The European Commission plans to revise the European Works Council Directive and has issued proposals that redefine the nature of the information and consultation, link national and European consultation, and provide a requirement for adaptation on significant changes in company structure. Is this something employers should welcome, fear or shrug their shoulders at?
David Bradley, head of employment team, DLA Piper
It is difficult to see how the changes will be welcomed by business as EWC’s have generally been seen as bureaucratic and expensive. To date, the key legislation on structural reorganisation has focused on domestic works councils and trade unions. In some respects, EWCs have therefore been seen as talking shops. Some companies have gained broader value-based benefits from the EWC but they are expensive to set up and administer. Estimates suggest that first year set-up costs are in the region of £400,000 and annual maintenance around £100,000. These costs are likely to increase with the new provisions of the revised directive.
Mike Emmott, employee relations adviser, CIPD
UK employers are unlikely to be enthusiastic. Existing EWCs have largely failed to meet the hopes and aspirations underlying their creation. The number of companies covered by the directive has increased with the enlargement of the EU in 2004. However, significant further expansion of the network of EWCs seems likely to be limited, irrespective of the revised directive. In the current economic circumstances, most companies operating at European level will have many other distractions to contend with and are unlikely to see amending their arrangements for informing and consulting employees as having a very high priority either.
Sean Banford, policy officer, TUC
There has been a failure to reduce the negotiating period of three years, and we just don’t understand why. It causes problems because people get frustrated and drop out, change jobs or simply decide they don’t want to do it any more. In the European Companies Statute there is a directive about workers’ rights to consultation, which is limited to a year. This came out later than the EWC directive so we don’t understand why they haven’t taken this opportunity to update the EWC directive and limit it to a year. A year of negotiation is a very long time.
Robin Chater, secretary-general, The Federation of European Employers
The principal advantage is that EWCs have been given a clearer remit to focus on trans-national issues rather than local or national issues. Yet its major flaw is that EWC members now have the facility to call on experts who are full-time trade union officers. This means that individuals from outside a company, possibly operating with a political agenda, may sit in on internal company meetings. This could not only introduce a higher level of adversarial debate, but it could make it very difficult for companies to ensure that commercially sensitive data remains confidential. It is difficult to see how a confidentiality agreement with union advisers could be policed or enforced.
Q Will increased trade union involvement shape the way EWCs operate?
Reiner Hoffman, Deputy general secretary, European Trade Union Confederation
What the commission did with this recast was give trade unions a role in the Special Negotiation Unit, which has to negotiate with management about the establishment of European Works Councils. This is the first step and to some extent has advantages for companies as well. There are quite a number of situations where managements have asked the European industry federations – the industry sector federations – to be involved in negotiations, and discovered that in parts of the EU such as Italy and France, there is more than one umbrella organisation. This has meant they have had to deal with three or four unions from France, three unions in Italy and a number of unions from the new member states. Obviously, it is far better to have coherence in the negotiations to create solid agreements.
Nicholas Squire, Partner in employment practice, Freshfields Bruckhaus Deringer
The formal role is not going to make a huge amount of difference to those EWCs that are already in place. There are, of course, quite a few organisations that are technically large enough to have work councils in place, but don’t yet have them, and it may be the case that one of the reasons for this is a lack of employee organisation. So it will give unions a role in shaping the European Work Councils because they will now formally have a role.
Q Will the changes increase the number of companies with a works council?
Reiner Hoffman Two key things have changed. First, some companies that have been highly critical in the past are now entirely convinced EWCs can play a productive role. Secondly, the procedure has been quite difficult. We have had some cases where it has not been possible to get proper information about the size and structure of a company to verify they are covered by the directive. Organisations should be forced to provide these details and the draft underlines that it not only applies to the central management but the management of each undertaking in each state. So if the headquarters is in Switzerland and you are working for the company in Germany, you can ask the German management to provide the information.
Nicholas Squire I don’t think the changes are going to mean that in three years’ time we’ll have a thousand more EWCs. You may see a few more, as much as anything because of the publicity the new legislation will bring about, but I don’t think the changes that have been introduced, from an employer’s perspective, will make much of a difference to the way EWCs operate.
Q When do you expect the changes to take root?
Reiner Hoffman If everything runs smoothly we expect the directive to be finalised by the end of the year and implemented over the next two years. Those companies who have not been convinced by the changes to it will at least have the chance to take a look at what it says.
Nicholas Squire The $64,000 question is: are we going to see requests for EWC or Special Negotiating Bodies in significant numbers within companies that don’t have them today? I can’t imagine you will have tens of hundreds of requests on day one. I think you need to look back in 18 months to two years’ time.
Q What are the major pros and cons of the proposed new regulations?
Reiner Hoffman Increased worker involvement and participation adds value and does not simply prolong decision-making. It is also not expensive as the cost of an EWC is very limited. Compared to the wage costs of big transnationals it is very little. The advantage is difficult to calculate, but to have a highly committed and motivated workforce has surely got to be a good thing.
Nicholas Squire If it is felt there is a need for a body for European-wide consultation within an organisation then workers should be able to ask for one. Some employers will say that one of the difficulties of the interaction between local and cross border information and consultation obligation is that there is an opportunity to delay and prolong the decision-making process, particularly if there is a lack of clarity over what takes precedence. The changes that were originally mooted, which effectively said you could have a default position where you could start the two balls rolling simultaneously, seemed positive and promoted clarity. Now, as I understand it, there is a move not to include that change in the directive.
Q Will the changes make much difference to UK business?
Reiner Hoffman In the UK there are about 260 companies covered by the directive and half of these already have EWCs in place, which is higher than the European average. One reason is that management in the UK can be very pragmatic and they have learnt that EWCs are a useful tool. So I can’t really understand why the CBI is so against the idea.
Nicholas Squire I’ve always found it slightly puzzling why we have comparatively so many EWCs. But I think a well-run EWC, where the employer and the reps take it seriously, can be beneficial. But I think that requires both the employer and the employee to approach the EWC in a positive way and as a forum for a genuine debate. With full engagement, they work well.
EWC directive – key points
The revised directive hopes to simplify and improve EWCs – and consequently encourage more firms to set them up. Here are the key changes:
- New definitions of information and consultation, bringing them into line with other information and consultation directives.
- The remit of an EWC will be confined to “transnational” issues, which concern the EU-wide business as a whole or at least two parts of the business in different member states.
- National and European levels of information and consultation will be linked.
- The fall-back rules will be changed. These are used as benchmarks in defining negotiated and adapted rules at company level.
- Training will be provided for employee representatives, who will also be required to report back to their members.
- Recognised role for trade unions in negotiations.
- Facility to adapt the framework of an EWC when structure of a business is likely to radically change.
- Simplification of the legislation, replacing three different directives (94/45/EC, 97/74/EC and 2006/109/EC) with an updated directive.