European Works Councils update: One year after the transposition deadline

Because of the prominence of the subsidiarity principle, the EWC Directive left many issues open to national interpretation. In order to reduce, to a certain extent, the level or divergence and differences of interpretation in national implementation and to assist national decision-makers charged with the transposition of the Directive, the Commission convened a "transposition working party". This expert working group provided - by the end of 1995 - guidelines on issues such as the definition of the "controlling undertaking", the validity of Article 13 agreements, and the selection and number of members of the SNB. As a result, the national measures to implement the Directive show a significant number or similarities, but at the same time also some important variations in detail.

Some of the most significant differences arise in the following areas:

• the validity and interpretation of Article 13 agreements;

• the size and composition of the SNB and the SNB negotiating process;

• the content of Article 6 agreements; and

• subsidiary requirements.

The validity of Article 13 agreements

In light of the relatively high number of pre-emptive agreements concluded prior to the implementation deadline (over 400 are on record, see below), national interpretation of their validity is crucial. The transposition working party (following the Directive) stated that such agreements should be considered to be valid if they cover the entire workforce and provide for transnational information and consultation of employees. In France, a ministerial instruction dating from November 1995 states that Article 13 agreements must meet the conditions for validity stipulated in French law - ie they must be negotiated with and signed by trade union organisations. Belgian transposition measures insist that such agreements be concluded either with national representative organisations of workers, which are represented in the company and are entitled to conclude collective agreements at member state level, or with the majority of workers' representatives on information and consultation bodies as stipulated by national legislation. If no such representation exists, it is to be concluded directly with the majority of workers or European organisations of workers which have been endorsed by the trade unions represented in the company.

In other countries, provisions are more vague. Under Irish legislation, such an agreement must have been accepted "by the majority of the workforce" and in the Netherlands, implementing legislation calls for the agreement to have been concluded with an employee representative body which the company "could deem reasonably representative of the employees in the member states involved."

It seems likely that possible legal challenges to Article 13 agreements can arise only after an employer has rejected a request by at least 100 employees or their representatives, from more than one member state, to initiate proceedings to establish a SNB on the grounds that an agreement is already in place. The legislation applying would be that of the member state in which the controlling undertaking is situated. If national courts fail to resolve this issue, it will enter into the remit of the European Court of Justice.

The composition of the SNB

The Directive states that the SNB is to have between three to 17 members and is to comprise one member from each country in which the undertaking is represented (and which is covered by the Directive). The transposition working party recommended that additional members should be allocated according to the following formula:

• one additional seat per member state with at least 25% of the undertaking's total workforce;

• two additional seats per member state with at least 50% of the undertaking's total workforce; and

• three additional seats per member state with at least 75% of the undertaking's total workforce;

This formula was taken on board in most member states, including Finland, Germany, Ireland and Spain. However, French legislation allows for up to an additional six members for countries in which 80% of the company's workforce are employed. Most national transposition measures stipulate that representatives from countries outside the scope of the Directive can attend meetings, but have no voting rights. In Germany, this is left up to individual agreements. In the Netherlands, such employee representatives are explicitly excluded from proceedings. Decisions on national legislation in this area were in many cases modelled on practice in existing EWC structures.

According to the Directive, SNB members are to be elected or appointed according to national rules and procedures laid down by each member state. In most cases, this means that they are to be representatives of existing works council structures. In Sweden, SNB members are to be nominated by trade unions. In most member states there are fall-back measures, should there be no provision for works councils at domestic level. Most national implementation measures limit the employer requirement to pay for experts to assist the SNB in negotiations to one expert. More than one expert can be funded by management under Swedish, Finnish and Norwegian legislation.

In terms of the actual negotiating process, a number of national measures restrict the time limit available following the SNB request until the first meeting with the SNB is convened to less than the six months stipulated by the Directive, and a number of countries (the Netherlands, Germany, Spain and Belgium) provide for a right for the SNB to hold a meeting prior to negotiations with management.

The content of Article 6 agreements

According to Article 6 of the Directive, EWC agreements must determine:

• the undertakings or establishments covered;

• the composition of the EWC, the number of members, the allocation of seats and the terms of office;

• the functions and the procedure for information and consultation of the EWC;

• the venue, frequency and duration of EWC meetings;

• the financial and material resources to be allocated to the EWC; and

• the duration of the agreement and the procedure for its renegotiation.

While most national provisions stick to these requirements, some insist on provision being made for adapting the arrangements to changes in company structure (the Netherlands, Germany, Denmark, Belgium). The Dutch legislation also requires agreements to determine the way in which employees and the representatives are to be consulted and the manner in which they can meet to discuss the information. In addition, Irish legislation requires a stipulation of the issues on which the EWC is to be informed and consulted. Many countries have chosen to make provisions for the possibility of separate EWCs being in existence for different parts of a group of undertakings.

Subsidiary requirements

The EWC Directive's Annex contains the subsidiary requirements to come into force should employee and management representatives fail to agree to set up an EWCs or information and consultation procedure. It covers composition, operational matters and information and consultation rights. This, arguably one of the most important provisions of the Directive and national implementation measures, has been subject to a number of additions at national level. These deal primarily with the allocation of seats, providing for more or less complicated formulae in the different member states, composition and the issues to be covered by information and consultation.

Among the most significant provisions in this area are:

• the French legislation's requirement that EWCs set up on the basis of these subsidiary requirements be joint management/employee bodies, and its stipulation of an entitlement of up to 120 hours time off per year for some representatives to carry out EWC duties. If subsidiary requirements are evoked as a result of an employer refusing to meet a request to set up a SNB, provision is also made for penal sanctions against the employer; and

• the Belgian agreement requires that meetings in exceptional circumstances should take place "at a point where information and consultation can still have a meaning". Similar provisions are made in the Dutch legislation.

Much more work is clearly required to understand and compare all national transposition measures and to assess their impact on the outcomes in terms of the quality of information and consultation at transnational level. Such detailed assessments are currently being carried out by European and national social partner organisations, European institutions and the research community, and emerging issues will become clearer as the operation of national measures progresses and the first legal challenges are made. We will continue to report on these developments.

An area where a substantial amount of research has already been done is that of the nature and operation of existing Article 13 agreements.

The experiences of voluntary EWCs

Recent estimates by the European Trade Union Institute (ETUI) suggest that approximately 1,300 companies will be covered by the Directive. Of these, it is estimated by the European Trade Union Confederation (ETUC) that about 430 negotiated pre-emptive European information and consultation arrangements. A review of 173 Article 13 agreements (in European Works Councils Bulletin, Issue 5, September/October 1996) found that two-thirds of the companies involved were headquartered in four countries: Germany, France, the UK and the USA, with Germany being the single largest contributor (these are also the countries with the largest number of companies falling under the scope of the Directive). The vast majority of these pre-emptive agreements were concluded in the two sectors which traditionally have strong employee representation, act as trendsetters in collective bargaining at national level, have a high number of multinationals and have benefited from the strong engagement of European-level sectoral trade union organisations: metalworking and chemicals.

In an analysis of 111 pre-emptive agreements, published in September 1996, the European Foundation for the Improvement of Living and Working Conditions (the Foundation) found that the majority of agreements fall into a relatively small number of categories in relation to the nature and scope of the agreement, the role and competence of existing EWCs, as well as their composition and organisational structure.

The study found that the majority of pre-emptive agreements (55%) were signed by trade union organisations. A further 26% were signed by one or several works councils. On the trade union side, international organisations were shown to have had a strong influence.

In terms of their geographical coverage, one-third of agreements covered countries outside the EU and the EEA. Only one agreement (Dutch-based finance house ING) explicitly excluded its UK operations from the scope of the agreement. In their composition, two basic models predominate - roughly equivalent to the German and the French model of employee representation. In the German model, the EWC is made up of employee representatives only and meets bilaterally with management, while the French model operates through a joint committee of management and employee representatives which is normally chaired by the managing director. The Foundation study found that the majority of agreements followed the French model, including a significant number of agreements concluded in German multinationals.

Virtually all such bodies were restricted to information and consultation on the following issues:

• the economic and financial situation of the company;

• employment and social issues;

• business, production and sales;

• investment, structure and organisation;

• restructuring;

• health and safety;

• environment; and

• training issues.

Only one of the Article 13 agreements explicitly included a negotiating function (Danone).

In relation to the size of the 111 EWCs studied, the Foundation found that the average number of members of these bodies was around 25, with the smallest having seven, and the largest with 70 members. The allocation of seats usually took place according to workforce size in each member state. Around 42% of agreements stipulated that selection should take place according to national legislation, while 34% of the remaining arrangements made detailed provisions for the selection of representatives. The participation of experts was provided for in most of these agreements.

Almost all EWCs held annual meetings, with provision made for extraordinary meetings to be called in exceptional circumstances. Most agreements included a confidentiality clause, binding members of the EWC not to disclose any information identified by the management as potentially damaging to the undertaking if disclosed.

After the passing of the deadline for Article 13 agreements in September 1996, progress in the formation of new employee information and consultation agreements under Articles 5 and 6 was initially sluggish. A number of agreement have now been concluded under national provisions, but it is too early to carry out a detailed analysis of their nature and operation.

Conclusion

Some commentators have argued that the Directive provides for the beginnings of European-level collective bargaining. This would appear to make sense in the context of the increasing Europeanisation and globalisation of company operations, and is strongly supported by transnational trade union organisations. However, the persistence of national systems of collective bargaining, which remain jealously guarded by many national trade union organisations, would seen to militate against this argument. The Directive itself makes no provision for negotiations within EWCs and employers argue that in light of the increasing devolution of management tasks, even European level information and consultation makes less sense.

However, the transposition of the EWC Directive and the setting up of these employee representation bodies in approximately 1,300 groups and undertakings, involving around 30,000 workforce representatives, will inevitably lead to an increasing exchange of information on issues such as pay and conditions among different national and transnational trade unions. This could be perceived as a first step towards the development of a common employee strategy in multinationals.

The next few months will show whether progress is likely on the Commission initiatives in relation to information and consultation of employees at the national level and the European Company Statute, and to what extent this will contribute to a Europeanisation of collective bargaining.

Further research will be required to assess to what extent the differences in national implementing legislation has an impact on the nature and quality of interactions within new EWC arrangements. (Tina Weber, ECOTEC Research and Consulting)

Sources

European Works Councils Bulletin, Industrial Relations Services/Industrial Relations Research Unit, University of Warwick, Issues 1-10, (1995-7).

"European Works Councils in focus", Mark Carley, Sabine Geissler and Hubert Krieger, European Foundation for the Improvement of Living and Working Conditions, Dublin (1996)