How to understand 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 2 EU countries.

Its articles provide that these multinational companies must set up appropriate works councils or procedures to ensure that employees are informed and consulted on transnational decisions involving significant changes to the organization or contracts of employment.

In addition to promoting their implementation, the recast version of the directive sought to improve the functioning of EWCs through a more fluid dialogue between company management and workers’ representatives.

Few European Works Councils

The reality is that in 2011 only 40% of the multinational companies targeted by these regulations had set up a European Works Council. There were also very considerable differences between them in terms of the scope of transnational dialogue.

One of the reasons for this very heterogeneous implementation is that the directive leaves a broad scope of manoeuvre for the company’s 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 approach to more strong commitments, such as that of the European Works Council of General Motors Europe, which is the result of the effective transnational organization of the workforce.

On the other hand, sometimes both management and employee representatives see advantages in the creation of a European Works Council, while in some instances neither perceive any added value.

Ireland, Spain and the United Kingdom: three different approaches

n order to verify the differences in the implementation of European Works Councils, the authors analyzed the labour practices of multinational companies established 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 with 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. On the other hand, 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, the existence of European Works Councils was significantly lower among local multinational companies than among those of foreign origin.

The contrast between Spain and the United Kingdom in terms of the percentage of local multinational companies in which a European Works Council had been set up (7% as opposed to 25%) would have been justified: employees in countries where information and advisory agreements are already in place often see less added value in EWCs than those in states without such agreements.

The study also showed major differences in the way in which EWCs operate. Twenty-seven per cent of the multinational companies complied with the minimum requirements of European regulations, 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 lower profile than those of foreign origin.

Why so many differences?

Various factors influence the establishment of EWCs and the performance of their work. Both the organization of the workforce and the degree of international integration of management and operations are important. However, the study showed that the internationalization of the human resources function is the most decisive factor.

This suggests that the design of the HR function more influences the establishment of EWCs than by decisions relating to the integration of operations and organizational structure.

Implications of the 2009 directive

While the 2009 directive formalizes the role of European-level trade unions in the establishment of EWCs, it is ineffective in increasing their actual presence in the operations of multinational companies. Indeed, the results of the study suggest that the latter is essential to encourage the establishment of EWCs.

The research also confirms that a significant number of companies are doing the minimum necessary to formally comply with the directive. Fortunately, as more and more companies have an international human resources organization, 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 are shaping management practices concerning transnational structures such as European Works Councils and the internationalization of the management organization.

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.