Co-determination is a structure of decision-making within the enterprise whereby employees and their representatives exert influence on decisions, often at a senior level and at a relatively early stage of formulation. Co-determination may operate in parallel to, and complement, other industrial relations mechanisms of employee representation and influence. It does not substitute for other mechanisms of employee influence on management decision-making, such as collective bargaining.
Co-determination is rooted in the industrial relations traditions of a number of EU Member States. For example, in Germany there are two distinct levels of co-determination: at establishment level via the works council, and at enterprise level, on the supervisory board of companies. In Austria, works councils have the right to negotiate a ‘social plan’ in the event of decisions involving restructuring, which may lead to job losses. In Denmark, employees have the right to elect a third of members of the company board, and through this mechanism they exercise a powerful voice in votes on matters that can have a major impact on the workforce.
Elements of co-determination feature in a number of EU directives. These directives require employees and their representatives to be informed in advance of decisions that will affect their interests, and impose procedures for their consultation, and other forms of participation in the decision-making process. The most general illustration of this approach at establishment or undertaking level is Council Directive No. 2002/14 establishing a framework for informing employees and consulting with them in the European Community. Although not allowing for employees or their representatives to determine the decision, the Directive imposes a requirement on management to consult ‘with a view to reaching an agreement on decisions within the scope of the employer’s powers’. At company level, Council Directive 2001/86/EC supplementing the European company Statute prescribes employee involvement in European companies (Societas Europea) in the form of information and consultation of employees and, in some cases, board-level participation.