4. EWCs and restructuring

Restructuring in transnational companies is a permanent feature of company life and development. In fact, it was transnational restructuring and notorious cases of disregarding basic workers’ rights that brought about the EWC Directive in 1994. Since then, we have seen various phases and types of restructuring, triggered by drivers such as globalisation and technological change or as an effect of changes in sector-specific market conditions (e.g.market and trade liberalisation). Currently, an accelerated pace of restructuring is taking place: companies are facing new challenges resulting from rapid technological change, driven by digitalisation and increased competition not only from low-pay countries but also from new businessmodels that erode traditional ones (Google Car, Uber, etc.).

Business is one of continuous change, and restructuring is one of the most prevalent approaches adopted by companies to respond to change. The impact of globalisation, improvements in information and communication technologies, new trends in the workplace and sector-specific markets, but also changes in the regulatory frameworks and other factors contribute to change and the need to adjust and restructure.

Major forms of restructuring

  • Internal restructuring: when the company undertakes a job cutting plan that is not linked to another type of restructuring defined below.
  • Closure: when a company or an industrial site is closed for economic reasons not directly connected to relocation or outsourcing.
  • Bankruptcy: when a company goes bankrupt for economic reasons not directly connected to relocation or outsourcing.
  • Outsourcing: when the activity is subcontracted to another company in the samecountry.
  • Relocation: when the activity stays within the same company, but is relocated within the same country.
  • Offshoring/delocalisation: when the activity is relocated or outsourced outside country’s borders.
  • Merger/acquisition: when two companies merge or when an acquisition involves an internal restructuring programme aimed at rationalising an organisation by reducing personnel.
  • Business expansion: when a company extends its business activities and hires new workers.

Mergers and acquisitions as well as business creation and closure are just two forms of corporate restructuring. However, they are neither the only nor the most important ones. According to the European Restructuring Monitor (ERM), which has been in place since 2002 and is run by the European Foundation for the Improvement of Living and Working Conditions(Eurofound), mergers/acquisitions and closures/bankruptcies accounted for only 2.2% and 9.5%, respectively, of all 1,500 cases documented in the ERM database. Apart from business creation, the most important form of restructuring according to the ERM database5 is “internal restructuring”, a broad term referring to corporate restructuring that results in job cutting.

EU regulation on workers’ rights and protection related to restructuring

  • Fundamental rights of workers regarding information and consultation;
  • Information, consultation and participation rights as laid down in the EWC and SE Directives;
  • Regulations of the social protection of workers affected by restructuring;
  • Workers’ rights in the context of economic and company law regulations.

Essential information and consultation rights for workers as well as employee

representation are guaranteed by the EU Treaties for every worker in the European.

According to the Community Charter of the Fundamental Social Rights of Workers (9/12/1989)7, the establishment of the internal market must also lead to an improvement in the living and working conditions of workers in the European Community. According to the Charter, key areas of such improvements are workers’ rights in situations of collective redundancies and bankruptcies.

The Charter also stresses that information, consultation and participation for workers must be developed along appropriate lines, taking account of the practices in force in the various

Member States. A further fundamental right according to the Charter is that information, consultation and participation must be implemented in due time,

particularly in connection with restructuring operations that have an impact on the employment of workers.

Information and consultation rights at the national level: Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishes a general framework for informing and consulting employees in the European Community.

If your EWC is affected by restructuring, such as a merger, division, partial closure or relocation of the headquarters, it is important to make use of improvements introduced by the EWC Recast  Directive 2009, namely the legal right to renegotiate the agreement, i.e. the so-called “adaptation clause” defined in Article 13 of the Recast Directive. In case of “significant

changes” of the transnational company and in case of a lack of respective provisions in the EWC agreement or with conflicting provisions in cases where two or more EWC agreements are concerned, there should be a negotiation of (a) new agreement(s) in accordance with the procedure described in the

Directive (establishing an SNB, etc.). This renegotiation might be triggered either by management initiative or by written request of at least 100 employees in at least two Member States.

It is important to note that in the context of cross-border mergers the EU legislative framework guarantees certain rights of employees. If one of the companies involved in a merger has established employee participation at board level, certain procedures have to be respected in order to safeguardthis right.

In case of insolvency of the employer, employees and the bodies representing them should be well aware of Directive 2002/74/EC amending Council Directive 80/987/EEC on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer

The Directive provides for minimum standards regarding employees’ claims against employers who are in a state of insolvency.

In case of a transfer and/or merger of undertakings, certain rights of employees are protected by Directive 2001/23/EC on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses

Directive 2004/25/EC on takeover bids provides employee interest representations with extended information as well as consultation rights in the context of takeovers: while aiming at reducing restrictions of the free movement of capital by banning all kinds of defences against hostile takeovers, the Directive leaves national actors significant room to manoeuvre. Regarding workers’ rights, the Directive stipulates that workers have to receive extensive

information on the takeover bid and gives them the right to issue their opinion/recommendation.

An EWC that is involved in restructuring in a timely manner can have several functions: it should be instrumental in co-ordinating employees’responses to the restructuring and serve as the catalyst for the creation of agenuinely European strategy or action. The EWC should be used to obtainmore information and buy some time, which could prove useful at the local

level, at which social plans may be negotiated. The EWC can bring in the necessary experts to assist in evaluating the company’s plans and suggest alternatives; it can also support local strategies by exerting influence on management at the European level.

As previous surveys have shown, EWCs have the potential to play an active role in transnational company restructuring that complementsand articulates local and national employee interests. Despite the well-knownchallenges related to cultural and language differences or site competitionacross countries as well as the multiple barriers an effective EWC practice isfacing due to a lack of management co-operation, there are a number of tools

and instruments provided by the legislative framework that seem to be by too many EWCs.

A key instrument in this context is the right to call for an extraordinary meeting not only with a view to meeting management but also in order tomeet and exchange with other employee representatives, specifically withthose from local sites affected by the restructuring.

Transnational company restructuring – 10 basic principles of IndustriAll Europe
1.    Develop an early warning system Regular exchange of information should be promoted in multinational companies. This is essential to build mutual trust and prepare for closer cooperation. Where EWCs have been established, the EWC Coordinator can play a key role in fostering transnational cooperation. Any rumour of a restructuring plan should be checked, especially with colleagues from other countries, in order to be able to rapidly confirm or deny the news. Should the information be confirmed, it has to be disclosed as much as possible to the concerned stakeholders, i.e. national officers, the EWC Coordinator and EWC members, in such a way as to allow a rapid reaction. Anticipation is a pre-condition for influencing the decision-making process. A formal request for further information e.g. in the event of rumours, should be made to the relevant level of management.
2.    Ensure full compliance with information and consultation rights both at national and European level Access to relevant information is essential to understand the company strategy and propose alternative measures. Furthermore, workers and their representatives should have the necessary time to develop these alternative proposals. Steps will be taken to ensure that workers and their representatives are properly informed and consulted both at national and European level before a final decision is taken. Where a European Works Council exists, an extraordinary meeting of an EWC will be requested in the first place with a view to obtaining more information and agreeing on a timeframe for consultation. Participation rights where they exist as well as the interlinking between the national and European levels will be developed.
3.    Set up a European trade union network If it is deemed necessary, a European trade union coordination group will be set up. The idea is to rally around the same objective all the potential stakeholders: trade union officials from the trade unions concerned, EWC members, the EWC Coordinator and the workers’ representatives sitting in the Executive/supervisory Boards. This body will be the driving force behind the European strategy and the establishment of a European and coordinated response.
4.    Provide full transparency of information Creating a climate of trust and confidence among the colleagues in the different countries concerned is the prerequisite for a joint and coordinated response. Full transparency of information should be achieved in this respect. No negotiations will be concluded before trade unions and/or workers’ representatives have received sufficient information, have been duly consulted and before a joint strategy has been established at European level.
5.    Draw up a platform of common demands A platform of common demands will have to be drawn up to signal to management and different stakeholders the workers’ position and intention to stand together and develop coordinated actions. Basic demands will have to be supplemented by the development of a plausible and coherent alternative concept combining an industrial plan with socially acceptable measures. The possibility of bringing in external experts to assist on this matter should be considered. Where an EWC exists the industriAll Europe EWC Coordinator will have a key role to play in initiating such a platform. The platform will be drawn up in cooperation with the national unions and the EWC.
6.    Envisage negotiated solutions acceptable for all The unions, together with the EWC, will seek to promote negotiations either at national or European level guaranteeing that restructuring is managed in a socially responsible manner across Europe. All possibilities to mitigate the social consequences will be explored (reduction of working time, reallocation of work, early retirement, retraining, reclassification, etc.). Minimum standards for a social plan will be defined Europe-wide. No negotiation at national level or within one company will be concluded before the colleagues concerned at European level have been informed and consulted.
7.    Develop a communication strategy Wielding influence is one of the keys to the success of your strategy. First reactions, the political platform, conclusions and decisions should be immediately relayed by the press, the unions, the workers, the politicians, etc. In order to ensure that the campaign is ‘worker-based’, members and workers must be fully informed. Communicating to the outside world is also essential. Politicians, MEPs or anyone with influence can be rallied to your cause.
8.    Envisage cross-border activities Cross-border actions can be contemplated. Mobilisation should be worker-based and creative. A European day of action is one of many instruments that can be envisaged. Others can be developed in line with national practices and traditions providing they make our cause and our demands more visible.
9.    Explore any legal possibilities to ensure that workers are heard In the event of a merger, workers have the right to be heard in the merger control procedure which is carried out by the European Commission. Through this procedure the European Commission will decide whether the planned merger/acquisition will lead or not to abuse of dominant position. Workers can ask to be consulted by the European Commission on the abuse of dominant position and raise the issue of the social consequences.
10.  Binding commitment Any strategy agreed and any decision taken at European level should be made binding for all the players concerned and implemented at national level.