The European Works Council Directive applies to companies or groups with 1000 or more employees in the European Economic Area (EEA) and at least 150 employees in each of two or more Member States. It applies whether the company is based in Europe, US, Japan or anywhere else.
What do you have to do? The Directive requires companies to set up a European Works Council when requested by employees or their representatives, and then to inform and consult it regularly on “transnational issues” affecting employees. At least 100 employees, or representatives of 100 employees (eg a trade union or works council), from two or more Member States must make the request to set up a European Works Council. When a valid request has been made, the company must first set up a “Special Negotiating Body” (SNB) comprising representatives of all its EEA-based employees. It then has up to 3 years to negotiate an agreement with the SNB establishing a European Works Council and setting out how it will be informed and consulted. If no agreement is reached by the end of the 3 years – or if the employer fails to start SNB negotiations within 6 months – fallback rules apply, contained in the annex to the Directive. The fallback rules require a European Works Council (EWC) to be established representing all EEA employees, and set out how it must be informed and consulted. EWC agreements, and the fallback rules, are legally enforceable against the company, meaning it could be penalised for not consulting as it should. In some countries, eg France and Belgium, business decisions may have to be suspended or even reversed until consultation has been carried out correctly. In most countries though, the penalty for failing to consult is a fine.
Implementation in the Member States. Each EEA Member State has implemented the Directive into its national law. There is much similarity between the different Member States’ laws, being closely based on the rules in the Directive. But there are also some important differences, especially with regard to enforcement and sanctions. As a general rule, the law of the country where the company has its headquarters is the one that will apply to the company when setting up and running its EWC. However, non-EEA headquartered companies can choose which Member State’s law will apply if they have a “representative agent” there.
The revised (“recast”) EWC Directive. Significant changes to the Directive were adopted in 2009 and were required to be implemented in national law by 5 June 2011. The most important are as follows:
- New definitions of the “information” to be provided to EWCs, the nature of “consultation” and the meaning of “transnational issues”. Potentially, EWCs will have to be informed and consulted earlier, in more detail, and on more issues. But this will depend on which Member State’s law applies to the EWC, and how that Member State implements the new definitions. The UK and Irish legislation seeks to minimise the impact of these new definitions on existing EWC agreements.
- New rules governing negotiations to establish an EWC. These also apply where an existing EWC agreement must be renegotiated following a corporate restructuring under Article13 of the Recast directive. The new obligations cover both the process of negotiating a new or revised agreement (including a stronger role for trade unions), and the contents of the new agreement.
- A new clause requiring management to provide EWC members with the “means required” to carry out their duties. What this means in practice is far from clear. It could mean different things in different countries, although many countries have not specifically transposed this clause into their own law. Trade unions argue that it includes the employer paying the costs of expert advice to the EWC, and the legal costs of EWC members litigating against the company.
- A new right to training for EWC members. It is not clear whether they have the right to choose the content of such training and/or the training provider.
- A requirement to link consultation of the EWC with national consultation procedures, though there is flexibility as to exactly how this is done. Some trade unions argue the EWC should be consulted before national representative bodies, but the Directive does not say this.
- A requirement to renegotiate an EWC agreement following a corporate restructuring or merger, in certain circumstances. This only applies where the agreement does not contain an adequate “adaptation” clause, or where companies are merging, each with its own EWC, and there are conflicts between such clauses in the respective EWC agreements.
- Changes to the exemptions for existing agreements. Companies with what has been known as an “Article 13” agreement (now an “Article 14.1a” agreement) will continue to be exempt from the Directive, though with the important exception of the new rules concerning renegotiation following corporate restructuring. Companies with an “Article 6” agreement that was signed or revised in the 2 years leading up to June 2011 (an “Article 14.1b” agreement) will enjoy a partial exemption which covers most of the new provisions in the Recast Directive.
Article 13 agreements are agreements establishing an EWC that were in place before the original Directive became law in the Member States in September 1996 (1999 in the case of some UK agreements). Strictly speaking, they should now be called “Article 14.1a agreements” – the relevant clause in the Recast directive. It is no longer possible to put an Article 13/14.1a agreement in place. Companies with such an agreement are exempt from the obligations in the Directive, although this has changed to an extent since June 2011 because of the Recast Directive. Article 13/14.1a agreements are supposedly voluntary, ie not enforceable in the courts – this is the case in some Member States, but not all.
Article 6 agreements are agreements establishing an EWC that were negotiated following the procedure in the Directive – with a Special Negotiating Body (SNB) and up to 3 years of negotiations. The agreement will set out the composition of the EWC, how it is to be informed and consulted, and on what subjects. Article 6 agreements are normally enforceable through the courts (the Central Arbitration Committee in the UK, labour courts in much of Continental Europe). Article 6 agreements that were not signed or revised in the 2 years leading up to June 2011 will become subject to all the new provisions in the recast Directive. Agreements that were signed or revised during this period should be exempted from these new provisions, but which provisions apply will depend on the way the governing national law has been drawn up, and this will vary from country to country. The UK legislation has been drawn up in a way that minimises the impact on agreements signed or revised in the 2 year window.
Different interpretations of the Directive. Although the Recast Directive was supposed to help clarify the law, on certain points it has made it less clear. This has led to different interpretations of some of the key new provisions, such as how the new definitions apply to existing agreements, what is a “transnational” issue, what is included in “the means required”, who can provide training to EWC reps, when is the “adaptation” article triggered, and what is the status of an existing agreement after it has been renegotiated (does it retain its exempt status)? Trade unions, not surprisingly, are putting forward interpretations that seek to maximise the effect of the changes.
Review of the recast EWC directive. As with many employment directives, the European Commission is required to review the directive after a period of time and make any recommendations for changes. Article 15 of the recast directive requires the Commission, by no later than 5 June 2016, to report to the European Parliament, the Council [of member state governments] and the European Economic & Social Committee on the implementation of the directive “making appropriate proposals where necessary”. The Commission used consultants to research and report on implementation of the directive, and their report suggested a number of changes. Trade unions have made suggestions for numerous changes, particularly in the area of enforcement. As of end 2016 the Commission had not produced its report (such missed deadlines are commonplace). Any Commission suggestions for changes to the directive would have to go through the normal process of consultation of the EU-level social partners (BusinessEurope, ETUC etc), who would have the opportunity to negotiate an agreement on changes. If they did not do so, the Commission would then be free to make specific proposals of its own, which would have to be agreed between the European Parliament and member state governments.
Implications of Brexit. The UK’s exit from the EU should mean that the EWC directive will no longer apply to the UK. If that is the case, it will have a number of implications for European Works Councils, including those not based in the UK. Implications include: (1) whether there is a continuing obligation to have a European Works Council; (2) the position of UK representatives on a European Works Council; (3) redistribution of seats on the EWC; and (4) whether the governing law of the EWC will change.
Got any questions or need advice? Please contact us. We have long-standing and extensive experience advising companies on setting up and operating a European Works Council, and training both employee representatives and management. We advise on the rules in all of the EU Member States, including rules for appointing EWC reps in each country, and on the implications of the new Directive. We advise on negotiating strategy and tactics if you need to negotiate or renegotiate an EWC agreement. We can provide examples of other recent EWC agreements, and put you in touch with other companies who have European Works Councils to learn from their experience and benchmark against them.