A short video (courtesy of FNV Formaat) explaining the basics of EWC and its purpose available at https://www.youtube.com/watch?v=zQLtOPtDpCc
Council Directive 94/45/EC of 22 September 1994 (henceforth, the ‘EWC Directive’) introduces European Works Councils or alternative procedures/structures in order to ensure information and consultation for employees of multinational companies that meet certain criteria.
The following criteria apply under Directive 94/45 (EWC Directive):
a. community-scale undertakings (multinational companies) – undertakings employing at least 1,000 employees within the EU Member States and the European Economic Area (EEA: EU 27 + Liechtenstein, Iceland and Norway) and at the same time employing at least 150 employees in each of at least two EU Member States.
b. community-scale groups of undertakings – groups of undertakings (a controlling undertaking and its controlled companies) employing in total within the EU Member States and EEA at least 1,000 employees and controlling at least two group undertakings in different Member States, of which each employs at least 150 employees.
It is worth noting that the location of the headquarters of a multinational company or group of undertakings has no influence on the application of the EWC Directive. Even if the company’s main HQ is outside the EU, as long as the company has 1,000 employees in the EU and at least 150 in two or more EU Member States the EWC Directive still applies. In fact, many companies registered for instance in the USA or Japan meet the above criteria and thus are covered by the EWC Directive.
The Directive stipulates that EWCs should:
a) be established at the group level, and
b) unless wider scope is provided for in the agreements governing their powers and competences (or the scope of information and consultation procedures, if such an alternative exists at a company), cover all establishments and all group undertakings located within the Member States .
In other words, EWCs shall be established at supranational level and, at the same time, cover all the subsidiaries and establishments of that group/multinational company.
Firstly, companies (and thus EWCs) which established an EWC or a procedure for information and consultation before 22.09.1996 (deadline for transposition into national legal systems) are exempt from the regime of the EWC Directive (so-called ‘Article 13 agreements’, voluntary EWC agreements).
Secondly, in Art. 1 paragraph 5 the Directive states that it shall not apply to merchant navy crews.
Companies having headquarters outside the EU, though fulfilling the criteria laid down in the Directive are NOT exempt from the Directive.
The main partner of an EWC is always the central management of the company. In case the central management/headquarters are situated outside the EU or EEA (for example, in the USA) the central management shall be represented by a designated agent who is responsible for all issues concerning the EWC (or its establishment).
In the absence of such a representative of the central management the management of the establishment (or group undertaking) employing the largest number of employees in any Member State is considered the agent of the central management located outside the EU/EEA and hence has all the consequent responsibilities.
How can it be determined whether a company/group of companies meets the criteria in terms of numbers of employees?
In order to check whether a company meets the criteria laid down in Directive 94/45 one needs to make sure that this company is active in at least two EU/EEA Member States. Secondly, conformity with the given employee thresholds needs to be verified. All the prescribed employee thresholds should be based on the average number of employees, including part-time workers, employed during the previous two years. Methods of calculation must be in line with national legislation and/or practice.
At the time of adoption of the EWC directive it was applicable to companies having operations in the then EU Member States (excluding the UK on the basis of the opt-out clause in the Maastricht Social Protocol): Belgium , Denmark, Germany, France, Greece, Ireland, Italy, Luxemburg, the Netherlands, Portugal and Spain. In 1995, with the accession of three new Member States – Austria, Sweden and Finland – the scope of the Directive was increased to companies operating also in these countries. In 1997 Directive 97/74/EC of 15 December extended the application of the EWC Directive also to the UK. Finally, in 2004, with the enlargement of the EU by ten new Member States, the EWC Directive became applicable also to undertakings operating in these states: Cyprus , Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovenia, Slovakia.
On 01.01.2007, as a result of the latest round of EU enlargement and the accession of Bulgaria and Romania, the geographical scope of the EWC Directive increased again, as the acquis communautaire was adopted on entry to the EU.
Meanwhile, on 22.06.1995, by means of the Decision of the Joint Committee of the European Economic Area the application of the Directive 94/45 was extended to the three EEA Member States: Iceland , Liechtenstein and Norway.
The EWC Directive currently applies to community-scale undertakings operating in the 30 Member States of the EU and EEA.
The first step in establishing an EWC involves negotiations between a Special Negotiating Body and the management of the company. Negotiations may be initiated either by the management (more seldom) or at the written request of at least 100 employees or their representatives from at least two undertakings or establishments in at least two Member States.
In case of employees or their representatives submitting the demand to the management to start negotiations it is necessary for the workers’ side to obtain information about employee numbers and company undertakings operating in other Member States. The management is obliged to provide such information to the employees or their representatives without unnecessary delay and cannot refuse to fulfil this obligation by saying they have no access to such data.
Procedures for the selection of SNB members are laid down by the national transposition laws of the Member State in which the given member is to be elected. These procedures may differ in each Member State. It is highly advisable that each elected member of the SNB present the SNB with proof of a lawful mandate (for example, protocol of the elections).
The SNB must have a minimum of three and may have a maximum number of members equal to the number of Member States in which a company is active (recent technical amendment of the EWC Directive adopted on 20 November 2006 by the European Commission, COUNCIL DIRECTIVE 2006/109/EC), in respect of the fact that:
i) each Member State in which a company has a subsidiary must have at least one member, and
ii) there are supplementary members in proportion to the number of employees working in the establishments within one country of operations.
It is obligatory to inform the central and local management about the composition of the SNB.
The SNB has the task of determining, in accord with the central management, by written agreement:
- the scope,
- functions, and
- term of office
of an EWC.
Yes, an SNB has the right to call upon experts of its choice. Directive 94/45 explicitly stipulates (Art. 5 paragraph 6) that the cost of expert advice and any other costs of the functioning of an SNB shall be borne by the central management. But Member States are entitled to limit (in their transposition laws) the coverage of expert costs borne by the management to one expert only.
The ultimate aim of Directive 94/45 is to provide the employees of multinational companies with proper information and consultation procedures. The EWC is a concept/structure proposed by the Directive as, in legal terms, the most precisely described and thus the easiest to apply form of institutionalised flow of information and channel for consultation. Nonetheless, it is not the only solution. The Directive gives the contracting parties (SNB and company management) the ability to elaborate a solution that will be the functional equivalent of an EWC. Such an alternative must not be named an EWC, however, even if it performs the minimal functions foreseen for an EWC (see Question 12), that is, first and foremost, exchange of information and consultation. Such a body may even go far beyond the competencies of a standard EWC, may have another name, and so on, yet the procedures for its establishment and, to some extent, its functioning need to be in line with the requirements foreseen for EWCs.
In general, the legislator shall respect the contractual liberties of the parties to the EWC agreement. Nonetheless, in Art. 6 paragraph 2 of the Directive the legislator obliges the SNB and company management to determine the following issues:
- the undertakings (groups of undertakings) which are covered by the EWC agreement;
- the composition of the EWC, that is, the number of members, allocation of seats and term of office;
- the functions and the procedure for information and consultation of the EWC;
- the venue, frequency and duration of meetings of the EWC;
- the financial and material resources to be allocated to the EWC;
- the duration of the agreement and the procedure for its renegotiation;
- the method by which the employees’ representatives shall meet to discuss the information conveyed to them (so called ‘follow-up meetings’).
The right to information and consultation and procedures ensuring the exercise of this right make up the core of Directive 94/45. Thus, it is crucial to use precise definitions of these terms. The Directive itself provides only a definition of consultation (art. 2 point f of the Directive): ‘ the exchange of views and establishment of dialogue between employees’ representatives and central management or any more appropriate level of management’ .
Although this definition has been widely criticised as not precise enough – for instance because it fails to mention the timing of such an ‘exchange of views’ (prior to any decisions being made/implemented) – it does represent a basis for enforcing the competencies of an EWC in conflict situations.
On the other hand, there is no definition of ‘information’ in the Directive. EWC practice has shown that this is one of the major flaws of this regulation
The special negotiating body and central management shall negotiate an agreement on an EWC in a spirit of cooperation with a view to reaching an agreement on the detailed arrangements. Normally, such negotiations lead to the signing of an agreement. But if no agreement is signed within three years of a request to establish an EWC being submitted due to, for example, a conflict or different views of the negotiating parties the so-called ‘subsidiary requirements’ come into force. Subsidiary requirements are provisions laid down by the legislation of a Member State (transposition law) and they need to be in line with the Annex to Directive 94/45. These provisions were designed to avoid a situation in which obstruction by one party during the negotiations leads to a deadlock in the process of establishing an EWC. Thus, they set minimal standards which stipulate basis principles governing the functioning of a EWC.
Firstly, subsidiary requirements are provisions setting minimal standards for EWC functioning (see also Question 14). They are laid down in the Annex to Directive 94/45.
Article 7 of the Directive lists situations in which subsidiary requirements come into force:
- when the parties to negotiations decide so;
- when the central management refuses to commence negotiations within six months of the submission of a request;
- when, three years from the date of this request, the parties are unable to conclude an agreement.
This list of possibilities for application of the subsidiary requirements is closed.
It is obvious that EWCs are likely to become cognisant of confidential information. Various kinds of information may be of crucial importance for the company’s interests and performance and their dissemination should be protected in order to avoid the EWC being the source of ‘leaks’, causing losses for the company. On the other hand, if an EWC is to be taken seriously it is imperative that it be treated as an insider with an insight into the company’s performance, financial and production reports, and so on, and all data concerning the functioning of its undertakings. These circumstances have the potential for a conflict of interests.
For the reasons mentioned above, in Art. 8 of the Directive it is stipulated that the information conveyed to the EWC or experts as explicitly confidential must not be passed on by EWC members or experts. Individual Member States were granted a rather wide margin of discretion as regards setting rules for confidentiality.
On the other hand, EWC practice reveals that managements sometimes abuse the confidentiality clause, so hindering the flow of information both to ordinary employees and to external experts assisting the EWC (for example, trade union experts). Cases of such conduct on the part of the central management are extremely difficult to litigate on the grounds of Art. 9 of the Directive, namely the obligation to work in a spirit of cooperation with due regard to the reciprocal rights and obligations of the parties. It can be argued that the abuse of the confidentiality clause in extreme cases can be countered with an appeal to a labour court on the basis of, for example, Art. 9 of the Directive. Nonetheless, lawsuits are costly, represent the last resort for an EWC and are by no means advisable as a universal instrument.
Yes, all EWC members, as well as members of the special negotiating body, enjoy the same protection as trade union members in their home countries (the countries which they represent).
Directive 94/45 (Subsidiary requirements) stipulates that an EWC shall have a minimum of three members and a maximum of 30. But taking into consideration that in some large multinational companies there are representatives from all EU/EEA member states and that often there is more than one representative from a single country (on the basis of proportional formulae calculated according to the workforce in a given country) the maximum number is often exceeded (for example, the EWC at Saint Gobain has 70 members).
There are a few institutions which provide assistance for already existing EWCs and SNBs, as well as for those trying to start the process of establishing an EWC. The first, most practically-oriented bodies are always the European Industry Federations (EIFs). They are European-level bodies representing employee interests in assorted ways at the international/European level. Each EIF operates in a specific sector and is responsible for coordinating and contacts with employee representatives and trade unions acting in undertakings within that sector. Here is a list of EIFs with website addresses:
- European Metalworkers Federation (EMF) – www.emf-fem.org (EWC coordinator Isabelle Barthes)
- European Mine, Chemical and Energy Workers’ Federation (EMCEF) – www.emcef.org (EWC coordinator Peter Kerckhofs)
- UNI-Europa covering services – www.union-network.org (EWC coordinator Ivonne Jackelen)
- European Federation of Food, Agriculture and Tourism (EFFAT) – www.effat.org (EWC Coordinator Simon Cox)
- European Federation of Building and Woodworkers (EFBWW) – www.efbww.org
- European Trade Union Federation – Textile, Clothing and Leather – www.etuf-tcl.org (EWC coordinator Patrick Itschert)
- European Transport Federation (ETF) – www.etf.org (EWC Coordinator Cristina Tilling)
- European Journalists’ Federation (EJF) – www.ifj-europe.org
Furthermore, the European Trade Union Institute for Research, Education and Health & Safety (ETUI-REHS) has a database of multinational companies and EWC agreements (available on this website), as well as dealing with research on EWCs (the Research Department). The Education Department of ETUI-REHS provides EWCs, trade unions and other partners with customised training on various issues concerning the functioning of EWCs.
More questions and answers on European Works Councils
The Directive states that EWCs should be established at the group level and that ‘ unless a wider scope is provided for in the agreements … the powers and competences of European Works Councils and the scope of information and consultation procedures … [must]… cover all the establishments … and all group undertakings located within the Member States’ . The Directive also mentions which undertakings are considered part of a group of undertakings: a group of undertakings consists of a ‘controlling undertaking’ that can exercise a dominant influence over another company (‘controlled undertaking’). This dominant influence can be exercised in various ways: for instance, by financial participation, ownership or the rules which govern it. To sum up, all companies of a group of undertakings located in the EU/EEA shall be covered by the EWC agreement.
A more detailed issue is the question of how to interpret the phrase about a company that ‘can exercise a dominant influence over another’ used in the Directive. According to the EWC Directive there are three ways for a company to exercise control:
- the ownership of shares (company’s subscribed capital);
- controlling the majority of votes attached to the shares of a company;
- appointing more than 50 per cent of a company’s administrative, management (for example, board of directors) or supervisory (supervisory board) bodies.
These regulations exclude, however, companies in which a given company has holdings (defined by Council Regulation 4046/89).
It is widely disputed whether subcontractors and franchisees fall within the category of companies over which the receivers of their production/services (that is, groups of undertakings) exercise a dominant influence. In fact, these relations between such subcontractors and the sole purchasers of their products/services represent a situation known as monopsony (a market in which there is only one buyer).
What makes companies a group of undertakings? Types of links within a ‘community-scale group of undertakings’ and ‘monopsony’
The EWC Directive also mentions which undertakings are considered part of a group of undertakings. A group of undertakings consists of a ‘controlling undertaking’ that can exercise a dominant influence over another company (‘controlled undertaking’). This dominant influence can be exercised in various ways, for instance, by:
- financial ownership of a company’s capital;
- controlling a majority of votes (in a general assembly of shareholders);
- appointing more than 50 per cent of that company’s administrative, management or supervisory body.
A more detailed issue is the question of how to interpret the phrase about a company that ‘can exercise a dominant influence over another’ used in the Directive. It is widely disputed whether subcontractors and franchisees fall within the category of companies over which the receivers of their production/services (that is, groups of undertakings) exercise a dominant influence. In fact, these the relations between such subcontractors and the sole purchasers of their products/services represent a situation known as monopsony (a market in which there is only one buyer).
Why do different transposition laws apply to the EWC itself and to its members, and what are the differences?
In certain situations it might be necessary to differentiate between various legal orders, that is, between various national transposition laws of Directive 94/45/EC, applicable to the functioning of EWCs. For the functioning of an EWC as such it needs to be clearly stated in the EWC agreement which legal order (in other words, the transposition law of which country) is applicable to its functioning. In legally well formulated agreements such a precise statement often goes together with the nomination of specific labour courts of a selected country (the same as in the national transposition act of that country) for resolving legal disputes and handling possible lawsuits. If not explicitly stated the EWC shall be subject to the transposition law of the country in which the central management is based. If the central management of a company is outside the EU/EEA then the transposition law of the country where the designated management of a subsidiary within the EU/EEA – or, if no management is designated, the management of the largest subsidiary in the EU/EEA (that is, employing the largest number of workers) – is located shall apply to the EWC.
The transposition law of a country chosen in the EWC agreement does not, however, always apply to individual members of the EWC. There are situations in which the rights, freedoms, competencies, employment protection sanctions, and so on, are granted to EWC members individually by the law of their home country, that is, the country which they represent. Similar differences might occur, for instance, in regard to the obligations of local/national managements of individual undertakings belonging to a group of undertakings in terms of providing information to EWC members (as regards scope, timing, content). Such differences arise since the Member States of the EU/EEA were granted a certain margin of discretion when transposing Directive 94/45 into their national legal orders. It is thus necessary to be aware of these discrepancies and always to apply the proper legal basis to one’s actions or claims.
Does the law on European Works Councils provide for any substructures (for example, working groups) within the EWC itself?
The EWC Directive does not mention any substructures within the EWC apart from the offices of Chair and Select Committee (see also Question 23). The EWC is, nonetheless, not limited in its freedom to establish, for example, working groups. Such working groups exist in some EWCs and have the task of tackling specific issues, either on a regular basis or ad hoc matters that arise in the course of the functioning of the EWC (for example, the EWC at Gucci). Such subgroups present the EWC with reports and possible solutions, and are often equipped to work closely with the company management between the plenary sessions of the EWC.
These two terms are used in the professional jargon to describe two categories of EWC agreement foreseen in Directive 94/45. So-called Article 13 Agreements are EWC agreements concluded on the basis of Article 13 of Directive 94/45. This article refers to agreements in force and stipulates that EWC agreements concluded before the deadline for transposition of Directive 94/45 – that is, before 22.09.1996 – will remain valid also after this date. Article 13 granted the parties to the EWC agreement much more flexibility in terms of setting the rules of functioning of a EWC/alternative information and consultation procedures. After 22.09.1996 no further ‘Article 13 agreements’ could be concluded. Nonetheless, already concluded ‘Article 13 agreements’ can be renegotiated/prolonged on the basis of Article 13 even after 22.09.1996. All new agreements establishing an EWC concluded after 22.09.1996 are referred to as ‘Article 6 agreements’, which means the negotiating parties need to respect minimum requirements laid down in Directive 94/45.
In professional jargon one often hears about German- or French-type EWCs. The two terms refer to different compositions of EWC sessions. The criterion for distinguishing between them is whether management participates in the sessions of an EWC or not. In an EWC of the German type only the employee representatives are allowed to participate in the sessions. No delegates of the management are invited nor admitted to such internal EWC sessions. This approach stems from the German tradition of industrial relations and is closely related to the concept of the German works council or Betriebsrat, which is exclusively an employee body.
On the other hand, the French type of EWC comprises at its sessions representatives of both management and employees. They debate and reach decisions together. Moreover, in contrast to the German model, the EWC is most often chaired by a representative of the central management. Such a solution is not acceptable for German EWC members or trade unionists for whom works councils and EWCs are bastions of employee representation.
All in all, these two models are not very different from each other. This is due to the fact that in the German-type EWC such exclusively internal meetings are followed by a joint session with the management, during which all issues are discussed again. In the French-type EWC, on the other hand, it is a commonplace that the joint sessions of the EWC are preceded by preparatory meetings of the employee representatives. During these pre-sessions the employee delegates prepare the agenda, discuss points of special interest, agree upon strategy, and so on. Therefore, although the two models represent different philosophies and traditions of industrial relations they have relatively moderate implications for the functioning of EWCs.
An alternative and a compromise between the French and German models is a system of alternate chairmanship. In this structure the employees’ representative holds the chairmanship for a certain period of time, after which its counterpart on the management side takes over. Another alternative may be a system of joint chairmanship, in which the chair is a two-person office held jointly by employees’ and management representatives. The latter solution might have serious legal implications in case of a conflict between the EWC and the company management, however; in some cases, where the possibility of a joint chair is not foreseen by national legislation, the EWC might be hindered in bringing a case to court in consequence of having a management representative as the chairman.
The EWC Directive, under ‘Subsidiary requirements’, stipulates that ‘the EWC shall have the right to meet with the central management once a year, to be informed and consulted, on the basis of a report drawn up by the central management’. This provision states a normal frequency of meetings (in exceptional circumstances the EWC has to meet more often).
Despite the fact that Directive 94/45 speaks about only one meeting this statement should be considered solely as a minimal standard. Much research has shown that one EWC session a year is insufficient to enable this body to function effectively. The relationship between the frequency of meetings of an EWC and its efficacy is clear: the more often the EWC members meet the more effective they are in representing employee interests.
The experience of over 800 EWCs and many research projects proves a simple correlation: the more often an EWC meets during a year the greater its efficacy and the more important its role. The majority of EWCs (over 50 per cent) have only one annual session foreseen in their agreement, plus an extra meeting in cases of restructuring or other exceptional circumstances. Unfortunately for these EWCs they find it very difficult to make their meetings an effective instrument of employee representation and to go beyond merely fulfilling the formal obligation to have EWC sessions.
EWC Directive 94/45 unfortunately does not mention training for EWC members. This is one of the most serious drawbacks of this regulation, especially compared to other EU acts dealing with employee representation such as the ‘SE Directive’. Therefore, negotiating provisions securing training opportunities for EWC members is purely a contractual affair. This weak positioning of training is reflected in a relatively low rate of EWC agreements mentioning an entitlement to education (28 per cent of all EWC agreements, both active and no longer valid – ETUI-REHS database on EWCs 2006). On the other hand, there is an established tendency for recently negotiated agreements to include provisions securing training rights for EWC members. In the majority of cases they refer to language training as the most urgent need of members.