European Works Councils: the experience so far

Some three-and-a-half years after the adoption of the EU European Works Council (EWC) Directive, this feature summarises and assesses some of the main developments and experiences associated with EWCs in the Member States. It draws on the findings of recent research commissioned by the European Foundation for the Improvement of Living and Working Conditions, as well as on discussions at a March 1998 European Trade Union Confederation workshop, where representatives from various trade union organisations discussed the operation of "Article 13" agreements and EWCs across a range of sectors.

The EU Council Directive on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (94/45/EC) was adopted on 22 September 1994 and came into force two years later. For an outline of the Directive's history and content, as well as progress in national implementation legislation in the Member States, see EU9708142F. Here we examine the findings of a new report which looks at the nature and experiences of "Article 13" EWC agreements. The Directive stipulates in Article 13 that multinational companies and groups with pre-emptive agreements concluded prior to the implementation deadline of 22 September 1996, are effectively exempt from the provisions of the Directive, as long as the agreement covers the entire workforce and provides for transnational information and consultation. In their transposition measures, some Member States have ensured that Article 13 agreements are bound by further commitments under national law - for example, under a French ministerial instruction, agreements must be negotiated and signed by a trade union. Article 13 agreements are voluntary, while post-September 1996 agreements governed by the procedures of the Directive's Articles 5 and 6 must be negotiated by a special negotiating body (SNB) and must cover certain issues.

The study commissioned by the European Foundation for the Improvement of Living and Working Conditions ("Negotiating European Works Councils: an analysis of agreements under Article 13", Paul Marginson, Mark Gilman, Otto Jacobi and Hubert Krieger, Interim Report, European Foundation for the Improvement of Living and Working Conditions, March 1998) is based on a database of Article 13 agreements (though it should be noted that no attempt has been made to assess whether the agreements on the database meet the requirements of Article 13). The actual practice of EWCs may, of course, differ from what is specified in the text of agreement and was not analysed as part of the Foundation study. However, after summarising the Foundation research, this feature will analyse some experience of the operational aspects of EWCs, based on the evidence presented at a seminar organised by the European Trade Union Confederation (ETUC) on 19-20 March 1998. Finally, the feature will consider what is required to enable EWCs to play a greater role as a mechanism or framework that facilitates transnational information and consultation for employees in different Member States.

The findings of the European Foundation research

The Foundation research covered 386 Article 13 agreements negotiated in multinational companies (MNC's) based in 25 countries, out of a total of 400 or so such agreements thought to have been concluded. Therefore, approximately one in three of the MNCs covered by the Directive adopted a "pragmatic" approach and responded voluntarily to it.

Geographical and sectoral coverage

In respect of geographical coverage, the research found that companies headquartered in Germany, France, the UK and the USA between them account for almost two-thirds of the agreements. Around 20% of agreements involve non-European MNCs. Despite the UK's "opt-out" at the time from the Directive, the country registered a higher "strike rate" than many other Member States, including France and Germany, as around half of the UK companies meeting the terms of the Directive concluded agreements. The high number of agreements concluded in UK companies is explained firstly by a concern to avoid negotiating agreements through the SNB procedure, and secondly by the preference for voluntary arrangements due to the absence of any tradition of works councils in the UK. Overall, Belgium was found to have the highest strike rate, at over three-quarters of companies covered by the Directive.

In terms of coverage by sector, manufacturing predominates with 80% of agreements being concluded in this broad sector. Of this 80%, more than a third are in metalworking (35%), followed by chemicals (17%) and food, drink and tobacco (12%). Only 13% of agreements are in the service sector, where the largest number of agreements are in finance and other services. There also exist differences between sectors in terms of the "strike rate" - for example, although the metalworking sector has the largest number of agreements, its strike rate is only just over the average at 38%, whereas in the chemicals sector the strike rate is higher than average at 45%. Overall, it was found that the strike rate in manufacturing is almost double that in the service sector. This, it is argued, reflects the varying levels of trade union membership and organisation across these broad sectors of the economy.

The relationship between national systems of industrial relations and the occurrence of EWC agreements is explored by grouping the countries into seven different types of systems, as follows.

Base: all agreements = 386.

The existence of established structures for employee information and consultation within enterprises at national level, either through law or by basic agreement, appears to be influential in determining the attainment of a higher percentage of agreements reached. The Franco-Belgian, Germanic-Dutch, Nordic and southern European countries are characterised by the presence of established works councils structures; an experience which the Anglo-Irish, North American and Asian groups do not have. Another difference exists in the fact that in the Germanic-Dutch, Nordic and southern European models, such representative structures are made up only of employee representatives. The first four country groupings listed in the above table are distinguished from the other groupings - firstly by the existence of established systems and secondly by a higher incidence of agreements, with a total of 65% compared with only 35% in the other three groupings combined.

However, although the Anglo-Irish grouping has no established structures for consultation and information, agreements have been significantly prevalent. As mentioned above, this has been explained by the preference of companies in these countries to develop agreements in a voluntary as opposed to a legislative context, by forming agreements under Article 13.

The question of the influence of existing national structures of employee representation over EWC arrangements is further confused by the fact that a substantial number of agreements concluded in countries characterised by employee-only representative structures, have opted for joint bodies. In the report, Marginson et al argue that there are two ways of interpreting these decisions: one is to infer that national models which provide for strong employee-side representation are being eroded; and another is that employee representatives at national level are seeking to protect the rights they have already established in respect of MNCs headquartered in their country, through the establishment of a European-level forum with relatively less robust rights to consultation. Within the framework of the research, this question remained unresolved.

Nature of the agreement

The provisions of the Directive do not directly specify a role for trade unions in negotiations to establish EWCs but, as the report points out, Article 13 provided procedural scope for negotiations to be conducted between management and employee representatives either in the form of trade unions or through existing works councils. Trade unions are a signatory to 45% of agreements and European and international trade union organisations were a signatory in one in three cases. National trade unions were signatories in one in three cases (this includes 19% that were also signed by international trade union organisations). National works councils or a pre-existing employee-side European level works council were signatories to 34% of all agreements (this includes 19% of cases where both trade unions and works councils were signatories). Therefore, it was found that established forms of employee representation are signatories of two-thirds of agreements. However, a quarter of agreements were signed with unspecified employee representatives only - a matter of some concern to trade unions.

Agreements in the Germanic-Dutch group of countries were much more likely to be concluded with national works councils (49%), while agreements in Franco-Belgian countries were much more likely to be concluded by trade unions only (62%) or jointly (25%). Agreements in non-European multinationals were found to be twice as likely to have been concluded with unspecified employee representatives only than those in European-based multinationals.

Sectorally, it was found that International trade union organisations were more commonly signatories to agreements in the food/drink, textiles/clothing, construction and banking/finance sectors, than in chemicals or metalworking. They are also more likely to be signatories to agreements in large multinationals than in medium-sized or small multinationals. Conversely, unspecified employee representatives are markedly more likely to be signatories to agreements in small and medium-sized multinationals.

The form and scope of EWCs

As mentioned above, it was found that two-thirds of all the EWC agreements follow the "French" model and establish a joint committee (as opposed to the "German" model of an employee-side only body), even in some cases in agreements in companies headquartered in countries which are not characterised by joint structures. It was found that more than two-thirds of the agreements include subsidiaries from countries outside the 17 EEA countries covered by the Directive. Interestingly, 63% of agreements include operations in the UK, even though at the time the UK maintained an opt out position. Clearly, says the report, the opt-out of the UK from coverage of the Directive did not prevent the inclusion of UK subsidiaries within the scope of Article 13 EWCs. (With the opt-in of the UK now due to be in force by 5 December 1999 (EU9712175N), the coverage of UK-based MNCs will grow.)

The role and competence of EWCs

With regard to the purpose of the EWC, it was found that with one exception, every agreement explicitly stated that the function of the EWC is the provision of information and consultation. Consultation was most commonly defined in terms of "dialogue" or an "exchange of views". A more "proactive" role is provided for in 6% of agreements, which were most likely to be found in Franco-Belgian companies. Clearly, the scope of involvement accorded to EWCs remains within the boundaries specified by the Directive in respect of being limited to information and consultation, with only 2% of agreements allowing for negotiations on certain issues (and 4% for the EWC to make recommendations and proposals of its own).

The majority of agreements identify core economic, financial and employment-related issues as areas on which information and consultation is to take place in the EWC. However, the report's authors highlight the fact that, although the subsidiary requirements of the Directive (which apply where no EWC agreement is reached) include mergers, transfers of production, cutbacks, closures and collective redundancies as issues for information and consultation, only around half of agreements refer to these issues. It is interesting to note that a list of specifically excluded issues - such as remuneration - is most common amongst agreements in Anglo-Irish and non European-based MNCs.

The operation of the EWC

The size and composition of the employee side of the EWCs established under Article 13 are found to be highly variable between agreements. However, some areas of similarity and difference are identified. For example, 90% of EWC's have 30 or fewer members. In the majority of agreements, seats are allocated either on a flat-rate basis to each country or operation covered, or on the basis of the size of the workforce in each country or operation covered. Around 44% of agreements specify that operations in particular countries will be represented on the EWC only if employment exceeds a certain threshold. In one-third of agreements, it was found that external persons can attend meetings as full members or by right - in 90% of cases, these are officials of national or international trade unions.

Approximately 62% of agreements establish a select committee (as provided for in the Directive's subsidiary requirements). Employee-side-only select committees were found to outnumber committees which are joint structures amongst EWCs in the majority of country groups. Select committees' responsibilities are centred around preparing and organising meetings, liaison and coordination and agenda setting. It was found that in only 11% of cases do select committees have the right to receive information and consultation on an ongoing basis - a fact that limits continuous dialogue.

The other main findings of the research in areas related to the EWC's operation include the following:

• language services - translation and interpreting - are provided in over three-quarters of EWCs, but in a quarter of cases this is restricted to the main languages;
• paid time off to attend EWC meetings and travel and accommodation costs are universally provided; and
• only a third of agreements specify that the costs of any training for employee members will be met by the employer.

The practical experience of EWCs

On 19-20 March 1998, the ETUC held a workshop which aimed to disseminate the findings of various research projects on EWCs and to exchange experience of the actual operation of these bodies between trade union organisations and the research community. A number of representatives from union organisations covering a number of sectors of the European economy - for example, metalworking, chemicals, textiles, clothing/leather and financial services - presented the practical implications of operation of Article 13 agreements in their sectors.

All of the sectoral trade union representatives indicated that they had engaged positively with the Directive, and that many agreements had been reached in their respective sectors. For example, in the chemicals sector 150 agreements had been reached, while in the metalworking sector, approximately 25% of relevant MNCs were covered by Article 13 agreements. In the textiles sector, 30% of companies involved were covered by Article 13 agreements, while the figure was as high as 60% in the banking sector and 90% in the insurance sector.

However, although all the unions reported many examples of agreements negotiated in multinationals, a number of common obstacles facing EWCs were presented. These related, firstly, to the differences in national industrial relations systems, and secondly to the deficiencies seen as being inherent to the Directive, which are perceived as reducing the EWC's effectiveness as a mechanism to facilitate transnational information and consultation. Common problems highlighted were the following:

• a lack of local representation in some sectors, which makes it difficult to select employee representatives;
• a lack of national coordination between the various mechanisms of employee representation, which prevents coordination at company level;
• a lack of specific definitions of information or consultation in agreements, which creates a lack of clarity on what is actually provided to employee representatives;
• a lack of recognition of the important role played by trade union representatives, who have valuable experience to bring to the process and can provide expert support;
• the existence of provisions which specify that members of EWCs should acquire a sufficient command of the English language;
• insufficient resources available for interpreting services or for language and cultural-awareness training beyond the dominant languages;
• limitations on the funding and provision for preparatory meetings - currently 20% of agreements lack provisions in this area;
• the lack of a right for select committees to call for extraordinary meetings or to be informed of extraordinary circumstances;
• a lack of a right for select committees to be informed and consulted on an ongoing basis;
• a prevalence of management controlling the agenda and giving inadequate time for employee representatives to suggest additional points or to have a general input. Quality information is required in advance so that effective discussion occurs; and
• limits on the competencies of the EWC, which need to be broadened and strengthened to allow greater information and consultation on important issues such as restructuring, collective redundancies and mergers.

It was also debated whether the workforce-size thresholds for the Directive's application should be reduced, but it was maintained that this was not an urgent priority and the quality of agreements was an overriding goal over the quantity of agreements. Lastly, it was suggested that in the future mediation or conciliation procedures should be put in place.

Commentary

While the scope, nature, composition and competence of existing Article 13 agreements has been analysed in some detail and provides many interesting findings, much less is known about the actual operation of EWCs. This is partly due to the fact that many of these bodies were only recently set up and have only held two or three meetings. While many trade union organisations welcomed the Directive and have been much engaged with the development and negotiation of such bodies, there is also a significant level of frustration in light of the perceived shortcomings of the Directive and the current operation of these bodies. According to many of the sectoral union organisations represented at the recent ETUC seminar, in most cases management continues to dominate the agenda and it is seen as significant that in the instance of major restructuring, only a minority of these bodies are, it is stated, currently being consulted. It is also claimed that much of the information currently being provided is of little relevance, or is provided too late to enable the employee side to establish a coordinated response. However, a number of the participants at the ETUC workshop spoke of the improvement of formal and informal information flows between employee representatives in different countries as a result of the setting up of an EWC. A call was made at the seminar for further qualitative research on the practical operation of the EWC agreements.

One of the key questions of existing "quantitative" research revolves around the issue of whether the establishment of EWCs will lead to continuity or greater divergence in information and consultation structures. The findings which indicate that a significant number of agreements have opted for joint employer-employee bodies, even where the national tradition is to have employee-side-only bodies, is interesting in this area. The question of whether this leads to the undermining of strong information and consultation arrangements remains unresolved. It has, however, been argued that the distinction between the two arrangements is of less significance than was initially assumed, because all bodies eventually meet with management, and even joint bodies usually provide for separate preparatory meetings. An answer to such questions must surely lie in the further study of EWCs in operation.

It is clear that the Directive has had a substantial impact in stimulating European-level negotiations between group management and employee representatives: before the Directive was adopted, only around 40 EWC-type arrangements existed, indicating that in two years some 400 EWC agreements were concluded. Additionally, the Foundation research indicates that agreements signed after the Directive was adopted displayed a noticeable improvement in the nature and scope of provisions. It was argued at the ETUC seminar by Otto Jacobi - one of the authors of the Foundation study - that EWCs create the basis for a pan-European culture of social participation and will thus contribute to social convergence. Trade unions believe that in the long run EWCs will be in a position that goes beyond the right to information and consultation. (Peter Foster and Tina Weber, ECOTEC Research and Consulting Ltd)