Collectively speaking

European works councils affect only hundreds of employers but millions of
employees. They are the probable precursors of national equivalents and they
are seen by trade unions as a means to regain power in multinational
organisations. They are ignored at your peril. Roger Steel reports

It has been said that taking an interest in European works councils (EWCs)
is a minority sport. They are dismissed as a costly talking shop for debating
soft issues. When even employment lawyers take this view it is probably due to
comparatively few having had much exposure to collective employment law.

With the supremacy of the individual contract over collective bargaining
during the past 20 years, this is hardly surprising. But with the effects of
the Government’s employment law policies beginning to be felt, we are
witnessing a revived interest in collective bargaining, union participation and
the whole area of collective consultation. Last November’s regulations on
consultation in collective redundancies and Tupe situations, the rights of
audience newly granted to trade union representatives in disciplinary
proceedings and the prospect of compulsory recognition procedures are part of
that story.

If the European Commission, the European Parliament and the Social Affairs
Commissioner get their way, we shall in a few years’ time be witnessing the
introduction of works councils in every employer in the UK with more than 50
staff. EWCs will provide the model for such national works councils, and unions
across Europe and beyond are spending millions in research, training and
preparing for EWCs.

Many employers are already revamping their collective consultation and
bargaining procedures to embrace the partnership concept of dealing with their
unionised workforce.  Others are setting
up staff councils as a perceived way of deflecting recognition pressures.

In light of these developments, HR practitioners should familiarise
themselves with what EWCs are about. Indeed, increasing merger and
globalisation activity may lead to them being asked to display an instant

The legal basis

The starting point is the European Works Councils directive (94/45/EC). It
applied originally throughout 14 EU member states and was later adopted by
Norway, Iceland and Liechtenstein, three non-EU members of the European
Economic Area. To start with, it did not apply in the UK, which opted out of EU
Social Policy under the 1992 Maastricht Treaty.

With the election of a Labour government in 1997, that opt-out was reversed.
In the case of EWCs this was achieved by means of the Extension directive

As the EWC directive is not itself legally enforceable between employers and
employees, each member state enacts local laws giving effect to its terms. In
the UK, we have the Transnational Information and Consultation of Employees
Regulations 1999, or Ticer, which came into effect on 15 January. All other
states had to have their laws in place by 22 September 1996.

Ticer throw up their own problems. Unlike the transposing laws of many
member states, they go into great detail about the election of representatives
to a Special Negotiating Body and which out of the Central Arbitration
Committee (CAC), Acas or the EAT is responsible for sorting out problems.

The election procedures are aimed at ensuring a democratic process of broad
representation but many employers would prefer not to disturb existing and
hard-negotiated procedures already in place. After protest the Government
relented to some degree but the rules remain complex.

Since the CAC is also the body that will carry prime responsibility to decide
issues relating to trade union recognition, familiarity with the ways and
powers of this body will be another must for many practitioners.

Unfortunately, however, it is not just the UK laws that practitioners have
to know. Historically, as we shall see, there have been a number of different
types of EWC affecting the UK. As things stand, a UK employee may be covered by
any one of six types of agreement.

From a legal perspective, some issues under the directive are left to member
states to decide so that, for example, there are various ways in which
employees are counted in order to see if the employer is within scope, and
various methods by which delegate members/negotiators are identified.
Familiarity is required with the relevant rules in each country of operation.

Who is within scope?

There are complicated rules determining whether an employer or group of
employers falls within scope. Uncertainties abound regarding, for example,
franchise or large partnership arrangements. Part-timers are not treated
uniformly throughout the EU.

As a general proposition, however, an organisation with more than 1,000
employees within the now 18 member states will be in scope if there are at
least 150 such employees employed in establishments in two member states.

Six types of agreement

One:  From 22 September 1994,
when the EWC directive was passed, until 22 September 1996, employers in scope
had the opportunity to enter into voluntary agreements. These had to be in
writing, had to cover the entire workforce, and had to relate to the
information and consultation of the workforce on "transnational
issues" – that is issues affecting employees of the employer in more than
one member state.

Beyond these simple requirements the employer could strike whatever bargain
it liked with whoever it liked. However, since works councils were a familiar
concept in continental Europe and since the directive provides for a default or
mandatory model in certain circumstances, voluntary agreements followed the
same broad parameters.

Remember that during the 1994-1996 period the UK was not part of
"Social Europe" so we had no relevant rules and UK employees did not
count towards the thresholds for determining scope, nor was a UK workforce to
be included in a voluntary agreement as of right.

But about 400 UK-based multinationals were nevertheless in scope simply by
virtue of their continental workforces. Accordingly, many UK plcs or UK-based
European headquarters of non-EU multinationals, set up voluntary agreements
which included UK-based workers and were negotiated with employee
representatives which included UK representatives. Note that simply because a
group is ultimately in, say, US or Japanese ownership, does not prevent it from
being in scope.

Two:  When the UK opted back
in to Social Europe, it was given its own two-year period – from 15 December
1997 to 15 December 1999 – for any employer in scope for the first time to
enter into its own voluntary agreement.

Therefore, about 125 further organisations came within scope and were eligible
to enter into such agreements. Some, but certainly not all, have done so.

As will be appreciated, these organisations have UK workforces which, when
added to their below-threshold continental workforces, take the group over the
threshold. Some will be major UK companies but also non-UK companies can be
involved. For example, several Irish groups have found themselves caught by
having suddenly to take account of their Belfast workforce.

Three:  For organisations with
headquarters outside the UK qualifying under the 1994 directive, the expiry of
the voluntary period in September 1996 brought them into a semi-voluntary
regime. The shape of the EWC agreement itself could still be freely negotiated,
albeit within some more clearly defined parameters, the real change being that
the employer could now negotiate only with a set of employee representatives –
the Special Negotiating Body or SNB – elected according to the laws of each
relevant member state.

This third type of agreement may arise either at the instigation of
management or at the request of at least 100 employees or their representatives
coming from at least two member states.

Four, Five and Six:  The
expiry on 15 December 1999 of the UK’s special two-year period for voluntary
agreements means a fourth type of agreement can now exist – a semi-voluntary
agreement in an organisation caught for the first time under the EWC directive
by virtue of the Extension directive.

If an employer does not respond by setting up an SNB within six months of a
valid request to do so, or alternatively fails to conclude an agreement within
three years of the request, the directive and all local transposing laws
provide for a mandatory form of EWC, thus envisaging the fifth and sixth type
of agreement under which a UK-based worker could be covered.

Who has to set up an EWC and whose law applies?

These are important questions given that UK employees can be involved in any
one of so many ways. With voluntary agreements, the EWC directive states that
its obligations do not apply as long as the relevant conditions are met.

For a UK voluntary agreement instigated by a UK multinational – that is, in
the 1997-1999 period – that means the English or Scottish law of contract.
Other jurisdictions see things differently. France believes there should be
much less freedom and that voluntary agreements must still comply with the
principles of the Social Charter of 1989, so voluntary does not mean what it
says. French courts have upheld these principles in terms of issuing
injunctions and fines against Renault when it was not obviously in express
breach of its EWC agreement. The plant Renault wished to close had to be kept
going for another year.

Of course, many UK employees are covered by voluntary agreements dating from
before September 1996 or non-UK semi-voluntary agreements and are thus subject
to the laws of other member states.

For semi-voluntary types of EWC it is the location of the "central
management" of the employer that will usually decide the issue. For non-EU
groupings there are provisions for nominating a representative agent – that is,
an operating subsidiary within the EU to act as the central management. This is
what UK-based groups did in the pre-opt-out period.

In the absence of a nomination, management in the member state where the
greatest number is employed will be responsible and their laws will apply.

Doing nothing

Note that it is perfectly lawful for an organisation within scope to do
nothing about an EWC until receipt of a valid request. It may have a
disinterested workforce and be happy for things to stay as they are. It will
still have an opportunity to create a semi-voluntary arrangement but if it has
had an acrimonious battle in the meantime, over trade union recognition for
example, it may have lost an opportunity to negotiate an agreement more
favourable to itself.

Roger Steel is an employment law partner at Eversheds.

Contents of an EWC agreement

All must relate to transnational issues so national issues such as wage
bargaining or other matters relating to terms and conditions of employment are
generally excluded. Typically, all types of agreement will contain clauses, in
varying detail, about most or all of the following:

– An annual meeting with provision for interim ad hoc meetings if
circumstances arise

– A pre-meeting facility for employee representatives to discuss issues to
put to management

– Provisions for dealing with agenda items and post-meeting dissemination of

– Identifying who is going to be the chairperson and who is to act as

– Identifying the terms of office and geographical spread of delegates

– Identifying the issues to be discussed, typically: headcount and manpower
plans; product development and introduction of new technology; production
figures and financial results; prospective acquisitions; disposals and plant
closures; facilities relating to venue, accommodation, travel expenses and
translations; facilities for experts to assist employee delegates; protection
of delegates from victimisation through the discharge of their function and
protection of the employer’s confidential information.

Why employers dislike the mandatory system is because it makes many of the
above requirements compulsory and forces management to report to employee
representatives, once a year, on a variety of issues and in writing.

Practical issues for employers

– Identify and prioritise overlap between the EWC and local consultation
obligations, for example on plant closures

– Who sets agenda items and supervises the minutes?

– Who retains the roles of chairperson and secretary?

– Who controls the appointment of experts?

– Who decides what information can be kept from the EWC?

– How long does the agreement last and can it be amended?

– How long do delegates serve, how are they elected, deselected and what
about alternates?

– Which law applies?

– Who controls the costs?

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