European works councils

Definition

European works councils (EWCs) are standing bodies that facilitate the information and consultation of employees in European companies and European groups of companies, as required by the 1994 European Works Council Directive (Directive 94/45/EC, updated by Directive 2009/38/EC (Recast)).

Current status and regulatory aspects

EWCs are highly significant in terms of European industrial relations, as they represent the first genuinely European institution of interest representation at company level. They reflect the growing recognition of the need to respond to the ‘Europeanisation’ of business emerging as a result of the Single European Market by supplementing existing national channels of information and consultation, a goal expressed in the 1989 Community Charter of Fundamental Social Rights of Workers and its accompanying Social Action Programme.

The thresholds required for a company to be covered by the European Works Council Directive are, for a community-scale undertaking, ‘at least 1,000 employees within the Member States and at least 150 employees in each of at least two Member States’ (Article 2(1)(a)).

The directive aims to promote voluntary agreements on the constitution and operation of EWCs. This functions in two ways.

  1. First, the original 1994 directive allowed multinational companies and groups covered by the directive to reach voluntary agreements with employee representatives on the establishment of EWCs before the directive came into force on 22 September 1996. These so-called ‘Article 13 agreements’ were exempt from the provisions specified in the directive for the lifespan of the agreement, as long as they covered the entire workforce of the group within the scope of the directive.
  2. Second, since 22 September 1996, negotiations to establish EWCs have been governed by the procedures under Article 5 of the directive, which require the formation of a special negotiating body (SNB). It is up to the undertaking’s central management and the SNB to agree on the precise form and function of their EWC. This includes several items mentioned in Article 6, for instance: the coverage, composition, numbers and seat allocation; the functions and procedure; financial and material resources; or issues for information and consultation. If the parties fail to agree, or if they choose to do so, the fall-back position of the provisions is triggered, as detailed in the annex to the directive.

Background information

After the original directive came into effect in 1996, around 70 new EWCs were set up each year from 1997 to 2001. This rate then declined to around 37 a year for most of the 2000s. After the recast directive was adopted in May 2009, the rate of conclusion of new EWC agreements declined to even lower levels: 22 per year on average from 2010 to 2018, with a sharp decrease in 2017 (13 creations) and 2018 (6 creations), according to the European Works Councils database, managed by the European Trade Union Institute (ETUI).

The latest data from the ETUI database (January 2019) show that a total of 992 EWCs are active and about 400 have been disbanded over time as a result of factors such as mergers, bankruptcy or dissolution. In 2016, ETUI estimated the number of multinational companies with an EWC to be 913 covering over 17 million employees – lower in fact than the number of EWCs, as some companies have several EWCs (per division or per subsidiary, for example).

Historical development

Consultation

In April 2004, the Commission began consultations with the EU-level social partner bodies regarding measures to enhance the effectiveness of EWCs, including a possible revision of the European Works Council Directive. At the time, the social partners were divided on this matter: the European Trade Union Confederation (ETUC) was pressing the Commission for numerous revisions, while BusinessEurope contested the case for overhauling the directive. In April 2005, the EU-level employer and trade union bodies published a joint text which assessed the operation of EWCs and highlighted what could be improved in future.[1]

In July 2005, ETUC and BusinessEurope responded formally to the Commission’s April 2005 Communication on restructuring and employment. The Communication outlined measures aimed at improving the EU’s capacity for anticipating and managing restructuring, and was intended to initiate the second phase of consultation on the revision of the European Works Council Directive. However, in general, the social partners were critical of the Communication.

A Commission document to formally launch the second-phase consultation was released in February 2008. During this phase, the employer side agreed to negotiate a revision. The ETUC, however, did not on the grounds that negotiations might not be finished early enough for the revision process to be completed before the next European elections.

Recast directive

On 2 July 2008, the Commission published the proposal for a recast directive, in which it set out ways to enhance the effectiveness of EWCs:

  • a better definition of ‘information’ and ‘consultation’
  • the resolution of legal uncertainties and problems, for example in cases of restructuring
  • harmonising the European Working Council Directive with more recent directives on employee representation

In August 2008, the European social partners indicated that they would accept the Commission’s proposal as a basis for a recast of the 1994 European Working Council Directive and proposed a number of changes. As there was mutual agreement among the social partners, the political institutions reached an informal agreement on the recast directive in a meeting on 4 December 2008.

The new, recast directive strengthens the role and rights of EWCs in a number of areas. Notably, it:

  • reinforces and more clearly defines the information and consultation rights of EWCs
  • links and more clearly differentiates the information and consultation of EWCs and of national bodies, providing a new definition of ‘transnational matters’ covered by EWCs
  • gives a more powerful role to trade unions
  • entitles EWC members to training without loss of pay
  • contains rules on adapting EWCs to structural change in the multinational context

According to the report on the implementation by Member States of Directive 2009/38/EC, published by the Commission in May 2018, ‘the Recast Directive provided some impetus for setting up EWCs and renegotiating existing EWCs’ agreements while it did not stop the declining trend of creation of EWCs’. [2]Furthermore, the report highlights that ‘there is room for improvement to encourage creation of such bodies, as it is estimated that half of the companies eligible to do so have not yet set up an EWC’.

Moreover, while the Commission’s report identified some challenges that require action at EU level, it did not foresee a need to revise the current directive. The Commission therefore proposes:

  • to create and share a practical handbook for EWCs’ practitioners
  • to provide funding to social partners to support the implementation and effectiveness of EWCs
  • to ensure the full transposition of key provisions of the recast directive in Member States

Related dictionary terms

Collective redundancy community-scale undertakings consultation in the enterprise European company information and consultation International Framework Agreement pacts for employment and competitiveness special negotiating body transnational industrial action .


References

  1. ^ UNICE (2005), Lessons learned on European Works Councils (PDF), 7 April.
  2. ^ European Commission (2018), Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee , Brussels.

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