There is employee board-level representation in large companies and those with substantial state involvement in Luxembourg. The issue of the European company is of interest, as Luxembourg could potentially be the base for future European companies. The proposed legislation implementing the directive produced detailed comments from both unions and employers but there was no widespread public debate.
Companies which have more than 1,000 employees, or which are more than 25% state owned, or which receive state aid for their main business must have employee representatives at board level. They generally have a third of the seats.
The introduction of the concept of the European company also provoked interest in Luxembourg, in view of its existing position as the headquarters of a number of major companies already operating across Europe. As the government stated in its background comments on the draft text presented in January 2005, “”the European Company could be an interesting instrument for attracting companies into the Luxembourg economy”.
Both unions and employers were directly consulted in June 2004 on the proposed legislation on the transposition of the directive on employee involvement in European companies. Both responded the following month and their comments were taken account of in the draft text presented in January 2005. In addition the formal consultation after the draft text had been presented involved the elected chambers representing employees and employers and both sides made comments on the text.
Despite this extensive involvement in the draft text by both unions and employers and more general representative bodies, there was no public debate. One reason for this was that, as the government’s own comments in January 2005 made clear, the directive did not “introduce any fundamentally new concepts into Luxembourg labour law, either in terms of the general approach or the techniques used”.
Directive was transposed by law in August 2006 almost two years after the October 2004 deadline
The directive on employee involvement in European companies was transposed through the following legislation passed on 25 August 2006 and published in the Official Journal on 31 August 2006: Law of 25 August 2006 1. Supplementing the European Company (SE) statute with regard to the involvement of employees and 2. Amending the amended law of 6 May 1974, which instituted mixed committees [works councils] in private sector companies and organised the representation of employees in limited companies (Loi du 25 août 2006 1. complétant le statut de la société européenne (SE) pour ce qui concerne l’implication des travailleurs et 2. modifiant la loi modifiée du 6 mai 1974 instituant des comités mixtes dans les enterprises du secteur privé et organisant la représentation des salariés dans les sociétés anonymes).
Separate legislation adapting company legislation in Luxembourg to the Regulation on European companies was passed on the same day – 25 August 2006.
Special negotiating body (SNB)
Luxembourg SNB members are appointed by the employee delegations – the elected representatives of the employees. If there is no employee delegation SNB members are elected by the employees directly.
The legislation sets out in detail how members of the SNB from Luxembourg are appointed. They are elected by the employee delegations, the employees’ elected representatives, who should exist in all companies where there are at least 15 employees. The arrangements vary, according to whether or nor there is a single employee delegation, or separate delegations for manual and non-manual workers. There should be separate delegations for these two groups in companies employing more than 100, where at least 15% of the workers are either manual or non-manual, although the delegates can decide to form a single delegation if they choose.
Where there is a single employee delegation, SNB members are elected by it on the basis of a simple majority. Where there are separate manual and non-manual delegations, the first SNB member is elected by the group representing the majority of the workforce (the first two if this group makes up more than two-thirds of the employees), with the deputy/deputies being chosen by the other group. The remaining SNB members from Luxembourg are elected by members of both delegations on the basis of a simple majority.
Where there is no employee delegation, SNB members from Luxembourg are elected directly by all employees (Article 4).
External union representatives can be SNB members in Luxembourg.
The Luxembourg legislation specifically states that SNB members may be chosen either from “among employees, or from among representatives of trade union organisations”, although these need to be unions which are either ‘nationally representative’ or ‘representative at industry level’ (Article 4). Nationally representative unions must be active in a majority of the country’s economic sectors and have at least 20% support in the elections for chambers of labour – the bodies representing employees. To be representative at industry level a union must have the support of 50% of the votes in the chamber of labour covering that industry.
Funding limited to a single expert.
The legislation limits the costs to a single expert. It also states that they are limited to the direct costs in participating in the meeting (Article 5).
Standard rules under the fallback procedure
Luxembourg members of the SE representative body are chosen in the same way as Luxembourg members of the SNB – by the employee delegations – the employees’ representatives. If there is no employee delegation there are direct elections.
Luxembourg members of the SE representative body, known in the Luxembourg legislation as the representative body (l’organ de représentation) are chosen in the same way as Luxembourg members of the SNB: by the employee delegation/s or by direct election if there is no employee delegation. The arrangements for voting, which vary according to whether there is a single employee delegation for all employees, or separate delegations for manual and non-manual workers, are the same as those for Luxembourg members of the SNB (see section on SNB).
There is, however, one difference: external trade union officials may not be members of the representative body. They must be chosen from “among the employees” (Article 10).
The company should bear the costs of the representative body, including one expert for each nine members of the representative body.
The company is obliged to bear the costs of the representative body, so that it can “function in an appropriate manner”. The costs to be borne by the company also include the expenses of “one expert for each tranche of nine members of the representative body”, although these costs are limited to the direct costs in participating in the meeting (Article 11).
Employee representatives at board level from Luxembourg are chosen by the employee delegations –the elected employee representatives.
The legislation includes rules for the choice of employee board-level representatives from Luxembourg. They are to be elected by the employee delegation or delegations – the employee representatives who should be elected in all companies with 15 or more employees. The employee board members should be elected by the employee delegation/s in a secret ballot, and the number of manual and non-manual board members should be in proportion to the number of manual and non-manual employees. There is no mechanism for choosing employee board-level representatives where there is no employee delegation (Article 13).
Misuse of procedures and structural change
There should be new negotiations if in the year following the establishment of the SE the representative body can show that the purpose of the SE was to deprive employees of their rights.
If, in the year following the registration of an SE, the representative body can show that the establishment of the SE was an abuse of procedures and the intention had been to deprive employees of their right to be involved, new negotiations take place. This new negotiation can be called for either by the representative body, or by representatives of employees who have been brought into the SE (Article 18).
The Luxembourg legislation does not provide for renegotiation after structural change, other than in the year after the establishment of the European company, where it can be shown that the SE was established to deprive employees of their rights.
There is no automatic right to renegotiate the agreement if there are changes in the structure of the SE, except in the year after the establishment of the company, where it is clear that the procedures were misused. This means where it is clear that the purpose of establishing the SE was to deprive employees of their rights to be involved in company decision making.
Unions and employers were consulted in detail on the introduction of the legislation. For the unions the main concern was that the plans were too restrictive in terms of the numbers of employee representatives and the resources available to the employee side. The employers feared that they could be used to extend employee involvement at board level.
Unions and employers were involved in the discussions on the transposition of the directive on employee involvement in European companies into Luxembourg law. This occurred both directly – the main bodies were sent a copy of the draft text – and indirectly – the chambers representing employees and employees were consulted on the proposed legislation.
The view of the unions, as shown in the comments of the chamber of private sector non-manual employees (CEP-L), were: that the before and after principle of the directive, in terms of employee involvement at board level, did not go far enough, as companies could continue to avoid employee involvement; the number of employee in the representative body needed to be increased so that all companies could be represented; limiting the costs of experts to a singe expert was too restrictive; and the rights of members of the representative body to be have access to training were inadequate.
The view of the employers, as shown by the joint opinion from the Chamber of Commerce and the Chamber of Trades, were: that the mechanism for choosing employee representatives should be kept as simple as possible; and that there was a danger that the existing form of employee involvement in Luxembourg – “one of the most favourable to workers in Europe, and, as such in its current form a substantial disadvantage for companies registered in the Grand Duchy” could be extended through the legislation.
L. Fulton (2008) Anchoring the European Company in National Law - Country Overviews (online publication, prepared for worker-participation.eu)
Although Luxembourg is a small country, its economic influence within the EU is large. SEEurope network member Patrick Thill presented at the SEEurope network meeting in Romania the system of industrial relations in Luxembourg and the current dynamics of worker participation and corporate governance in this country. What are possible explanations why they are comparatively many SEs in Luxembourg?
The presentation showed that the crisis has had an enormous impact on Luxembourg’s economy: unemployment has increased (to 6.1 per cent), as has the budget deficit and company restructuring, while, unusually for Luxembourg, there have been social unrest and tensions (demonstrations) in the face of crisis-related developments (for example, company closures). The government tried to counter this crisis via an early economic stimulus package, a rescue plan for two of its major banks and, more recently, a package of austerity measures.
The crisis, however, has not made the establishment of Luxembourg SEs more attractive. At the moment, there are 18 SEs (6th of all EEA-countries) in Luxembourg, six of which were established in 2009 and 2010. Of these 18 SEs, the majority are UFO or empty SEs, normal SEs being mainly active international companies with offices in neighbouring countries.
Patrick Thill investigated two of these Luxembourg SEs: Elcoteq SE (normal, one-tier, international, open information policy, model SE) and Algest (empty, one-tier, regional, scarce information, only available through the official register of companies). These SEs highlight the different kinds of SEs which can be found in Luxembourg.
For more information about Luxembourg’s response to the crisis and the case studies of both SEs, see Patrick Thill’s presentation.
Luxembourg adopted the law on employee involvement in European Companies and the European Company Statute on 25 August 2006.
Two laws dated 25 August 2006 transposed the European Company into thelaw of Luxembourg while at the same time supplementing the EuropeanCompany Statute (SE) in relation to worker involvement.It should be noted that, as well as transposing Directive 2001/86/EC of 8October 2001, these laws also constitute a follow-up to the law of 28 July 2000 on the establishment of a European Works Council or a procedurein Community-scale undertakings and Community-scale groups ofundertakings for the purposes of informing and consulting employees.
Two laws dated 25 August 2006 transposed the European Company into the law of Luxembourg while at the same time supplementing the European Company Statute (SE) in relation to worker involvement. It should be noted that, as well as transposing Directive 2001/86/EC of 8 October 2001, these laws also constitute a follow-up to the law of 28 July 2000 on the establishment of a European Works Council or a procedure in Community- scale undertakings and Community- scale groups of undertakings for the purposes of informing and consulting employees.
The new laws also reflect the legislator’s wish to modernise labour law and, in particular, its “social dialogue” aspect , one of the best illustrations of which is the law of 30 June 2004 on collective labour relations. The first of the new laws mentioned introduces the management system known as “two-tier management” composed of a praesidium and a supervisory board, an arrangement hitherto unknown in Luxembourg law.
Public limited companies, including the European Company, will therefore in future be able to choose either to have a management board or a praesidium and a supervisory board. The Chamber of Deputies was nonetheless careful to ensure that a firm that adopts the two-tier system under the national Luxembourg law before turning into an SE cannot avoid complying with the rules on employee representation: in this event, employee representatives are to be allowed on the supervisory board according to the same arrangements as those applicable to the management board. The Chamber of Deputies also completed the initial government plan by settling the question of the representation of public officials and employees in an SE whose capital is owned by public law bodies.
As the Directive does not impose a single model of involvement but is intended to respect the “before-after” principle (found in the 18th recital of the Directive), designed to guarantee workers’ acquired rights in relation to involvement in the decisions taken by companies, such that “the rights of workers pre-existing the constitution of the SE should form the basis of the provisions governing their rights in relation to involvement in the SE”, an SE will not be obliged to set up an involvement or representation arrangement if no such arrangement previously existed in the companies involved.
The second law is divided into four titles, reflecting the general approach of the text of the Directive Apart from the First Title, which contains the general provisions, and Title IV, containing miscellaneous provisions, the law contains Title II on negotiating an agreement between the social partners and Title III setting out reference provisions which are applicable only if the partners are not required to conclude an agreement (or if they agree to implement these provisions for the purposes of an agreement). It is therefore up to the different parties – workers’ representatives meeting in the special negotiating group on the one hand, representatives of the participating companies on the other – to reach an agreement on the details of worker involvement in the SE (such being the purpose of Title II of the law). The provisions contained in Title III – whether relative to information and consultation of workers or to their participation in the SE’s management or supervisory bodies – constitute a corpus of subsidiary rules that are applicable only if the parties fail to reach an agreement (or should they specifically agree to adopt them as they stand as the content of an agreement).
On 21 January 2005, the Luxembourg Government tabled a bill in the Chamber of Deputies to supplement the Statute on European companies with regard to the involvement of employees (parliamentary document No 5435), henceforth referred to as the "bill".
This bill is intended to transpose Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute on European companies with regard to the involvement of employees (the "Directive"). As indicated by its name, the Directive supplements the Statute on European companies ("SE") established in Council Regulation (EC) 2157/2001 of the same date (the "Regulation") which entered into force on 8 October 2004.
As the Directive and the Regulation are two separate but related texts under Community law, Luxembourg decided to take the same approach at national level, and to transpose the Directive and the Regulation in separate legislative acts.
Three different factors come into play in the new bill:
Obviously the bill is intended to transpose the Directive.
It is one of a current series of bills and new legislation modernising labour law, particularly in respect of social dialogue.Examples of new social dialogue legislation include the law of 30 June 2004 on industrial relations and the draft bill on social dialogue within companies, which has just been completed and sent to the social partners for comment. (The draft bill seeks to revise existing legislation on workforce delegations, joint committees, and worker representation on the management boards of public limited companies).
Thirdly, and lastly, the bill follows on from the law of 28 July 2000 on the creation of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (Council Directive 94/45/EC of 22 September 1994).
The two directives (and in turn the texts intended to transpose the directives into Luxembourg law) are closely related, both in terms of content (involvement of workers in Community-scale undertakings) and the procedures they seek to establish (a two-part procedure, initially creating a special negotiating body, and then a permanent representative body for employees).
It therefore seemed logical to include in the bill solutions that were deemed appropriate and useful during the vote on the above-mentioned law of 28 July 2000. (See on this point the annex entitled "European Works Councils Directive finally implemented" in English and French).
The Directive does not impose any one model for worker involvement, but rather aims to ensure compliance with the "before and after" principle (as described in recital 18 of the Directive), which is designed to maintain the employees' acquired rights as regards involvement in company decisions and means that "employee rights in force before the establishment of SEs should provide the basis for employee rights of involvement in the SE". Consequently, an SE will not be required to establish a structure for involvement or representation if there was no such system in place in the company in question.
The structure of the bill, which is divided into four chapters, reflects the overall approach of the Directive.
Chapter I contains the general provisions and Chapter IV contains various additional provisions, whilst Chapter II covers the negotiation of an agreement between the social partners and Chapter III establishes the standard rules, which will only apply if the partners have not reached an agreement (or agree to a standard application of the rules).
The different parties are therefore responsible for reaching an agreement on the ways in which workers are involved within the SE: the worker representatives meeting in a special negotiating body, on the one hand, and representatives of the companies concerned on the other. (This is the purpose of Chapter II of the bill).
The provisions contained in Chapter III, both those on informing and consulting workers, and those on worker participation in the SE management or supervisory board, constitute a set of subsidiary rules which will apply only if the parties are unable to reach an agreement (or if they agree to a standard application of the rules).
Thus the bill does not introduce any fundamentally new concepts into Luxembourg's labour law, either in terms of the general approach or in terms of the methods used:
* On the negotiation of an agreement (Chapter II), Luxembourg's labour law traditionally favours social dialogue and independent negotiation between the social partners, rather than imposing rigid mechanisms by means of legislation. The main aim of labour law is therefore to create a framework for the negotiating process. Although the special negotiating body was introduced fairly recently, it is not a completely new concept, as the same mechanism was foreseen in the aforementioned law of 28 July 2000 on the creation of a European Works Council.
* The standard rules (Chapter III) relate to the creation of a representative body designed to inform and consult employees, and to permit worker participation in the company's management or supervisory board where relevant.
In such cases, some SEs may need to set up a co-determination mechanism. The various worker representation bodies are well-known and well-established in Luxembourg's law, from workforce delegations (law of 18 May 1979) to joint committees (law of 6 May 1974) to European Works Councils (law of 28 July 2000). Co-determination in certain companies has also been part of the law in Luxembourg for over 30 years: the concept was introduced in the law of 6 May 1974.
So, to reiterate, the bill is consistent with those provisions of the Directive that build on the Directive on European Works Councils, which was implemented by the law of 28 July 2000 on European Works Councils. It did not seem reasonable to call into question the solutions that were accepted by the legislator and the social partners in 2000 when drafting that legislation, given that there is little fundamental difference in the context and objectives of the two acts.
The Government stated that the bill was clearly urgent and advantageous as "European companies could be a useful tool for attracting companies to the Luxembourg economy".
In view of the urgency, the Council of Government agreed on a draft document dated 11 June 2004, and called on the Minister for Labour and Employment to submit it to the social partners for comments. These comments would then be incorporated into the document, which would then be formally submitted for approval.
In a letter dated 17 June 2004, the Minister for Labour and Employment consulted the Union of Luxembourg Companies and the Joint European Secretariat of the OGB-L and LCGB trade unions. The views of these organisations were submitted to the Minister for Labour and Employment in letters dated 16 July (trade unions) and 23 July 2004 (employers).
The bill was revised in accordance with the mandate from the Council of Government, incorporating all the comments made by the social partners, who did not in fact express any fundamental opposition or differences of opinion.
The legislative procedure in Luxembourg requires that all chambers of trade likely to be affected by draft legislation be consulted about it. (In the case of employees, this means the Chamber of Labour, the Chamber of Private Sector Employees, and the Chamber of Civil Servants; on the employer side, the Chamber of Agriculture, the Chamber of Commerce and the Chamber of Crafts.)
Once these views have been submitted, the Council of Ministers gives its own opinion, taking into account the comments made by the chambers of trade, and the bill is then submitted to a Chamber of Deputies working committee before being put to the vote.
On 18 March 2005, the Chamber of Labour issued its opinion, which contained various comments and criticisms but basically indicated agreement with the principles of the bill.
On 25 March 2005, the Chamber of Private Sector Employees issued a fairly critical opinion on the government’s proposal.
In particular, the Chamber of Private Sector Employees felt that whilst the European company structure could prove economically beneficial for Luxembourg, it must not do so by disadvantaging workers.
The Chamber called for amendments to the bill, in particular to the rules on the composition of the special negotiating body and on worker involvement in SE management.
A 33-page opinion on the bill was issued by the Council of State (No 46,883, Doc. Parl. 5435) on 17 January 2006. As this report also contains a coordinated text it may well be examined by the Commission of the Chamber of Deputies. Furthermore, a joint opinion by the Chamber of Commerce and Chamber of Trades was published on 16 February 2006 in the parliamentary papers.