On 5 February 1997, the Dutch European Works Councils Act (Wet op de Europese Ondernemingsraden) came into force, thereby extending Dutch co-determination to include a transnational dimension. This law transposed into Dutch law the EU Directive on European Works Councils (EWCs), which aims to increase the right of consultation and information of employees in "Community-scale" companies. It requires every Community-scale company to establish an EWC or an alternative procedure to inform and consult its employees on the company's transnational activities. Although the term "European Works Council" suggests that it corresponds to the Dutch system of works councils, the EWC should not be seen as the apex of the Dutch co-determination structure.
The impact of the EWC Act
Within the framework of European Works Councils, "Community-scale" companies are defined as those employing at least 1,000 workers with branches or subsidiaries which employ 150 workers or more in at least two European Union member states. According to government estimates, approximately 100 multinational companies which have their headquarters in the Netherlands will be subject to the EWC Act. The Netherlands ranks fifth as a home base for multinationals covered by the Directive. In addition to the Dutch-based multinationals, it is still unknown how many non-member state companies will appoint their Dutch operations to be their headquarters in order to meet the provisions of the EWC Act, and the Directive's requirements.
In accordance with Article 13 of the Directive, section 24 of the Act exempts from its provisions companies that were party to one or more agreements already in force on 22 September 1996. These agreements must cover information disclosure and consultation of employees on transnational matters. The Dutch Act requires these agreements to be concluded with a reasonably representative delegation of employees. Due to the provisions of this section, approximately two dozen multinationals in the Netherlands are exempt from the obligations of the EWC Act because they had already concluded EWC agreements. These companies include Shell, Unilever, Philips and Akzo as well as non-European groups such as Canon, Merck Sharp & Dohme and Rothmans International Europe.
Implementation and the contributions of social partners
The EWC Act omits Section 1 of the Directive which covers objectives and definitions. Instead, one of the legislator's guiding principles when transposing the Directive into Dutch law was to ensure that the EWC Act created favourable conditions that supported the functioning of Dutch works councils currently operating in multinationals.
The Dutch legislature did not wish to place the EWC at the apex of the co-determination structure in the Netherlands. For this reason, a separate law was created to transpose the Directive instead of incorporating it into the existing national Works Councils Act. However, several connections between EWCs and Dutch works councils do remain. The first is that the works councils have the right to appoint Dutch representatives to the Special Negotiating Body (SNB). This body negotiates with the management of the company on establishing an EWC. Furthermore, despite objections from employers' organisations, the EWC Act offers the chance for trade union officials to be appointed or elected to the SNB. This influence of trade unions in co-determination at the company level is unprecedented in the Netherlands. Until now, only works councils have had co-determination rights. Members are elected by employees, and though unions have the right to propose lists of candidates, union officials do not have the right to participate in works councils proceedings. The EWC Act allows them to be appointed by the (central) works council or to be elected to represent them on the SNB. This is new.
It is expected that negotiations between management and the SNB will lead to an agreement to establish an EWC. If negotiations fail to do so within a period of three years, against the will of the SNB, central management is then obliged to establish an EWC in accordance with the subsidiary requirements of the Act. Members of this mandatory EWC must be employees of the company concerned.
The EWC has the right to be both informed and consulted by central management. These rights were the subject of much discussion between the social partners. Initially, the Minister of Social Affairs and Employment wished to extend the right to information to include activities outside the European Union that could affect companies in member states. However, pressure from both employers' organisations and the American and Japanese Chambers of Commerce to adhere more closely to the Directive led to a parliamentary amendment which limited the obligation to inform and consult the EWC to only those matters involving companies or subsidiaries within the European Union. However, in comparison with the Dutch Works Councils Act, the right to be informed has nevertheless been extended. Whilst the right of the works council of a subsidiary company to be informed about a parent company's plans, reports and investments abroad cannot be enforced legally under the Works Councils Act, the EWC Act now makes this possible.
The EWC should be informed and consulted about important organisational changes as well as the introduction of new production methods, mergers, transfers and the reduction or closure of the company or parts of the company. In exceptional circumstances, in which the Dutch EWC Act includes planned decisions that affect the interests of workers to a considerable extent, information and consultation should take place in a timely manner. In addition to the Directive, the Dutch Act requires management to inform and consult the EWC on environmental protection. The EWC Act lifts central management's obligation to inform the EWC if this would seriously impede or harm the functioning of the company. However, other clauses have been introduced that prevent unlimited use of this exemption.
Whilst the Directive defines consultation as "the exchange of views and establishment of dialogue between employees' representatives and central management or any other more appropriate level of management", the EWC Act leaves the definition to the discretion of the parties involved. Although both works councils and EWCs are covered by different Acts and the rights of the national works councils are not prejudiced by the EWC, the boundaries between the national works councils and the EWC are not completely clear. Dutch works councils are entitled to go to court to object against strategic decisions proposed by management. But what would happen if an EWC were to agree with the closure of a company in the Netherlands, whilst the company works council attempts to obtain a ruling from the Enterprise Chamber of the Amsterdam Court that management should not, in fairness, have taken the decision to close the company? Would the fact that there is an agreement with the EWC influence the court's decision? The opinions on this subject are divided. Much will depend on the extent to which EWCs respect the rights of national works councils. In other words: do EWCs compete or complete? The Renault Vilvoorde case (EU9703108F) is an example of the added value an EWC can have.
In addition to the issue of EWC rights, the social partners have voiced their opinions on other subjects as well. Trade unions demanded and indeed obtained the same protection (for example against dismissal) and facilities (training and education) for the employees' representatives on the EWC and SNB as provided in the Works Councils Act. The demand of the employers' organisations to be given a management representative on the EWC was also granted.
Commentary
Whilst the Government formally consulted the social partners at the beginning of the transposition process, in reality the partners exercised their influence more powerfully during the parliamentary debate in the Second Chamber. Both sides succeeded in securing part of the Dutch EWC Act. The EWC will strengthen the right to be informed, and this should probably improve the functioning of the Dutch works councils. For countries like the Netherlands where works councils already have a strong position, the added value of the EWC can be found mainly in the preliminary transnational meetings amongst the labour representatives from all the member states involved. (Josee Lamers and Robbert van het Kaar, HSI)