8. Annex 1 – Position of ETUC and BusinessEurope in the first stage consultation
Background – launch of a process on the need to amend the EWC Directive
Undoubtedly, the right to information and consultation is firmly rooted in EU law[1] and European law[2] , as well as being reflected in the European Pillar of Social Rights. There is no space here to elaborate on the issue of the right of employees to be informed and consulted on an individual or collective basis. The primary reference in secondary law is Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a general framework for informing and consulting employees in the European Community. Numerous questions can be raised regarding the right to information and consultation. The first question is whether the Directive provides for an individual and/or collective right to information and consultation? It is not clear whether information and consultation must be or can be provided to the individual employee (whether we are dealing with a ‘direct’ or an ‘indirect’ right to information and consultation). The question also arises as to whether Member States have to provide some kind of consultation mechanism in case workers do not set up (show the initiative provided for by law) a representative body[3] .
At this point, it is necessary to turn to the institution of European Works Councils (hereafter EWCs) – i.e. the right to information and consultation on a transnational basis. The ongoing processes in this area in the EU should also be presented.
In 2019. The European Parliament has decided to prepare two own-initiative reports in relation to employee involvement at company level as a means of fostering democracy in the workplace and, in particular, strengthening the functioning of EWCs.
The first report is a non-legislative report on democracy in the workplace, published in December 2021. (2021/2005 (INI))[4] 36. It covers the areas of information, consultation and participation of workers, trade unions, works councils, as well as some aspects of company law and corporate governance.
The second report is a legislative own-initiative report on the revision of the European Works Councils Directive (2019/2183 (INL)), which was adopted by the European Parliament on 2 February 2023. It aims to ‘strengthen EWCs’. It aims to “strengthen EWCs and their capacity to exercise their right to information and consultation, and increase the number of EWCs, while taking into account the different industrial relations systems in the Member States”. The document includes an annex outlining proposed legislative amendments to the recast directive, including, inter alia:
– a broader concept of ‘transnational matters’ on which EWC information and consultation should take place;
– a revised definition of ‘consultation’, i.e. the requirement for EWCs to receive a reasoned response to their opinion before management adopts a decision, and the assurance that this opinion must be taken into account by management;
– requiring Member States to provide for injunctive relief, whereby a company’s decision can be suspended in the event of a breach of information and consultation requirements, and to impose financial sanctions of up to €20 million or 4% of annual turnover, as well as exclusion from public procurement and grants;
– requiring companies to provide the EWC with objective criteria for determining whether a matter is confidential and for how long, and requiring companies to ensure the confidentiality of information and consultation;
– stricter deadlines for the establishment of EWCs (up to 18 months to negotiate an agreement establishing an EWC);
– the removal of the exclusion of undertakings which concluded agreements before the entry into force of the Directive from its scope and the extension of the amended provisions to undertakings which have concluded all types of existing information and consultation agreements.
On 1 March 2023, in a reply to the European Parliament, the European Commission welcomed the European Parliament’s resolution on the basis of Article 225 TFEU. In line with the political commitment made by President Ursula von der Leyen in her political guidelines for resolutions adopted by the European Parliament under Article 225 TFEU, the Commission is committed to present a legislative proposal in full respect of the principles of proportionality, subsidiarity and better regulation[5] . As indicated by the European Commission, the European Parliament’s proposals, including the specific proposals set out in the annex to the resolution, will be assessed in the light of ensuring legal certainty for workers and employers and protecting and promoting employment and industrial activity in the EU. This evaluation will include data and evidence gathering and a comprehensive assessment of the problems and factors associated with existing EWCs, as well as the issues highlighted in Parliament’s resolution. In its response, the Commission further indicated that it will initiate a two-stage consultation of the EU social partners in accordance with Article 154 TFEU and that the social partners may also decide to act through agreements under Article 155 TFEU. This action of the European Commission allows to proceed to the presentation in paragraph 2 of the Comparative Report of the views of the EU representation of workers in the form of the European Trade Union Confederation, on the one hand, and the EU representation of employers in the form of BusinessEurope, on the other.
Position of ETUC and BusinessEurope expressed in the first phase of consultation.
BusinessEurope’s position
In BusinessEurope’s view (position of 25 May 2023 expressed in the first phase of the consultation by the European Commission), the philosophy behind the EWC Directive is and should remain to give the social partners at company level, who know their company best, the space to negotiate arrangements that suit their situation, rather than imposing a standard template on everyone.
BusinessEurope stresses that the best EU policy approach to further advancing EWC practice is to encourage and support EWC practitioners to help them set up more EWCs within the scope of the directive and improve the practice of existing ones. The organisation highlights that many member federations and sectoral associations at EU and national level that are members of BusinessEurope are already providing extensive support to their member companies in setting up and running EWCs. This includes, for example, the production of step-by-step guides that outline the functioning of EWCs, summarise current legislation or make specific recommendations.
According to the organisation, the European Parliament’s report adopted at the EP plenary in February 2023 did not take into account business realities. In addition, and judged negatively, the European Commission chose to respond to the European Parliament by opening the way for consultation with the social partners, which is in stark contrast to its own 2018 report, which highlighted that the vast majority of Member States had correctly transposed the recast (recast) EWC Directive. The EU policy debate on EWCs should therefore address whether and how a revision (recast) of the existing EWC Directive could lead to an improved functioning of EWCs from the perspective of both companies and employees. Furthermore, a clear distinction should be made between the role of law and the role of contract in the establishment of EWCs, so that the social partners at the company level have the freedom they need to adapt their practices to the changing situation of the company.
Unfortunately, the Commission’s consultation document does not address issues important to the business community, such as:
- Create more space for the social partners at the company level to develop their own solutions to improve the functioning of EWCs in practice;
- Improving the way EWCs actually work, for example by reconsidering some of the arrangements for EWC meetings set out in the Directive in order to provide more flexibility for companies and EWC members, reduce the costs involved and make good use of the opportunities created by improved digital communication.
BusinessEurope regrets that the European Commission’s consultation document focuses largely on the main areas raised in the European Parliament’s report. BusinessEurope is deeply concerned about the European Parliament’s main proposals, which will further weaken the competitiveness of European companies and damage the smooth functioning of EWCs. Instead of fostering a social dialogue based on trust, the European Parliament’s approach poses a significant risk of administrative or judicial orders imposed on companies to freeze or delay decision-making, leading to disproportionate penalties, undermining companies’ trust in EWCs and undermining the role of social partners at company level. In particular, BusinessEurope stresses that the regulatory framework of the Recast Directive, based on Article 153 TFEU, does not allow the EU to instruct Member States on the exact level of sanctions to be applied. This should be decided by Member States in accordance with national laws and practices. Fines at the level proposed by the European Parliament will not play any positive role in labour relations and will seriously damage cooperation and trust between the social partners at company level and increase the risk that social dialogue will become full of contradictions. In the organisation’s view, the potential revision of the EWC Directive should create a safe harbour for pre-existing EWC agreements (e.g., in particular agreements prior to the entry into force of Article 14(1)(a) of the Directive) by ensuring that they remain outside its scope in future.
Finally, the quality and coordination of EU and national information and consultation processes depends mainly on building an environment of trust, cooperation, positivity and commitment. It is important to preserve the spirit of the 1994 Directive and not to seek to turn it into a co-decision-making body that does not correspond to a possible governance model. In order to improve the functioning of EWCs in practice in a way that respects the autonomy of the social partners at company level, BusinessEurope encourages the European Commission to present an alternative approach to the European Parliament’s proposal, either in the form of a Commission recommendation or by issuing a code of conduct.
Position of the European Trade Union Confederation
ETUC (position adopted and forwarded to the European Commission on 22 May 2023) would like to stress that the European Parliament has struck the right balance in its choice of issues, with its proposal focusing, on the one hand, on better defining the rights guaranteed by the 2009 Directive and, on the other hand, on ensuring their effective enforcement. Unfortunately, the European Commission’s consultation document does not address all these important points.
In practice, the application of workers’ rights to information and consultation within the EWC is often inadequate, late and meaningless. The EWC demands effective enforcement of EWC rights and considers the issues of proper enforcement and access to justice to be very important. The European Commission rightly stresses that sanctions must be effective and dissuasive. The European Parliament’s resolution agreed with this and called on the EWC to exercise its ‘right to apply to the national courts or other competent authorities for a preliminary injunction to provisionally suspend the enforcement of management decisions pending a procedure for informing and consulting the EWC at the appropriate level of management and representation and in a manner that allows for a reasoned response from management in accordance with this directive’. The ETUC supports the call for the right to temporarily suspend company decisions in the event of breaches of information and consultation procedures and even to annul company decisions in the event of repeated breaches, with the prerogative of national trade unions. The experience of Member States that have implemented such a system clearly shows that the deterrent effect alone is sufficient to induce companies to comply.
In addition, there is the issue of financial penalties. The Commission’s 2018 evaluation report has already shown that in most Member States, multinationals face maximum fines of several thousand euros. In Germany, the Member State with the highest number of EWCs, the maximum fine is €15,000. Such low fines are not effective and dissuasive and may even be seen as an incentive to disregard EWC rights. The ETUC supports the European Parliament’s position to provide penalties in relation to the turnover of a company or group of companies. Inspired by the RODO, the European Parliament calls for penalties of up to 2% of global turnover. The ETUC considers these penalties to be a deterrent.
However, the best sanctions are ineffective if the plaintiff’s route to court is impossible or difficult. The Commission has already noted in its 2018 evaluation report the general weaknesses of the existing measures to enable EWCs to enforce their rights. ETUC regrets that at that time the Commission decided not to act despite the clear evidence presented to the Commission by, among others, ETUC. The ETUC disputes in the Commission’s consultation paper that the level of litigation was low, while making no reference to the many obstacles that EWCs have to face in order to gain access to justice. Based on credible scientific evidence, the ETUC has already shown that the low level of litigation is due to the many obstacles placed on EWCs, which have de facto led to a lack of effective access to justice for EWCs. The ETUC and its affiliates have repeatedly reported to the Commission blatant violations of EWC rights since the entry into force of the Recast Directive (e.g. Caterpillar, ArcelorMittal, Nokia, Legrand, Whirlpool, GKN, Honda, Nissan, etc.). If these cases have not translated into litigation, it is because of the challenge of going to court all too often. For these reasons, the ETUC believes that action should be taken to address the lack of effective access to justice for EWCs and recalls that the European Parliament rightly calls on the Commission, as guardian of the Treaties, to ensure effective access to justice for EWCs. This includes, inter alia, the recognition of the legal personality of EWCs, the need for central management to provide the necessary financial support for judicial proceedings.
The Commission correctly identifies the definition of ‘consultation’ as another issue to be addressed. The ETUC supports the position of the European Parliament, which noted that: “the timeliness of consultation remains an issue where the opinion of the workers’ representatives may be requested or provided at a time when no meaningful consideration can be undertaken or when a management decision on the proposed measure has already been taken”. This observation is supported by academic research conducted by the ETUI and by complaints made by EWCs to the ETUC and European industry federations.
The ETUC stresses that information and consultation must be an integral part of a company’s decision-making process at all levels: local, national and international. Before management makes a final decision, the international information and consultation process must be properly conducted and completed. Meaningful consultation must therefore take place in good time so that the EWC has sufficient time to carry out an in-depth evaluation of the information provided, including with the support of experts if necessary, and to consult with national and regional employee representatives in order to obtain an informed opinion. Sufficient time and resources are also needed to prepare an EWC opinion depending on the potential impact of the planned measure. The opinion should be taken into account by management and the EWC should receive a reasoned response before taking a final decision. The current provisions of the Directive do not provide sufficient legal clarity on these essential steps and must be strengthened to reflect this principle. ETUC stresses that the European Parliament’s proposal to amend Article 2 of Directive 2009/38/EC is a viable way to strengthen the consultation procedure.
The concept of ‘transnationality’ needs clarification. The current Directive already provides a comprehensive definition in Recitals 12 and 16: “Appropriate provisions should be adopted to ensure that workers (…) are properly informed and consulted when decisions which affect them are taken in a Member State other than the one in which they are employed.” (Recital 12 of Directive 2009/38/EC) and further: ‘The transnational character of a case should be determined by taking into account both the extent of its potential impact and the level of governance and representation at which it is situated.’ To this end, cases that involve an entire company or group or two or more Member States are considered transnational. They include cases which, irrespective of the number of Member States involved, are of importance to the European workforce in terms of the extent of their potential impact or which involve the relocation of activities between Member States.” (Recital 16 of Directive 2009/38/EC). However, not all Member States have transposed the recitals into national law and, contrary to what is described in the Commission’s consultation document, the recitals are not read together with Article 1(3) and (4). Practice shows that there are often disputes with central management on how to define transnationality. The ETUC therefore proposes, as requested by the European Parliament, to consolidate and incorporate the provisions of the recitals into the body of the directive. This would provide legal clarity in the interests of both management and workers. There must be an enforceable, comprehensive right for EWCs to be informed and consulted on transnational matters throughout the decision-making process, and legal certainty must be ensured.
The ETUC strongly emphasises the importance of guaranteeing access to the knowledge of recognised trade union organisations, not only for the special negotiating body, but also for the EWC in its daily work. Drawing on the most accurate knowledge of the industry, sector and transnational issues, as well as an in-depth understanding of the functioning of EWCs, European and national trade unions provide valuable and accurate expertise, including legal advice where appropriate. Although the current Directive provides for the possibility for EWCs to appoint experts and explicitly refers to trade union representatives as possible experts for the special negotiating body, most Member States limit this possibility to only one expert, as referred to in the supporting requirements. In practice, this very often means that trade union representatives are simply excluded from participating in any meeting of the special negotiating body or the EWC.
The ETUC regretted that the European Commission’s consultation paper does not analyse the position of trade union representatives in detail and only deals with them in the framework of other issues.
[1] Article 27 of the Charter of Fundamental Rights provides: Workers and their representatives must be guaranteed, at the appropriate levels, information and consultation in good time in the cases and under the conditions provided for by Union law and national laws and practices.
[2] Article 21 of the European Social Charter states With a view to ensuring the effective exercise of the right of workers to be informed and consulted within the undertaking, the Parties undertake to take or promote measures to enable workers or their representatives, in accordance with national legislation and practice:
a. To obtain, on a regular or timely basis and in an accessible manner, information about the economic and financial situation of the enterprise employing them, on the understanding that certain information, the disclosure of which could be detrimental to the enterprise, may not be disclosed or will be disclosed on a confidential basis;
b. and to be consulted in good time on decisions envisaged which may significantly affect the interests of employees and, in particular, those decisions whose effects may have a serious impact on the employment situation in the undertaking
[3] It should be noted that the Court of Justice of the European Union (CJEU) has held that where the protection provided by EU law (in this particular case, collective redundancies) depends on the right to information and consultation of workers through their representatives, a Member State is in breach of EU law if it does not have an effective possibility to designate workers’ representatives[3] . In other words, such designation is necessary for the information and consultation mechanism to be effective. In some countries (for example Belgium, France and Luxembourg), the creation of employee representation bodies by the employer is mandatory by law. In other countries, this is regulated by collective agreements (e.g. Czech Republic, Denmark, Sweden). Still in other countries, the law defines the thresholds (minimum number of employees) required to start the procedure leading to the establishment of a representative body. A question that arose in 2011, but still remains relevant, is whether the voluntary representation rights currently prevailing in the Member States are sufficient to achieve the objective expressed in the Directive[3] . The above comments have served to signal the diversity of models for the right to information and consultation on a national dimension.
[4] European Parliament resolution of 16 December 2021 on democracy at the workplace: European framework for the rights of employee participation and revision of the European Works Council Directive
[5] Supplementary information:
Launch of public consultation process with European social partners
https://ec.europa.eu/commission/presscorner/detail/en/ip_23_2141
Basic data on EWCs in the European Union
Position of the European Parliament- https://www.europarl.europa.eu/doceo/document/TA-9-2023-0028_EN.html
Evaluation of the Directive carried out in 2018. – https://ec.europa.eu/social/main.jsp?langId=en&catId=707&furtherNews=yes&newsId=9102
10 demands of the ETUC – https://www.etuc.org/en/document/etuc-position-paperfor-modern-ewc-directive-digital-era