European Works Councils - law and practice

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This article examines the implementation into Cypriot law of the EU Directive on European Works Councils (EWCs), and the country's experience of EWCs, as of autumn 2004.

Implementing legislation and debate

EU Directive 94/45/EC on the establishment of a European Works Council (EWC) or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (plus Directive 97/74/EC, which extended the 1994 EWCs Directive to the UK) was implemented in Cyprus by Law 68(I)/2002 on the 'establishment of a European Works Council for the purpose of safeguarding employees’ rights for information and consultation in Community-scale undertakings and groups of undertakings', as amended by Law 143(I)2003. Before the legislation was approved and passed, a dialogue took place between the government, employers' organisations and trade unions, in the framework of tripartite deliberations in the Workers’ Consultative Body. The implementation process was completed by Regulatory Administrative Act No. 336/2004 of the Council of Ministers, which set 1 May 2004 as the date when the transposition legislation came into force.

Key provisions of the legislation

Law 68(I)/2002, which was amended by Law 143(I)/2003 and came into effect on 1 May 2004, harmonises Cypriot law with Directives 94/45/EC and 97/74/EC. The legislation (as in all Member States) largely repeats the content of the Directive(s), while also 'customising' a number of provisions to fit the Cypriot industrial relations system, as provided for by the Directive. The main such provisions are set out below.

In calculating the number of workers employed by an undertaking (ie to determine whether it meets the workforce-size thresholds set by the Directive), according to Article 6(2) of Law 68(I)/2002: 'expired fixed-term or part-time employment contracts shall be converted into full-time annual employment according to what constitutes full-time employment in the undertaking or sector of economic activity'.

According to Article 8 (3)(a) Law 68(I)/2002, representatives of Cypriot workers on the special negotiating body (SNB), and their substitutes, shall be 'elected in accordance with the following priority':

• from the 'existing employees’ unions';

• where no unions exist, directly from the employees by direct election.

The same rules apply (Article 13) to the election of Cypriot members of 'statutory' EWCs - ie those based on the Directive's subsidiary requirements, essentially where no agreement can be reached by management and SNB.

In SNBs in multinationals based in Cyprus, the SNB seats are to be allocated among countries - in addition to the basic allocation of one representative from each Member State where the multinational has an establishment or undertaking - in line with the following criteria (Article 9):

• one additional representative for each Member State in which at least 25% of all the employees of the multinational (within the countries covered by the Directive) are employed.

• two additional representatives for each Member State in which at least 50% of all the employees of the multinational are employed; and

• three additional representatives for any Member State in which at least 75% of the employees of the multinational are employed.

The maximum number of members of the SNB is set at 18, but if the multinational has establishments in all Member States, then there can be more than 18 members. Upon agreement between central management and the EWC, representatives from third countries (ie countries not covered by the Directive) can participate, as observers only.

In order for the SNB to be able to carry out its mission in the most appropriate manner, the central management shall bear any expenses relating to the negotiations, as provided for in the Directive. Specifically the following expenses are covered:

• those relating to the election or appointment of the members of the SNB;

• those relating to the organisation of SNB meetings , including expenses for interpretation, accommodation, travelling, 'members’ allowances, printing and notification of results';

• those relating to 'one expert from the special negotiating body who will help the body to carry out its tasks'.

The only amendment made to Law 68(I)/2002 by Law 143(I)/2003 was the cancellation of Article 22, which implemented Article 13 of the Directive, stating that the provisions of the law did not apply to multinationals in which, on the date that the law came into force, there were already agreements covering the entire workforce and providing for the transnational information and consultation of employees. It should be noted that both the employers' organisations and the trade unions are of the opinion that the amendment was made on the initiative of the Ministry of Labour and Social Insurance, without prior consultation with the social partners

If the EWCs legislation is violated, provision is made, depending on circumstances, for sentences of imprisonment of up to two years or a fine of up to CYP 20,000, or both.

Companies covered

There is no official estimate of the number of undertakings falling under the provisions of the Cypriot EWCs legislation - either multinationals covered by the Directive and based in Cyprus, or multinationals covered by the Directive based elsewhere and with operations in Cyprus. According to an estimate by the Employers and Industrialists Federation (OEB), the number of Cyprus-based undertakings that could set up EWCs is between 10 and 20, of which at least five are active in the banking sector.

Experience to date

Since the relevant legislation was only put into effect on 1 May 2004, it is not possible to evaluate the extent of its implementation or the extent to which undertakings have responded to the creation of EWCs. Although Article 6 (3) of Law 68(I)/2002 specifies that undertakings located in the Republic of Cyprus must notify the competent department of the Ministry of Labour and Social Insurance and the representatives of the employees in writing about the number of people they employ within three months of law comng into effect, according to the Ministry the relevant procedure has not been completed because the undertakings have not met this obligation. No Cyprus-based multinational is yet known to have set up an EWC.

Commentary

The introduction of Law 68(I)/2002 in compliance with Directive 94/45/EC/ meets Cyprus’s obligations as an EU Member State and covers a significant part of the issues relating to the establishment and operation of EWCs, by creating the legislative framework for their regulation. As far as the extent of implementation of the legislation is concerned, although the experience to date has been relatively brief, it has generated questions on the extent to which undertakings have responded - not merely in going forward to set up EWCs but also in meeting their obligations on the basis of the provisions of the legislation. According to estimates, mainly by employers' organisations, activity in the banking sector is anticipated, and it will be interesting to see to what extent the legislation will be used to implement the institution of EWCs in practice and increase their importance. (Eva Soumeli, INEK/PEO)