European Commission Proposes Significant Revisions To The European Works Council Directive – Management

Background

A European Works Council (EWC) is a body that facilitates
information and consultation with European employees on
transnational issues. EWCs are composed of employees’
representatives from each country that is a member of either or
both of the European Union and the European Economic Area, in which
a business has employees. They operate separately from national
information and consultation bodies.

The concept of a EWC dates from the early 1990s, when the first EU
legislation on EWCs was enacted (Directive 94/45/EC). That
legislation was revised in 2009 to strengthen the rights of EWCs
and their members (with Directive 94/45/EC being recast as
Directive 2009/38/EC). Despite the revisions, the fundamental
rights of management to run their businesses remained unchanged
(much to the disappointment of the European trade union
movement).

The Radtke Report

On 2 February 2023, the European Parliament adopted a resolution approving a report drawn up by the
German MEP and former trade union official, Denis Radtke. The
Radtke Report called for fundamental and profound amendments to the
current legal framework on EWCs. Its most significant proposals
included:

• for matters to be considered as transnational where their
  potential effects concern, directly or
  indirectly, employees in two different
  countries, with employees deemed to be concerned where it can be
  reasonably expected that a matter in one country
  may entail in the foreseeable future an
  impact in a second country;




• for national Labour Courts to have the power to grant
  preliminary injunctions to suspend management’s decisions and
  their effects, such as the termination of contracts of employment,
  if an EWC asserts that it has not yet been adequately informed and
  consulted; and




• adding to that new risk and again incentivising businesses to
  come to an agreement with their EWCs, for national Labour Courts to
  have the power to impose fines on businesses of up to 4% of the
  total worldwide annual turnover of the business for failures
  adequately to inform and consult.

The European Commission’s consultations

On 11 April 2023, the European Commission launched a first-stage consultation of European social
partners on a revision of Directive 2009/38/EC. It did so in line
with President von der Leyen’s commitment that the European
Commission would follow up on any resolution by the European
Parliament calling for legislative reform.

Then on 26 July 2023, the European Commission launched a second-stage consultation of European social
partners on a revision of Directive 2009/38/EC. This reflected that
it concluded after its first-stage consultation that there was
scope for further EU action to improve Directive 2009/38/EC,
meaning that it was appropriate for it to consult European social
partners on the possible content of this action, based on the
potential areas for reform already identified.

The European Commission’s proposed revisions to Directive
2009/38/EC

On 24 January 2024, the European Commission
published its proposed revisions to Directive 2009/38/EC.
Although its proposals do not go as far as the Radtke Report’s
suggestions, they would still represent a very significant revision
to the current legal framework governing EWCs.

The changes being proposed by the European Commission include:

• expanding the definition of what counts as a
  ‘transnational’ matter. In future, these would include not
  only situations where proposed measures can reasonably be expected
  to affect employees in more than one country but also situations
  where employees in one country can reasonably be expected to be
  affected by the consequences of proposed measures in another
  country (such as through consequential changes to supply
  chains);




• elections and appointments to a Special Negotiating Body (SNB),
  which negotiates an EWC agreement within a business, must strive to
  achieve a gender-balanced representation of workers;




• the financial resources to be afforded to SNBs will include the
  reasonable and necessary costs of legal assistance and legal
  representation in judicial proceedings. However, such expenses must
  be notified to management before they are incurred;




• EWC agreements will be required to specify the format of
  meetings, such as them taking place in-person or virtually;




• EWC agreements will be required to specify the financial
  resources to be afforded to EWCs, including in respect of legal
  assistance and legal representation in judicial proceedings;




• EWC agreements will be required to agree arrangements for
  attaining, as far as possible, the objective of gender balance
  whereby men and women each comprise at least 40% of the members of
  EWCs;




• the legal default rules will apply automatically if there is no
  meeting of a SNB within six months of a valid request;




• managements will be required to justify why any information
  that they provide on terms of confidence is confidential or why
  they are withholding any information altogether on the basis that
  to do so would seriously harm them;




• managements will be required to wait until after they have
  responded to any opinion which they receive from their EWCs before
  they may proceed with decision-making on their proposals;




• members of EWCs will be entitled to engage with employees or
  their representatives on the content of an information and
  consultation process before the EWC meets with management to be
  consulted on the proposed measures;




• the ending of the exemption for businesses with an old-style
  “Article 13” EWC agreement, meaning that their employees
  or their employees’ representatives may request the
  establishment of a new EWC operating fully in accordance with the
  revised EWC Directive;




• EWCs operating under the default legal rules in the absence of
  an EWC agreement having been concluded will, so far as possible,
  have to comprise of at least 40% men and 40% women;




• EWCs operating under the default legal rules in the absence of
  an EWC agreement will be entitled to meet with management at least
  twice each year;




• EWCs operating under the default legal rules in the absence of
  an EWC agreement will only be entitled to an exceptional
  information and consultation meeting if the proposed measures in
  question are so urgent that information and consultation cannot
  take place at the next scheduled meeting;




• experts assisting EWCs operating under the default legal rules
  will be entitled to be present during meetings between the EWCs and
  management in an advisory capacity; and




• the financial resources to be afforded to EWCs operating under
  the default legal rules will include the reasonable and necessary
  costs of legal assistance and legal representation in judicial
  proceedings. However, such expenses must be notified to management
  before they are incurred.

In addition to the above reforms to the operation of SNBs and
EWCs, EU countries will also need to strengthen their frameworks on
dispute resolution, including to ensure that fines reflect the
gravity, duration, consequences, the intentional or negligent
nature of the offence, and the size and financial situation of the
business.

Implications for businesses

At this stage, it remains unclear whether the European
Commission’s proposals will be enacted in their current form.
On the one hand, the proposals do not go as far as the European
Parliament had sought as, for example, they neither provide for
injunctive relief for EWCs nor fines of up to 4% of a
business’s global turnover. It is therefore possible that the
European Parliament may seek to add such provisions to the draft
legislation before it is enacted. On the other hand, many European
governments represented in the Council of Ministers may be
concerned about the threat to European competitiveness that these
proposals might cause, such as by allowing EWCs to slow down
decision-making by withholding their opinions, without which
management cannot prepare a response and make decisions on its
proposals.

Nonetheless, the key implications for businesses of the current
proposals would be as follows:

• No more “Article 13” exemptions:
  Almost 400 businesses that currently have “Article 13″
  EWC agreements would lose their status as being exempt from the EWC
  Directive. Instead of having to comply with an agreement that must
  merely provide for information and consultation in respect of all
  employees in member states of either or both of the European Union
  and the European Economic Area, these businesses would, upon
  receipt of a valid request, have to comply with the EWC Directive
  in full. This might not only be more onerous for these businesses
  but, to avoid unwelcome duplication, it might also lead to the end
  of arrangements for information and consultation that have worked
  well for over 30 years.




• Renegotiating agreements: Businesses which
  currently have an EWC agreement that does not conform to the new
  standards may be requested to renegotiate it. If such negotiations
  fail to lead to the conclusion of a new EWC agreement then the
  default legal rules will apply after a period of two years. For
  this reason most business will need to consider how to seek to
  amend their existing agreements as it is likely that many if not
  most existing EWCs will seek to renegotiate their agreements in
  order to benefit from the proposed revisions to the EWC
  Directive.




• Enhanced rights: Once EWCs are operating in
  line with the proposed revisions to the EWC Directive, they will
  enjoy greater rights than they currently do, in particular in
  respect of their ability to access justice and in respect of the
  penalties that might be imposed on management once they have done
  so.

We will publish a further article if and when revisions to the
EWC Directive are ultimately enacted.