Hayes solicitors LLP Employment Law Group has advised several EWD and staff groups negotiating EWCs, and are taking particular interest in the new legal developments in the area.

What’s New?

Shortcomings identified in the current European Works Council (“EWC”) regime has resulted in the recent new Directive (“the new Directive”), designed to improve the current legal framework for EWCs.

What are EWCs?

The prior EWC Directive (2009/38/EC)(“the Directive”) provides for the creation of European Works Councils to improve the rights of employees in multinational companies to be informed and consulted on transnational issues affecting their employment.

The Directive applies to companies with at least 1,000 employees in the EU and at least 150 employees in two or more member states. Employees can initiate the establishment of an EWC through a request signed by 100 employees from two different countries.

To establish an EWC, the employer is required to negotiate with a ‘special negotiating body’ (“SNB”) representing employees. It entails convening meetings for both parties to reach an agreement on the establishment of an EWC for its organisation.  The composition and functioning of each EWC can be tailored to the specific circumstances of the organisation, based on agreements between management and employee representatives.

Why the Need for the New Directive?

There are several limitations in the current legal framework, including:-

• the uncertainty about the scope of topics for consultation;
• the funding of EWCs;
• the lack of access to justice in certain members states; and
• the lack of a deterrent for employers in breach of their EWC obligations; and
• ambiguity in the language of the Directive which has led to many disputes and litigation. 

The new Directive addresses these weaknesses.

What’s in Scope? The new Directive clarifies what transnational matters are in scope for negotiation at EWCs.

Transnational matters in scope for EWCs are those which affect employees in a substantial, and not in a merely trivial, manner and which do not concern only individual employees or ordinary operational decisions.

The Directive applies to matters which are considered by management to affect their workers in more than one member state. The new Directive extends this, so that EWCs require consultation with staff where transnational matters affect workers in one member state, and the consequences can reasonably be expected to affect workers in the same group in at least one other member state.  This can arise where, for example, there may be lay-offs, redundancies, reorganisation of production activities or outsourcing, which explicitly target establishments in one member state, but can reasonably be expected to have consequences affecting workers of that group in another member state, perhaps due to changes in the cross-border supply chain or in production activity.

A summary of key changes introduced by the new Directive include:-

1. The reasonable legal and other experts’ costs of the SNB and EWC is to be funded by the employer by:-

• the allocation of an appropriate operational budget to the EWC;
• the setting up of solidarity funds at national level;
• the provision of insurance to cover legal costs; and/or
• the granting of access to legal aid in certain circumstances.
• Positive action to promote gender balance on SNBs and EWCs is promoted, whereby men and women are each to comprise at least 40% of the members of each body, subject to candidates satisfying merit and qualifications criteria.

2. Positive action to promote gender balance on SNBs and EWCs is promoted, whereby men and women are each to comprise at least 40% of the members of each body, subject to candidates satisfying merit and qualifications criteria.

3. For employers that relied on the exemption in the current Directive for establishing an EWC (there being a prior agreement for the transnational information and consultation of employees before 23 September 1996), that exemption no longer applies. Therefore, employees in organisations currently relying on that exemption can request the establishment of an EWC under the new Directive.

4. For those organisations which rely on the default arrangements known as the ‘subsidiary requirements’ in place of an agreed EWC, there is a strengthening of the information and consultation requirements, where the management and employee representatives must meet in person at least twice per year.

5. The initiation of negotiations to establish an EWC is sometimes delayed beyond the period of six months provided for in the current Directive. Under the new Directive, the subsidiary requirements apply where the first meeting of the SNB is not convened within six months following a request by employees to establish an EWC.

6. Employers can require information it shares with an EWC to be protected by confidentiality and not disclosed further to the wider group of employees in the business, or elsewhere. There has been overuse of the confidentiality restrictions by employers.  In the new Directive, employers can only use the restriction of confidentiality to protect its legitimate interests based on objective criteria, which criteria must also be shared with the employee representatives. For reasons of transparency and effective redress, employers must specify their reasons in a way which allows for sufficient legal scrutiny, while not disclosing protected information. Information can only be withheld where it would ‘seriously harm’ the functioning of the business concerned.

7. In certain members states including Ireland, rightsholders have encountered difficulties in bringing legal action to enforce their rights.  With the new Directive, member states are obliged to ensure effective remedies and access to justice, and the European Commission has a supervisory role in ensuring this happens.

8. For non-compliance by employers, each member state must introduce penalties that are effective, dissuasive and proportionate.

What’s Next?

Each EU member state has two years to legislate for the new Directive at national level. Now that employers and employee representatives know the changes that are coming, they are advised to plan for their implementation at this stage.  That is where we can help you.