European Works Councils - law and practice

This article examines the implementation into Latvian 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 was implemented in Latvia by the law on informing employees of European Community-scale commercial companies and European Community-scale groups of commercial companies and consulting such employees, which came into force on 1 July 2001.

National debate about the content of the national strategy for implementing the Directive was limited, because at the time of implementation neither employers, employees nor their representative bodies gave great weight to the EWCs issue - not least because no Latvian-based companies were thought to be subject to the legislation - and adoption of the law was a'formal' exercise. The main social partner organisations - the Latvian Employers’ Confederation (Latvijas Darba Devēju konfederācija, LDDK) and the Free Trade Union Confederation of Latvia (Latvijas Brīvo Arodbiedrību savienība, LBAS) - participated in the elaboration of the transposition law, In what debate there was, the overall views of LDDK and LBAS were coordinated, since both organisations have signed a 'general agreement' that commits employers to allowing the establishment of trade unions in their enterprises. Both sides have agreed to promote information and consultation by means of trade union involvement and social dialogue.

The deputy director of LDDK confirms that adoption of the EWCs legislation was seen in essentially formal terms in 2001, since there were no major enterprises based in Latvia investing abroad. The position of LBAS was that information and consultation processes needed to be improved, but this must be done by means of social dialogue. The main consideration behind this position was the reported bad experience from some other European countries, whereby some employers established EWCs that defended employers' rather than employees' interests.

The Latvian social partners did not reject EWCs as a possible good practice, and they currently monitor relevant developments in Latvia and inform employees and employers about EWCs. Given a perceived 'passivity' among employees in Latvia and a disinclination among the majority of employers to provide information and consultation, trade unions seek to strengthen their position in social dialogue, including EWCs where applicable. Unions will thus focus on attempts to: establish EWCs; establish trade union organisations in enterprises, including operations of foreign-owned multinationals; and have their members included as representatives from Latvia in emerging EWCs.

Key provisions of the legislation

The Latvian transposition legislation (as in all Member States) largely repeats the content of the Directive(s), while also 'customising' a number of provisions to fit the national industrial relations system, as provided for by the Directive. The main such provisions are set out below.

According to section 9 of the law, representatives of Latvian workers on the special negotiating body (SNB) 'shall be elected as representatives of employees in accordance with procedures prescribed by law'. This refers to section 10 of the Labour Law (LV0405103F), which provides that 'employee representatives' are: an employee trade union; or authorised employee representatives elected in undertakings that employ five or more employees by a majority vote at a meeting in which at least half the relevant employees participate. The same rules apply (section 24) to the election of Latvian 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 Latvia, 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 (section 8):

  • one additional representative for each Member State in which 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.

By agreement between the SNB and central management, the SNB may also include representatives of other states (ie outside those covered by the Directive), determining their number and status.

Companies covered

There is little information about companies covered by the EWCs Directive and headquartered in Latvia - neither LDDK, LBAS nor any other relevant body, including the Ministry of Welfare, has a list of such companies. These bodies also cannot name any single large Latvian enterprise that has subsidiaries in other EU Member States. It is known that some large Latvian companies have investments or subsidiaries in Russia and other CIS countries, but there is no information about investments in EU countries.

Information about the Latvian subsidiaries of foreign-based multinationals covered by the EWCs Directive is also lacking (though some certainly exist - see next section). Even the Foreign Investors’ Council in Latvia (Ārvalstu Investoru padome Latvijā, ĀIPL), which deals with about 20 foreign-based companies in Latvia, has no information about developments regarding EWCs.

Experience to date

No Latvian-based company is known to have established an EWC. It is not known how many EWCs in multinationals with operations in Latvia already include Latvian employee representatives, but the number of cases is thought to be very few. One example is the German-based Vereinsbank, where Latvian representatives were included in the EWC prior to EU enlargement in May 2004. Given the scarcity of cases, EWCs understandably cannot be said to have had any significant impact on industrial relations in Latvia.

It should be noted that foreign-owned enterprises in Latvia usually do not have trade union representation. Many foreign-owned enterprises are joint ventures between owners from different countries - eg Latvijas gāze (LG) (gas provider) is owned by German and Russian enterprises and the Latvian state, while airBaltic (aviation) is owned by Scandinavian Airlines Systems and the Latvia state. Many foreign-owned companies in Latvia have under 150 employees.

Commentary

Latvia has implemented the EWCs Directive in legislative terms, but practical implementation of this law is so far very limited. In addition, there is a major shortage of information about EWCs in Latvia. The main concerns among trade unions relate to EWCs' capacity to protect employees’ rights to information and consultation in the best way, and a possible diminution of the role of unions if EWCs are established. (Raita Karnite, Institute of Economics, Latvian Academy of Sciences)

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