The European Parliament adopted a proposal on 2 February seeking potentially far-reaching changes to the current European Works Council (EWC) Directive. These include strengthening the information and consultation rights of EWCs and improving enforcement by introducing GDPR-level fines for non-compliance and a risk of injunctions for failure to inform and consult.
Whilst there are still a number of steps in the legislative process before the proposed changes would become legally binding across member states, all multi-national organizations with operations in the EU (with or without an existing EWC) should monitor developments in this area. If adopted, restructurings and reorganizations affecting more than one jurisdiction in the EU will become even more complex and require thorough planning before being implemented.
Under the EWC Directive, certain multi-national organizations are required to establish a EWC or a procedure for informing and consulting employees about transnational workforce related issues where this is requested by a qualifying group of employees. The obligation applies to undertakings (or a group of undertakings) with at least 1000 employees within the EU and the other countries of the European Economic Area (Norway, Iceland and Liechtenstein) and at least 150 employees in each of at least two member states.
The European Parliament considers that EWCs still face significant challenges in enforcing their rights on timely and effective consultation which means that they often have little practical influence over an employer’s decision making process, particularly in cases of restructuring. It is calling on the European Commission to propose by 31 January 2024 legislation that will implement an ‘ambitious revision’ of the EWC Directive ‘that reinforces worker’s rights to information, consultation and participation’.
The European Parliament’s recommended changes to the current EWC rules include the following important developments:
- Broadening and clarifying the scope of the transnational matters which are subject to information and consultation obligations, in particular by removing a requirement to have a certain number of member states involved in order for a matter to be ‘transnational’.
- Strengthening consultation rights so that employee representatives are given a ‘prior’ opportunity to express an opinion on a proposed measure which must then be taken into account by management in related decision making. (The Directive currently only provides that management ‘may’ take the opinion of employee representatives into account and there is no express requirement around the point in the decision making process that their opinion should be sought.)
- Shortening the timescales within which a EWC or an information and consultation procedure should be established following a valid request by employees (from 3 years to 18 months), and strengthening the subsidiary or ‘default’ requirements that apply if no agreement is reached, and are often used as a basis for negotiations.
- Requiring that gender balance is actively taken into account in the membership of the EWC and its select committee.
- Increasing the scope for trade union representatives to act in an advisory capacity to employee representatives.
- Clarifying the scope of confidentiality provisions that management can apply in relation to information provided to the EWC with a greater focus on justifying the reason for confidentiality.
- Establishing procedures to suspend execution of decisions of management temporarily where these are challenged because of an alleged infringement of the information and consultation requirements.
- Increasing enforcement, both in terms of the financial penalties for infringement with proposals for penalties at the levels that apply for breaches of the GDPR, but also the introduction of a right for EWCs across all members states to request an injunction in relation to disputed management decisions. The recommendations also include proposals to facilitate more effective access to justice for EWC, such as granting legal personality to EWCs and ensuring member state courts have sufficient EWC expertise.
- Ending the exemption for EWCs that existed before the adoption of the first EWC Directive over 25 years ago (so-called ‘Article 13 Agreements’) which means that all EWCs would need to meet the standards set out by the proposed revised directive.
As the effective ‘gatekeeper’ of most EU legislation, the European Commission must agree to the European Parliament’s request to initiate legislation effecting the proposed changes to the EWC Directive. The usual legislative process would then start, involving the participation of and negotiation between the European Parliament and the Council of the EU.
Practical impact for European employers
Although the implementation of a new EWC Directive is still some way off, if the recommendations of the European Parliament are adopted it will lead to a significant strengthening of the influence and enforcement rights of EWCs. If the proposals are adopted it would, for example, give EWCs stronger influence in transnational acquisitions, disposals and restructurings which are all areas where we are already seeing an increase in EWC involvement. A codified right to earlier consultation coupled with the right to seek an injunction and significant fines will likely embolden EWCs and could lead to more requests for the establishment of EWCs. Given the potential effect of these proposals, it is worth paying close attention to their progress through the legislative process.