Determining terms of employment: works council or union?
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A current bill amending the 1971 Works Councils Act has focused attention on the increasingly important role played by Dutch works councils in the negotiation of terms of employment. However, although the function of the trade unions is being somewhat eroded, even in the area of determining primary terms of employment, the traditional division of roles between unions and works councils has remained fundamentally intact.
There has long been a traditional division of tasks in the Netherlands between trade unions and works council s in setting terms of employment. This division was intentional on the part of the legislators, but is also partly based on unwritten law. Primary terms of employment - especially wages, working time and paid holidays - are reserved for the unions. However, their monopoly in this area is being eroded and the role of works councils is growing. Opinions are divided regarding this development.
The most important arguments in favour of the primacy of the unions over works councils regarding the negotiation of primary terms of employment are:
- the negotiating experience and expertise of the unions;
- the unions' overview of the various sectors as a whole;
- the unions' independence with respect to employers; and
- last but not least, the means of exercising power at the disposal of the unions (such as their disposal of strike funds and their "strength in numbers").
An additional argument is the dual role of the works council. According to Article 2 of the 1971 Works Council Act, the task of a works council is to look after the welfare of a company's personnel and to promote the interests of the company as a whole. These two functions are sometimes at odds with each other.
Works councils have been accorded rights over secondary terms of employment - these include areas like top-up benefits and supplementary pension schemes. In so doing, the legislators have tried to some extent to separate out the respective spheres of competence of unions and works councils. This is apparent from Article 27 of the 1971 Works Councils Act: works councils have "rights of consent" - that is, the employer is required to secure their agreement - over any decision introducing, amending or withdrawing the rules on labour-related matters specified in that Article. However, these rights do not apply if the area concerned is regulated by a collective labour agreement (paragraph 3, Article 27).
Works councils and collective agreements
A sort of priority rule applies to the relationship between works councils and trade unions: the unions come first, but if there is no union, the works council comes onto the scene. However, works council involvement in the negotiation of terms of employment is no longer limited to rights of consent. It is also increasingly being expressed in collective labour agreements and works agreements. In collective agreement s, it is the unions themselves that, together with employers, confer powers on a works council. A large number of collective labour agreements contain provisions regarding the further interpretation of terms of employment by employers who must thereby involve their works councils.
However, it is agreements between employers and works councils which have attracted the most attention and provided cause for debate. Terms of employment can also in practice be regulated in such works agreement s (also referred to as covenants), which may be classified under two headings. The first group consists of agreements governing the involvement of works councils in the negotiation of terms of employment but do not themselves contain any terms of employment. By contrast, the second group consists of agreements that, in addition to procedural rules, do actually regulate terms of employment.
The new bill and case law
A bill to amend the Works Councils Act is currently under discussion in Parliament. In the explanatory memorandum attached to the bill and in all the discussion surrounding it, a great deal of attention has been paid to the growing involvement of works councils in the negotiation of terms of employment. In the bill itself, the possibility of concluding works agreements has been explicitly included. In this way, it links up with both practice and case law. The memorandum contains the expectation that the role of works councils in the negotiation of terms of employment will continue to gain in significance, subject to acknowledgement of the primacy of the trade unions.
The increasingly important role of works councils in the area of terms of employment is also reflected in case law. In the relatively few disputes in this area, the courts have traditionally adopted the standpoint that works councils do not have any powers with respect to primary terms of employment. However, in a controversial decision in 1992, the court adopted another standpoint (President of the Court of The Hague, 19 May 1992, ROR 1992, no. 19; interim injunction proceedings Grabowsky and Poort). In the case in question, the unions had tried to conclude a company-level collective agreement in a sector which, as a rule, has no collective agreements. When the company concerned subsequently concluded a terms of employment agreement with its works council, the unions appealed to the courts. They wanted the judge to oblige the employers, Grabowsky and Poort, and the works council to desist from all actions that would lead to works councils receiving powers in the area of primary terms of employment. The judge rejected the unions' request: although it is not customary for a works council to possess powers in the area of primary terms of employment, nowhere is it stated that this is prohibited.
In some sectors, such as information technology, it is now not unusual for an employer to negotiate with a works council instead of the unions with regard to primary terms of employment. And it is in that sector in particular that a remarkable development is taking place: works councils have started to establish a platform for collaboration and have thereby also sought the involvement of union representatives, partly in order to take advantage of the experience and expertise of the unions.
Works councils and the unilateral amendment clause
The role of works councils in the negotiation of terms of employment is also being discussed in the context of the so-called "unilateral amendment clause". By means of such clauses included in individual labour agreements, employees are not merely bound to the terms of employment prevailing when they are taken into a company's employment, but are also automatically bound to all their future amendments. There is a great deal of criticism of such clauses due to the unequal power relationship between employer and employee that arises as a result. The law has therefore been amended on this point from 1 April 1997. In the new statutory provision 613 of Book 7 of the Dutch Civil Code, it is now stipulated that an employer can refer to such a unilateral amendment clause only if its interests are so important that the interests of the employee concerned must yield, even if they are damaged by the amendment ("important interests" are defined under works councils legislation and in case law).
Until recently, the bill had reserved a role for works councils here too: based on draft Article 613, paragraph 2, it was assumed that the interests of the employer would indeed be so important in this sense if the amendment resulted from a collective agreement or from a regulation adopted with the consent of the works council. The goal of the provision was twofold: on the one hand, it aimed to reduce the number of unilateral amendments of terms of employment by employers and, on the other, to take account of the importance of adopting or amending collective labour agreements. However, the proposed paragraph 2 was recently scrapped because the general law of obligations was supposed to offer sufficient protection. Proponents of the greater involvement of works councils in the negotiation of terms of employment have already reacted critically to the scrapping.
There can be no doubt that a shift is occurring with respect to the involvement of works councils in negotiations concerning terms of employment. The decentralisation of such negotiations is leading to an increase in the importance of the role of works councils. However, insofar as primary terms of employment are concerned, the change currently taking place in the structure of industrial relations is far from radical; nor should such a fundamental change be expected in the foreseeable future. The trade unions would find such a radical change unacceptable; the Cabinet and a broad parliamentary majority would not be enthusiastic either, as is clear from the memorandum and reactions to the bill amending the 1971 Works Councils Act. Even employers appear, albeit not unanimously, to prefer to negotiate with experienced and expert union negotiators instead of works councils. An important reason for this attitude is that agreements reached between employers and works councils do not automatically carry over into individual terms of employment. In that they differ from terms of employment that are agreed in collective agreements. In Germany, on the other hand, works councils can reach agreements that carry over into individual labour agreements.
Recently, there has been support for a similar arrangement in the Netherlands, but the Cabinet has clearly indicated that this would require too drastic a change of the Dutch system regulating terms of employment.
In its official reaction to the bill, the Federation of Dutch Trade Unions (FNV) repeated its appeal to extend the rights of consent of works councils to include all agreements regarding terms of employment, subject to the maintenance of the primacy of the collective agreement. Employer representatives are turning against such an extension and are considering a greater role for works councils by means of covenants. This is apparent from the divided Social-Economic Council (SER) recommendation regarding standing employment conditions and the rights of consent of works councils, dating from 1994. The agreements reached would then have to carry over into individual labour agreements. ( Robbert van het Kaar, HSI)
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