The concept of participation at work refers to the involvement of employees in the management's decision making in the workplace by means other than information and consultation. According to Council Directive 2001/86/EC supplementing the European Company Statute with regard to the involvement of employees , participation is the influence of the body representative of the employees and/or the employee representatives in the affairs of a company through 1) the right to elect or appoint some of the members of the company’s supervisory or administrative organ, or 2) the right to recommend and/or oppose the appointment of some or all of the members of the company’s supervisory or administrative organ (Article 2(k)). This definition of participation is repeated in Council Directive 2003/72/EC of 22 July 2003 supplementing the Statute for a European Cooperative Society with regard to the involvement of employees .
In 2018, according to the worker participation website hosted by the European Trade Union Institute (ETUI), a total of 2,943 European companies (known as ‘Societas Europea’ or SEs) were established. Agreements on worker involvement were concluded in 144 SEs. In 70 SEs, the rights enshrined in the agreement include board-level participation, thereby adding an important dimension for workers’ contribution in company decision making.
A Eurofound report from 2011 on employee involvement in companies concluded:
Employee participation at board level was an important aspect of the negotiations regarding employee involvement in all 10 cases [studied in the report]. Company-specific traditions and requirements were respected. In many cases, employee participation in board levels was adjusted according to new needs.
Since the creation of the European Company Statute, many companies have converted to SEs to avoid the participation rules they are subject to in their own country. This trend is mainly found in Germany, where companies, often family-owned or start-up e-commerce companies, opted for an SE transformation when their German workforce approached 2,000 employees. Under German co-determination law, if a company has more than 2,000 employees, half of its supervisory board must be made up of employee representatives (compared with one-third in companies with 501 to 2,000 employees). Before this threshold is reached, some employers prefer to convert to an SE, which allows them to maintain a one-third employee representation on the supervisory board in the agreement on employee involvement, which is negotiated as part of the conversion to an SE. However, there is a safeguard, as the directive provides for a ‘before and after’ principle: when converting to an SE, the level of participation enjoyed by employees before the conversion must be maintained in the future SE. Therefore, representation can only be frozen at the pre-conversion level (e.g. one-third).
This ‘before and after’ principle has been reaffirmed by the Court of Justice in a 2022 judgment. The question put to the court was whether a specific ballot provided for in German law for the election of trade union representatives to the supervisory board must be maintained when the German company is converted into an SE, by application of Article 4(4) of Council Directive 2001/86/EC (describing the ‘before and after’ principle), or whether it can be set aside by the negotiation of the agreement on employee involvement in the SE. The court considers that this ballot ‘constitutes an element that characterises the national system of participation of employees’ representatives’ and that the German legislation ‘makes it … mandatory in nature’. Thus, this procedural element is to be considered as part of ‘all elements of employee involvement’ within the meaning of Article 4(4), which are to be maintained on conversion into an SE. The principle of party autonomy can therefore not justify the setting aside of this procedure in the agreement on employee involvement in the SE. The court emphasises that the aim of the directive is ‘to eliminate the risk that the establishment of an SE, in particular by means of transformation, might lead to a reduction, or even a disappearance, of the rights regarding involvement that the employees of the company to be transformed into an SE enjoyed under national law and/or practice’.
Information and consultation ; European company ; employee representation ; financial participation
Eurofound (2022), Participation, European Industrial Relations Dictionary, Dublin
https://www.eurofound.europa.eu/en/european-industrial-relations-dictionary/participation