Understanding the differences between European Works Councils
The European Union responded to the increasing integration of multinational operations in different countries with the European Works Council Directive, adopted in 1994 and recast in 2009.
This directive concerns all companies with more than 1,000 employees and a workforce of more than 150 in at least two EU countries.
Its articles stipulate that these multinationals must set up appropriate works councils or procedures to ensure that employees are informed and consulted on transnational decisions involving significant changes to the organisation or employment contracts, in addition to promoting their implementation, the recast version of the directive aimed to improve European Works Councils’ functioning through a more fluid dialogue between company management and employee representatives.
The results of this European initiative are included in the article “Variation in Approaches to European Works Councils in Multinational Companies”, by IESE Professor Javier Quintanilla, in collaboration with Paul Marginson and Duncan Adam, from the University of Warwick (United Kingdom); Jonathan Lavelle, from the University of Limerick (Ireland); and Rocío Sánchez-Mangas, from the Autonomous University of Madrid.
Too few European Works Councils
The fact is that in 2011 only 40% of the multinational companies targeted by these regulations had set up a European Works Council. And there were very considerable differences between them in the scope of transnational dialogue.
One of the reasons for this very heterogeneous implementation is that the directive leaves a wide margin of flexibility for its management concerning the committees. Moreover, committee practices often deviate from what was initially agreed.
Management practices in terms of information and consultation range from minimum approaches to more decisive commitments, such as that of the European Works Council of General Motors Europe, which results from the effective transnational organisation of the workforce.
On the other hand, sometimes both management and employee representatives see advantages in creating a European Works Council, while in some instances neither perceive any added value.
Ireland, Spain and the United Kingdom: three different approaches
In order to verify the differences in the implementation of European Works Councils, the authors analysed the labour practices of multinational companies located in Ireland, Spain and the United Kingdom.
To this end, they interviewed human resources managers from 892 multinational companies with headquarters or subsidiaries in these countries. The questions dealt with the existence or otherwise of a European Works Council and employee information and consultation practices.
The results showed that 36% of the multinational companies had such committees: 40% of those operating in Spain, 39% of those in Ireland and 28% of those in the United Kingdom.
In the case of Spain, companies agree with trade unions on both collective agreements and worker representation. In contrast, until very recently, Ireland and the United Kingdom had used trade union representation only for collective bargaining, with a minimal impact of the 2002 EU directive, which introduced the right of employee representation in information and consultation matters.
In both Spain and Ireland, European Works Councils’ existence was significantly lower among local multinational companies than among those of foreign origin.
The difference between Spain and the United Kingdom in terms of the percentage of local multinational companies in which a European Works Council has been set up (7% as opposed to 25%) would be justified: employees in countries where information and advisory agreements are already in place often see less added value in European Works Councils than those in countries without such agreements.
The study also showed significant differences in the way in which EWCs operate. Twenty-seven per cent of the multinational companies complied with European regulations’ minimum requirements, 30 per cent had no reservations about the EWC, and 43 per cent were in the middle range.
Local multinational companies tended to take a more minimalist approach than those of foreign origin.
Why are there so many differences?
Various factors influence the establishment of EWCs and the performance of their work. Both the organisation of the workforce and the degree of international integration of management and operations are essential. However, the study showed that the internationalisation of the human resources function is the most decisive factor.
This suggests that the establishment of EWCs is more influenced by the HR function’s design than by decisions relating to the integration of operations and organisational structure.
Implications of the directive of 2009
While the 2009 directive formalises the role of European-level trade unions in the establishment of EWCs, it is ineffective in increasing their actual presence in multinational companies’ operations. And the results of the study suggest that the latter is essential to encourage the establishment of EWCs.
The research also confirms that many companies are doing the minimum necessary to comply with the directive formally. Fortunately, as more and more companies have an international human resources organisation, this bad management habit is diminishing.
Interpretations of how to implement a transnational employment structure may vary due to country-specific conceptions of the type of information and advisory practices open to management.
In this regard, the research results indicate that national influences shape management practices concerning transnational structures such as European Works Councils and the internationalisation of the management organisation.