EU: State of the Union - New rules for the European Works Councils?

During the State of the Union on September 13, EU Commission’s President Von der Leyen, proclaimed the EU’s achievements, as well as its challenges. With respect to employment law the main challenge consists of labour shortages due to societal and technological shifts. During the speech it was emphasised that social partners will play a major role building a social Europe, therefore a Social Partner Summit will be organised at Val Duchesse (Brussels) in 2024.

Although not explicitly mentioned during the President’s speech, in relation to the State of the Union the Commission’s website states that initiatives will be taken to modify or implement new rules on the European Works Councils (EWCs). Within this context, we have sought to provide an overview of current concerns and possible upcoming changes in regulation.

1. Towards a new Directive

Despite the existence of a legal framework set out in the Recast Directive 2009/38/EC, practice shows that this is insufficient. Accordingly, the European Parliament (EP) issued the resolution of 2 February 2023 with recommendations to the Commission on revision of the European Works Councils Directive. An analysis of this document provides insight into the possible changes that the Commission could implement.

First of all, we outline the fact that multinational undertakings with assets or plants in several countries was approximately 45 times higher in 2015 than during the 1990s when the first EWC directive was introduced. In 2020, around 1.200 EWCs were in place compared to 62 in 1994. Pursuant to the social and technological developments the Directive 94/45/EC was rendered obsolete.

2. Increasing visibility

Currently, the opinion is that the Recast Directiveis not as effective as hoped. One of the main issues is that EWCs are not as known in every sector nor as visible in every member state. In contrast, some member states adopted provisions that go beyond the minimum requirements of the Recast Directive. For example, in Germany, the Czech Republic and Estonia, the consultation process ends with a reasoned opinion by management referring to the opinion expressed by employees’ representatives. This implies that the central management must provide a reply to each comment made by the representatives. 

With respect to increasing visibility, the European Parliament recognises that the exchange of knowledge, experience and best practices contribute significantly to the further development of EWCs. Therefore, the EP recommends the inclusion of a platform for structured and regular exchange on practices. This exchange could take place between member states and/or sectors. In relation to increasing the visibility of EWCs, it also calls on the Commission to support employee representing organisations with providing specialised trainings on ECWs rights in order for them to properly inform their members about the functionality of the ECWs.

3. Strengthening the position of the EWC

By the clarification of legal terms and procedures

In addition, the EP requests to clarify the procedures, objectives and definitions in order to strengthen the right of employee representatives to information and consultation, which is particularly problematic during restructuring processes. In fact, EWCs face major difficulties to enforce their right on timely information and, prior and effective consultation. A vague definition needing clarification is for example the term “transnational issues”, which is key to know whether a matter is supposed to be dealt with through a national level body of workers participation or through the EWC. The ECJ has not yet been invited to interpret this notion. Thus, resulting in fragmented transposition and implementation.

Another concern is the timely manner of consultation in the sense that, in practice, employees’ representatives’ opinion is requested or delivered at a point in time where no meaningful consideration can be taken or even when the management decision has already been taken. Therefore, the EP urges for a management obligation to take an opinion into account through the clarification of the term “consultation”. Moreover, with respect to having timely access to meaningful and up-to-date information, the EP envisages for example, board level employee representation as means of remedy.

Also, the current rules provide in an exemption to share information when this information could be harmful or damaging. However, the definition of “confidential information” is too vague in the sense that there is a lack of precise conditions under which central management is not required to pass on information. Within this context, the EP calls for clarification to prevent the abuse of confidentiality rules as a means to limit access to information and effective participation.

By strengthening subsidiary requirements

Further, in the event of failure to conclude an agreement on the establishment and the functioning of the EWC, the current Directive provides a three-year delay following the request to start negotiating on the establishment of an EWC before the national subsidiary requirements apply. In practice, this is not used effectively and is to the disadvantage of employees. The European Parliament views this three-year rule as excessive and therefore calls for a strengthening of the subsidiary requirements. Additionally, a potential forthcoming change involves expanding the rights of EWCs from having annual meetings to holding biannual meetings. 

By protecting EWC members

In addition, the EP underlines the importance of a gender balanced composition in EWCs and stresses that employees’ representatives and the EWCs should be protected against retaliation measures when exercising their rights.

By ending agreements concluded before the Directive

Lastly, pre-Directive agreements are still in force in certain companies and have not been adapted to the requirements of the Recast Directive. In order to establish uniformity in the rights and obligations governing all EWC agreements, ensuring equal treatment of employees, the EP urges the Commission to put an end to the exemption for what are referred to as “voluntary pre-Directive agreements”.

4. Non-compliance measures

Further, practice shows that corporations do not provide sufficient financial and material resources to enable EWCs to perform their duties in a pertinent manner. Therefore, instituting infringement procedures could offer solace.

Furthermore, the EU Commission could keep an improvement in dispute resolution in mind. After all, currently there is a lack of guidance on how to resolve cases of disagreement on whether to undertake an information or consultation procedure.

More, to strengthen the authority of the EWC, the European Parliament sees value in establishing the right to seek a temporary suspension of management decisions through a preliminary injunction in national courts. The suspension could for example last until the procedure for informing and consulting the EWC has taken place in such a way as to enable a reasoned response from the management in accordance with the future Directive. The EP also requests effective, dissuasive and proportionate penalties in order to secure compliance. What these penalties should entail in concrete terms is as yet not specified.

Regarding dispute resolution, the EP emphasises the significance of granting EWCs access to courts or competent national labour authorities. Consequently, it suggests that the Commission urges member states to facilitate administrative and legal proceedings. Specifically, it calls upon the Commission to explore the possibility of granting legal personality to both negotiating bodies and EWCs.

5. Conclusion

In conclusion, the recommendations of the European Parliament can be divided into three broad categories. Namely, they are about increasing visibility, non-compliance measures and strengthening the position (of members) of the European Works Councils. It is therefore expected that the proposal to be published by the Commission will mainly introduce alterations that can fall under these three categories.

Sources:

• Directive 2009/38/EC of the European Parliament and of the Council of 6 May 2009 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)
• European Parliament resolution of 2 February 2023 with recommendations to the Commission on Revision of European Works Councils Directive