their employees, they must first register their planned redundancies with the job market services.
The debate
Restructuring has been a topic of debate in Austria in recent years, particularly in the context of moving public sector organisations into the private sector. This has gained momentum since 2000, due to the ÖVP-FPÖ coalition government accelerating the privatisation process. Restructuring is particularly prevalent in the postal, telecommunications and rail sectors.
BELGIUM
Definitions and statistics
There is no statutory definition of socially responsible enterprise restructuring in Belgium, although there is a definition of what is deemed to be a company in trouble or a company undergoing restructuring. Accordingly, the Royal Decree of 7 December 1992 states that a company is in trouble if it has made pre-tax losses for two years. A company is considered to be undergoing restructuring if it is contemplating collective redundancies, if technical unemployment (where an employee is laid off temporarily) equals at least 20% of working time during one year, or if the government supports the company's restructuring plan. Companies can apply to be considered as in trouble or undergoing restructuring and may apply to offer employees early retirement from the age of 52. They must draw up and submit a restructuring plan after consultation with the works council (see below).
There are no figures tracking the number of restructuring events in Belgium, although the National Office for Social Security collects the number of employees for each company each quarter, consolidated for each statistical regional and professional activity.
Informing and consulting
Two national, collective, binding agreements and two pieces of legislation set out a range of obligations on employers to inform and consult employee representatives in the event of restructuring.
Collective agreement no. 9 states that any unexpected collective redundancies must be discussed with the works council before the redundancies take place. The works council must be informed as soon as possible, even if the information is not available on paper or an emergency meeting has to be convened. This agreement states that before an employer can make a decision, information must be provided to the works council. This information must contain details of the economic situation of the company, the actual employment situation, employment trends and detailed provisions on the jobs the employer intends to make redundant. It also stipulates that the employer must allow the works council to discuss the matter and to formulate advice, suggestions and objections. The employer must then say how they intend to act upon the advice and suggestions given by the works council.
Likewise, the agreement states that the works council must be informed and consulted before any announcement or final decision, if the enterprise is involved in a merger, and if this is likely to have employment consequences, although the prerogative of the employer is respected. Nevertheless, the employer must justify the economic, financial or technical elements that have caused the change to the structure.
Collective agreement no. 24 implements the 1975 EU collective redundancies Directive. It sets out a definition of collective redundancies and states that any employer contemplating collective redundancies must inform and consult the works council, or employee representatives in the absence of a works council, and the employees themselves in the absence of employee representatives, prior to making any decision. These consultations must include possible ways to avoid collective redundancies, limit their number and mitigate their consequences by means of social support measures, such as retraining or redeployment.
In addition to these national collective agreements, new legislation was passed in 1998. The so-called Renault Law of 13 February 1998 was a direct consequence of the Renault affair (see above). Belgian and French courts found Renault guilty of violating the law and politicians and trade unions subsequently wondered what they could do to prevent future violation of legislation in this area. The National Labour Council advised that existing legislation was sufficient but suggested that it would be worthwhile formulating a new law, which provides that individual employment contracts are not broken if the employer does not follow statutory information and consultation procedures. If there is a breach of procedures, workers would be entitled to receive their normal pay until the issue is resolved.
Thus, the Renault law was passed in February 1998 and implemented by Royal Decree on 30 March 1998. This law states that companies with more than 20 employees that are considering collective redundancies must first inform the works council, offering it the opportunity to ask questions, formulate arguments and submit a counter proposal. The employer must investigate these questions, arguments and suggestions and give an answer to them. It is, however, not obliged to take on employee suggestions. The employer must then inform the Regional Employment and Vocational Training Office about their intention to make collective redundancies. If these procedures are not respected, the government can force the employer to pay back all governmental financial support received during the past five years. Legislation passed on 3 April 2003 gives judges the power to impose a fine of between €1,000 and €5,000 for each employee if the employer has not respected legal provisions governing redundancies.
Finally, legislation passed by Royal Decree on 24 May 1976 sets out in detail the information that must be sent by the employer to the Regional Employment and Vocational Training Office. This includes data about the company, the reason for the redundancies and the timing of the redundancies. A copy of this notification must be sent to employee representatives. Notice of dismissal can only be given to individual employees 30 days after this official notification has taken place.
Negotiating with employee representatives
Although a variety of provisions contained in legislation and national collective agreements govern employer obligations to inform and consult with employee representatives in the event of restructuring, there is no obligation on the employer to reach agreement with employee representatives on their plans. Although the Renault law and Collective Agreement no. 24 explicitly oblige the employer to discuss and to investigate alternatives to redundancy, the right of the employer to make collective redundancies is not under question.
Alternatives to redundancy
The employer is obliged to consider alternatives to redundancy, but is not forced to implement any suggestions made by employee representatives. The most popular alternative to redundancy is early retirement. Promoting total or partial career breaks by using the Belgian "time credit" system is often suggested by employee representatives, although this is not as popular as early retirement. If at least 20% of workers are dismissed by companies deemed to be in trouble or restructuring, early retirement may be offered to workers aged 52 years or over. Early retirement can be offered to employees aged 50 in exceptional cases and with the permission of the labour ministry. In October 2003, around 109,000 people were receiving early retirement pensions, which is a heavy burden on social funds. Action will have to be taken to curb early retirement, as the participation rate in Belgium needs to be raised in order to meet EU employment strategy targets. However, no radical action has been proposed as yet.
Collective bargaining
There are currently no negotiations directly addressing ways of avoiding redundancies. However, existing national collective agreements do contain a number of rights for workers. For example, Agreement no. 82 gives all workers aged 45 or over and with one year's service the right to apply for outplacement of up to 12 months, financed by the employer, unless they are applying for retirement. In addition, Collective Agreement no. 10 provides workers who have been made redundant with the right to receive financial compensation by the employer.
Monitoring
There are no services dedicated to monitoring companies and sectors to predict restructuring. However, the commercial investigation services of the commercial courts look out for companies with financial problems and can invite these companies to begin a reorganisation or force it to accept bankruptcy.
In addition, the Flemish committee for preventive company policy, which was set up by the Flemish government in 1985 and ran until 2001, comprised management professors supported by officials, and met every two months. They screened all 2,650 Flemish companies with at least 50 employees in order to select those that were in danger of getting into financial difficulties. The committee selected around 150 companies and tried to convince them of the need to restructure before the situation worsened. However, funding for the committee was dropped in 2001.
The debate
The issue of socially responsible enterprise restructuring dominated the employment and social policy debate in 1997 and 1998, following Renault's Vilvoorde closure. As noted above, this development was instrumental in changing and strengthening legislation governing employers' obligation to inform and consult employees prior to taking decisions on restructuring that are likely to lead to reductions in employment.
Debate between employer representatives and trade unions in more recent years has centred on the Flemish monitoring committee set up in 1985. Employers believed that employers themselves, rather than external bodies, should decide the future of companies. Trade unions, in contrast, felt that the scheme did not go far enough and demanded a more extensive prevention policy.
DENMARK
Definitions and statistics
There is no statutory definition of socially responsible enterprise restructuring in Denmark. In general, the restructuring of companies is governed by legislation and collective agreements. There are no codes of practice or other elements of "soft law" governing this issue.
Similarly, there are no statistics tracking the number of restructuring events in Denmark, although figures are collated on the number of collective redundancies carried out.
Informing and consulting
The obligation on employers to inform and consult employee representatives before carrying out restructuring exercises that will have employment consequences is contained in the legislation that implements EU Directives in this area. The principal laws are Law number 414 of 1 June 1994, which implements the collective redundancies Directive, and Law number 111 of 21 March 1979, which implements the business transfers Directive. The new information and consultation Directive, which comes into force in March 2005, is also expected to be implemented by means of legislation, even though there is a tradition of implementing EU Directives by collective agreement in Denmark.
There is no obligation on the employer to negotiate with employee representatives once the information and consultation obligations are fulfilled. However, it is sometimes the case that the number of people actually made compulsorily redundant in a restructuring exercise is smaller than the number originally envisaged, following negotiations between management and employee representatives. This is due to favourable voluntary redundancy terms and early retirement arrangements being offered. This has especially been the case in the telecommunications and banking sectors in recent years.
Alternatives to redundancy
There is no obligation on employers to offer alternatives to redundancy. However, many companies offer schemes, such as job rotation, job sharing and education and training, to employees in danger of losing their jobs. In addition, a special fund, which held funds of DKr40 million (€5.4 million) in 2001, helps to finance activities aimed at improving the employability of redundant workers.
Monitoring
The regional employment authorities produce a quarterly report on the employment changes expected in their region. These reports contain considerable detail concerning sectors and occupations. If a major company in the region announced significant restructuring, the employment authorities normally make contact with the company and offer services such as employee counselling.
The debate
Socially responsible enterprise restructuring has not been a focus of debate in Denmark. The issues of how a company treats its employees and its responsibility for employing the long-term unemployed and people with disabilities have been more in the headlines in recent years. There is a debate on how to avoid making redundant people who are on long-term sick leave or who are older workers, but this is not explicitly linked to restructuring.
In general, restructuring is perceived to be fully in the control of employers, who are against any form of additional regulation on the grounds that this would impinge upon their prerogative.
FINLAND
Definitions and statistics
The concept of socially responsible enterprise restructuring is relatively broad and rather topical in Finland. The ministry of trade and industry has defined socially responsible enterprise restructuring as a practice where a company voluntarily links social aspects to its business practice and its interaction with interest groups. Speaking at a conference on social responsibility, organised on 8 October 2003, Mauri Pekkarinen, minister of trade and industry, defined social responsibility as: "Company management that increases a company's positive inputs into society and reduces negative effects on people and the environment."
Although there are no data specifically relating to the number of jobs lost through enterprise restructuring, the Labour Force Survey, published by Statistics Finland, shows that the number of unemployed people fell by 35,000 during the year to October 2003. The number of unemployed people also fell, by 8,000. Overall, the labour force participation rate among the working age population fell by 1.3 percentage points, to 64.3% in the 12 months to October 2003.
Informing and consulting
The Employment Contracts Act (55/2001) and the Act on Cooperation in Undertakings (the 1978 Cooperation Act and subsequent amendments) governs the information and consultation of employees in a situation where an employer is contemplating restructuring that may have a detrimental impact upon employment. These laws incorporate the provisions of the EU Directives on collective redundancies and transfers of undertakings. It is expected that the new information and consultation Directive will entail only minor changes to existing legislation. The Act on Cooperation in Undertakings provides for employee representatives to be informed and consulted in companies of at least 30 people (this threshold is lowered to 20 when the employer is considering the termination of at least 10 posts). The information and consultation should cover a range of issues, including the proposed changes to the structure of the company.
On 30 October 2003 the ministry of labour appointed a tripartite committee to examine whether to reform the Act on Cooperation in Undertakings. One aim is to clarify whether it would be appropriate to handle issues, such as redundancies, lay-offs and part-time employment, under different legislation. The committee, which will report in January 2006, will also review the issue of how employment authorities can be involved more effectively in the process of cooperation in redundancy situations.
Negotiating with employee representatives
Employers are under an obligation to negotiate with employee representatives on the parameters of a restructuring exercise. The negotiations should last for six weeks, although there is no obligation for the bargaining parties to reach an agreement. Nor can employee representatives block or delay employer restructuring plans. In practice, the problem is that simply making an announcement can fulfil this obligation, meaning that no "real" negotiations are actually held.
However, the number of proposed dismissals is usually higher than the number of actual dismissals, due to the fact that the numbers are often reduced during the negotiations.
Alternatives to redundancy
The employer is obliged, under chapter 4, section 7 of the Employment Contracts Act, to offer employees work that is either equivalent to that defined in their employment contract, or that is appropriate to their training, professional skills and experience. If employees take on new duties, the employer is obliged to provide them with "feasible and reasonable" (from the point of view of the employer and the employee) training.
Information on the training and reassignment of staff after a business transfer, division or merger must be given to employee representatives, under the provisions of section 6 of the Act on Cooperation in Undertakings.
In practice, many companies have introduced systems such as flexible working hours, including working time banks, in order to avoid dismissals and lay-offs.
The debate
The issue of socially responsible enterprise restructuring is a hot topic of debate at the moment in Finland. Trade union confederations have noted with dismay the number of dismissals that have recently taken place around the country. In December 2003 they organised a series of protest actions to bring this issue to the notice of policymakers. Furthermore, trade unions have indicated that their emphasis will be on enhancing employee protection against dismissal when they renegotiate the national incomes policy accord, which will expire at the end of 2004. However, the employers' organisation TT has criticised this demand, stating that increased protection against dismissal would be a barrier to job creation.
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Following the Commission's consultation of the EU-level social partners in January 2002 on the issue of socially intelligent restructuring (EU Commission: Commission consults on restructuring ), UNICE/UEAPME, CEEP and UNICE organised three seminars, in October 2002, March 2003 and May 2003, in which they studied in depth 10 specific cases of restructuring. These were:
After having studied these wide-ranging cases of restructuring, the social partners drew up a joint text based on the lessons learned. This text was agreed in June 2003 (Social partners: Joint text on restructuring ) and formally submitted to the European Commission on 29 October 2003. The text does not have the status of previous EU-level social partner agreements, such as those on parental leave, part-time work and fixed-term working, all of which subsequently formed the basis of EU Directives. However, it is intended to serve as a reference for those involved in managing change and its social consequences. Its main points are set out below. Explaining and giving the reasons for change The text states that it is essential to explain and give the reasons for change "in good time" to workers and/or their representatives. A subsequent "open discussion" on management's intentions, in some cases based on documents explaining the reasons for the decisions and their possible consequences, will allow workers to make their views known. It also states that any legislative and contractual obligations regarding worker information and consultation and on confidentiality must be met. Different levels of information and consultation may be required, depending on the subject under consideration. Specifically, European bodies, such as EWCs, are considered to be the "appropriate level" when changes concern the strategy of a group and affect sites in several EU countries. The text also lists a number of other information and consultation tools, such as: a specific annual report; documentation prepared for shareholders; suggestions from workers as to how to improve the organisation of work and production; and, over and above the formal procedures, "continuous quality communication" with workers and/or their representatives, an element which was reinforced by all 10 case studies. Developing employability The text notes that all the case studies underlined the importance of maintaining and developing workers' competences and qualifications in order to foster internal and external mobility and ensure the success of the business. They also pointed to the fact that it is essential to act early to change jobs and competences and anticipate movements. The development of workers' competences is crucial for the success of the enterprise and the management of workers' working lives. It is also in accordance with the agreement on the lifelong development of competences and qualifications, agreed by the EU-level social partners in February 2002. Territorial dimension The text states that where economic and social changes have "serious repercussions" for an entire region or territory, it is important to foster coordination between employers, trade unions and territorial public authorities. In this way, new job-creating economic activities can be fostered, reassignments managed and the operation of local labour markets improved. The signatories to the text recall the importance of the role played by EU structural funds and territorial infrastructures. The specific situation of SMEs Small and medium-sized companies (SMEs) are in a particular situation, as they are often dependent on one large customer, or operate in regions dominated by a single activity. Further, the creation and development of SMEs is "an indispensable component of a dynamic and adaptable economic and social fabric". The text states that where SMEs find themselves in a restructuring situation, strong creativity and motivation is required on the part of all actors if difficulties are to be overcome. Most specifically, the willingness of workers and/or their representatives to take part in the firm's collective efforts is a precondition for convincing everyone of a project's viability. Managing restructuring Each case study was concerned to explore all possible alternatives to dismissals, such as: reassignment; training; reconversion; support for business creation; an agreement to diversify in forms of work and employment and/or to suspend or adapt some benefits on a temporary basis; personalised worker support; and natural departures, notably through retirement or, as a last resort, early retirement. The text stresses that if restructuring is to be managed well, time is an important factor for both employers and employees: "the difficulty is organising quality information and consultation without creating undue delays and uncertainties". A "positive attitude to change, together with the existence of a climate of confidence between management and workers and/or their representatives" is also important, as are informal relations between management and employee representatives. The text concludes that, given that ongoing change is a characteristic of the lives of companies and workers, it has proved useful to put in place monitoring mechanisms to evaluate the effects and check the efficiency of the solutions identified in both the medium and long term. Examples of socially responsible restructuring in Belgium Ford Genk At the US motor manufacturer Ford's plant in Genk, the early retirement age has been lowered to 50. Employee representatives are negotiating to lower this by a further two years to allow all workers aged 48 to benefit from this early retirement scheme. Early retirement at the age of 50 or even earlier is not unique in Belgium: in 2002, the management of the German manufacturing multinational Henkel also applied to be allowed to offer early retirement at the age of 50, during a period of two years. Other examples of companies applying to offer early retirement from the age of 50 include the building systems supplier Gyproc Benelux, the Germany engineering multinational Siemens Altea, the Dutch electronics group Philips Hasselt and the wood products supplier Coplac. Flemish textile industry The Flemish textile industry recently signed an agreement with the Flemish government on better cooperation in the event of restructuring. There is a stand-by 'employment cell' (cellule d'emploi/tewerkstellingscel) that can be activated in case of collective redundancy. This unit builds up expertise in counselling textile workers threatened with redundancy and looks for vacancies for redundant textile workers, either in other textile companies or in other industries. The next step in the process is guiding the employee to specific training to make them eligible for one of the vacant jobs. A dedicated training centre and the companies involved in this project receive financial support to encourage this retraining process. The initiative is also supported by the European Union. Flemish employment and vocational training intervention team In 2003, the Flemish Employment and Vocational Training Office (VDAB) founded intervention teams in each province. These intervention teams contact companies making collective redundancies. They offer the company information on their service and they try to counsel the redundant employees as quickly as possible. The intervention teams also give presentations of the free services of the VDAB, publish a newsletter with relevant vacancies in the region, install computers with a vacancy database, invite employees to input their curriculum vitae into the database and suggest actions, such as vocational training and training in how to apply for jobs. Employment cells The government also finances an experiment that actively supports the search for a new job by employees who have been made redundant. The government supports the foundation of temporary job centres (termed employment cells) in a company undergoing restructuring. The employment cell provides emotional support, information and suggestions on appropriate training, how to search for vacancies and how to apply for training. The staff of these cells is provided by the Regional Employment and Vocational Training Office, by a private counselling company, or by a combination of these. Employment cells successfully counselled the redundant employees of Renault's Vilvoorde plant, the national airline Sabena and the clothing manufacturer Levi Strauss, Belgium. In the employment cell for Sabena employees, counsellors of the Regional Employment and Vocational Training Office engaged some Sabena employees and trained them as counsellors. This mix of counsellors contributed significantly to the success of this employment cell. This idea was piloted in the case of Renault Vilvoorde: here, the counsellors of the Regional Employment and Vocational Training Office engaged older Renault employees to assist in emotional support work and in communicating with redundant employees. |
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The Finnish Ethical Forum The Finnish Ethical Forum was set up in June 2001, formed of representatives of employers in commerce and industry, trade unions, consumer groups, environmental groups and the church. Its aim is to discuss questions of business ethics and CSR. The forum assembles a number of times each year to discuss a chosen topic. The main objective of the forum is to promote interaction between business, consumers and organisations and offer them a place to discuss CSR. It aims to bring together different points of view, exchange thoughts and, through cooperation, find new ways of evolving CSR. Discussions in the forum aim to raise awareness about the different expectations and objectives of social responsibility of the forum members. The first preparatory meeting of the forum was held on 14 February 2001 and was attended by 40 representatives. The first formal forum was held on 14 June 2001. From then on, the forum has assembled a few times a year. Finnish Business and Society In the spring of 2000, a new network, Finnish Business and Society (FBS), was established. This network is part of the European Business Network for Corporate Social Responsibility (CSR Europe) and aims to promote the idea of socially responsible practices and CSR. It attempts to create a partnership between companies, the public sector, citizens and consumers in order to establish socially and economically sustainable development. It also aims to promote the development of human resources policy, improve the welfare of workers, increase human and social capital in enterprises and contribute to productivity, safety and joint responsibility. FBS is also interested in developing a benchmarking system of social responsibility at domestic and international level, developing cluster models to enhance sustainable development, and acting as a wide network of companies of varying size and from various lines of business. Its focus on socially responsible personnel policy covers recruitment, working conditions, maintaining ability at work, supporting development at work, reward systems, termination of employment relationships, outplacement and lay-offs, and personnel management. |
