There is no general right to employee board-level representation in Spain. Although the draft legislation to implement the directive led to some debate among experts and was considered in detail by the Economic and Social Council, on which both employers and unions are represented, there was no wider public debate.
There is no general right to employee board-level representation in Spain in either the public or the private sector. There are a small number of union representatives on the boards of some public and recently privatised companies and employees also have rights to be represented in local savings banks. However, these are very much the exceptions and Spain has no tradition of employee involvement at board level.
Work on transposing the directive began before the change of government in Spain in March 2004 and by July 2004 an initial draft of the necessary legislation had already been prepared. For more details see report from Armando Fernandez Steinko (Universidad Complutense de Madrid) September 2004. This draft was presented to unions and employers in September 2004 and was subsequently discussed in Spain's Economic and Social Council (CES) which brings together representatives of the unions, employers and other groups, such as farmers and consumers. The CES presented its opinion in May 2005, which was approved by 31 votes to two, with six abstentions. A draft bill was approved by the government in November 2005 and presented to the Spanish parliament. It finally completed all its parliamentary stages in October 2006. The long delay meant that the legislation finally passed also transposed the directive on employee involvement in European cooperative societies.
During the long period before it was finally passed, there was some expert debate about the proposal, with the unions considering whether it could lead to a more participative culture in Spanish companies, while the employers were hostile to any limitation on their right to manage. However, there was no widespread public debate.
Directive was transposed by law in October 2006, two years after the October 2004 deadline.
There was separate legislation making the changes necessary to adapt Spanish company legislation to the Regulation on European companies. It came into effect on 1 November 2004.
Special negotiating body (SNB)
Spanish SNB members for a European company are chosen by the unions which have a majority on the works council or, in smaller companies, among the employee delegates. Overall the number of SNB members per union should be in proportion to the support each union received in the works council elections.
The legislation deals with the choice of both Spanish SNB members and Spanish members of the SE representative body in the same article. In both cases they are to be chosen by the unions that have a majority on the works council or works councils of the companies involved. In companies with fewer than 50 employees, where the duties of the works council are carried out by "employee delegates", it is the unions with a majority of these delegates who make the choice. The selection is made either through agreement of the unions or by a majority of the members of the works council/s and/or employee delegates themselves. In any case the selection of members should be in proportion to the representation obtained by each union in the works council and employee delegate elections for the entirety of the workplaces covered (Article 29).
The legislation makes no provision for what happens if there are no works council/s or employee delegates.
External union representatives are specifically permitted to be members of the SNB.
The legislation specifically states that Spanish employees may be represented on the SNB by an external union representative. However, he or she must be a member of one of the "most representative unions" at national level — a status which depends on winning at least 10% of the seats in works council elections across the country —or be a member of a union which is "representative" at company level, that is one which has at least 10% of the seats on the company works council/s, or among the company's employee delegates (Article 29). Only two union confederations, CCOO and UGT, are "most representative" unions at national level.
Funding limited to "at least one expert".
The companies involved must bear the costs of the SNB. They are required "provide it with the material and financial resources sufficient for it to carry out its functions adequately". This includes the costs of "at least one expert", although there is no limit on the number of experts the SNB can ask to help it in carrying out its duties (Article 9).
Spanish members of the SNB are also entitled to 60 hours paid time off a year in order to carry out their functions. This is in addition to time off to attend meetings, and any other time-off rights they may have in respect of their national positions, for example as national works council members (Article 31).
Standard rules under the fallback procedure
Spanish members of the SE representative body are chosen by the unions which have a majority on the works council or, in smaller companies, among the employee delegates. Overall the number of members per union should be in proportion to the support each union received in the works council elections.
Spanish members of the SE representative body, known in the legislation as the representative body of the workers (órgano de representación de los trabajadores) are chosen by the unions that have a majority on the works council or works councils of the companies involved. In companies with fewer than 50 employees, where the duties of the works council are carried out by "employee delegates", it is the unions with a majority of these delegates who make the choice. The selection is made either through agreement of the unions or by a majority of the members of the works council/s and/or employee delegates themselves. In any case the selection of members should be in proportion to the representation obtained by each union in the works council and employee delegate elections for the entirety of the workplaces covered.
The Article dealing with the representative body also deals with Spanish membership of the SNB, and the arrangements are largely the same. However, while SNB members can be either employees or external union representatives, Spanish representative body members must be employees. They must also be one of the existing employee representatives – either as a works council member, an employee delegates or a trade union delegate (Article 29). Trade union delegates are only found in workplaces with more than 250 employees, where members of each union which has seats on the works council have a legal right to elect a trade union delegate.
The legislation makes no provision for what happens if there are no works council/s or employee delegates.
The company should bear the costs of the representative body, including "at least one expert advisor "for a given area".
The legislation states that the European company must bear the costs of the representative body, and it specifically refers to "the costs of interpretation, subsistence, accommodation and travel" for its members. In addition, it states that the company must cover the costs of "at least one expert", although there is no limit on the number of experts the representative body can ask to help it in carrying out its duties (Article 18).
Spanish members of the representative body are also entitled to 60 hours paid time off a year in order to carry out their functions. This is in addition to time off to attend meetings, their right to paid time off for training, and any other time-off rights they may have in respect of their national positions, for example as national works council members (Article 31).
Spanish employee representatives at board level also have the right to 60 hours a year paid time off (Article 31).
Employee representatives at board level from Spain are chosen in the same way as SNB and representative body members – by the unions.
The legislation states that board members who represent Spanish employees in a European company are chosen in the same way as Spanish SNB members and Spanish members of the representative body (Article 30). This means that they are chosen by the unions that have a majority on the works council or works councils (among the employee delegates in smaller companies). The members chosen should be in proportion to the representation obtained by each union in the works council and employee delegate elections for the entirety of the workplaces covered. (See section on national seats on the SE representative body for further details.) The legislation does not spell out whether only employees can be chosen as board level representatives.
Misuse of procedures and structural change
Misuse of procedures – to deprive employees of their rights to involvement –should lead to a renegotiation of the agreement.
The Spanish legislation states that, where an SE is set up with the aim of depriving employees of their right to be involved or damaging these rights, the agreement should be renegotiated. The same applies when there are substantial changes after an SE has been set up which indicate the same aim. However, a court must decide that this was the case before there can be new negotiations (Article 26).
Other than where a court has found that there was an intention to misuse the procedures, there is no requirement in the Spanish legislation to renegotiate the agreement if there has been structural change.
The only circumstances in which structural changes will inevitably lead to renegotiation is where a court decides that these changes show that the intention in setting up the SE in its original form was to deprive employees of their rights (see section on misuse of procedures). In other circumstances there is no requirement for the agreement to be renegotiated.
The differing positions of unions and employers emerged in the discussions on the legislation in the economic and social council (CES). The key areas of disagreement were whether external union representatives should have a role, the payment of experts, the treatment of confidential information and the time off and training rights of those representing employees.
Draft legislation was submitted to the economic and social council (CES), on which both unions and employers' associations are represented. The CES opinion, published on 18 May 2005, identified four main areas of disagreement between the unions and the employers.
On the possibility of involving external union representatives as members of the SNB or representative body, the employers thought that this should be opposed at all costs, as it was foreign to the Spanish system of industrial relations; the unions, on the other hand, considered that this was an arrangement which was found in other EU states and which should also be considered for the representative body. On the financing of experts, there was a difference between the two sides on the level of support which the companies should pay for. On confidential information, the employers wanted to extend the circumstances in which information could be withheld from employee representatives and not limit it to "exceptional circumstances". On paid time off and training, the employers considered that the amount proposed was excessive and that training should be included within the 60 hours the legislation proposed; the unions welcomed the right to separate time off for training, which they considered should be specialised and appropriate to the tasks the representatives were being asked to perform.
L. Fulton (2008) Anchoring the European Company in National Law - Country Overviews (online publication, prepared for worker-participation.eu)
Armando Fernández Steinko, Universidad Complutense de Madrid
The transposition of the Regulation on employee involvement was finally approved by the Congress (lower house) with the support of all groups except the Conservative Party (Partido Popular).
The amendments proposed by the Congress were related to:
a.) the need to adapt some minor aspects of the Spanish Law on the Prevention of Risks in the Workplace (Ley de Prevención de riesgos laborales) of 1995 to the Regulation; and
b.) the need to introduce into the preamble of the transposition reference to §129.2 of the Spanish Constitution related to the promotion of company participation, the promotion of cooperatives and the access of employees to the ownership of the means of production.
The Socialist Group stressed that the Directive is the result of the agreement of the social partners at the European level. The amendments proposed by the Conservative Party (Partido Popular), which has a majority in the Senate but not in the Congress, were not approved.
The arguments of the Conservative senator Azpiroz Villar were almost identical to those of the Spanish employers’ association. He made a long polemical speech questioning the real meaning of the “involvement” of employees, on the grounds that all employees belonging to a firm are in one way or another already “involved” in the firm’s activities. He accepted the possibility of incorporating assessors representing labour in the special negotiating body, but expressed his doubts about the “unnatural” possibility of non-employees being part of the SNB. He also stressed the differences between the Spanish and “German” traditions of industrial relations in order to demonstrate the “unnatural character” of the Directive from the point of view of Spanish industrial relations. He also expressed his doubts about confidentiality issues, since technological and other sensitive issues and industrial secrets are becoming more important in modern competitive contexts.
Armando Fernández Steinko (Universidad Complutense de Madrid)
SE Regulation: Transposition of the Regulation was finally approved by the Congress (lower house) at the beginning of 2006. The parliamentary discussions were not significant as the proposals of the parliamentary groups were mainly technical. In general terms, it was seen as a positive step towards the creation of legal guarantees under Spanish law on the SE, the modernization of Spanish commercial law – mainly through the possibility of dual-tier corporate governance – and as a possible incentive for foreign firms to invest in Spain and so contribute to reducing the worrying trade deficit. The Socialist parliamentary group emphasised that the Regulation could lead to significant administrative cost savings for firms.
SE Directive: Congress approval of transposition of the Directive at committee level is expected in June 2006. It can then be sent to the Senate (upper house) and return to the Congress after the summer for definitive approval. The political and technical frame for the position of the Socialist majority group was the ruling of the Economic and Social Council ( Consejo Económico y Social) in 2005 (see Report June 2005). The amendments of the conservative Partido Popular included a proposal to regulate confidentiality more strictly, to remove trade union members not belonging to the firm from corporate boards, and to change the composition of the special negotiating body. None of these amendments were included in the (almost) definitive text. The only real amendment to the transposition text proposed by Congress was the extension of the Directive to European cooperatives with SE status (‘Second additional provision’) (four articles).
A) UNIONS (CCOO & UGT)
In the discussions and analyses of the trade unions the consensus seems to be that the SE Regulation and Directive could become a major issue in the medium term, but not for the time being. Firms do not feel particularly motivated to make use of it as it does not provide clear or significant benefits. Only in the context of possible tax harmonization at the EU level could it lead to significant changes in the Spanish corporate landscape. At present, the Directive is mostly an internal issue in countries with big European firms and board-level participation legislation than a real pan-European issue.
Nevertheless, in the last few months there has been some movement in the insurance sector. When the German firm Allianz, with several thousand employees in a number of Spanish subsidiaries, decided to become an SE, the possibility arose of sending a Spanish representative to the central management board. This issue generated a discussion on corporate governance within the trade unions (finance and insurance sector) which can be considered something of a novelty in Spain, although its possible long-term and strategic significance for society as a whole and the labour movement in particular has not yet come under discussion. It all depends on the direction Allianz will take.
b) Employers and firms
During the parliamentary debates on the Directive, the business press emphasised that its main purpose was to extend the board-level participation traditions of central and northern Europe to the Spanish corporate system. In this way it was attempting to portray it as an ’artificial’ or ’imported’ issue in Spanish industrial relations. This has been, more or less, the ‘official’ position of the Spanish Employers’ Association since the beginning of the discussions on the SE.
Nevertheless, three Spanish firms (whose names were not revealed by the Employers’ Association) – two in the banking sector and one in industry – showed some interest. After examining the details of the Regulation and the Directive they decided not to establish an SE, however. Their arguments were not political but mainly economic and technical: they consider SE law as ’much too complicated’ in technical terms and they do not see how it could lead to a real reduction in administrative costs within their European activities. Another reason for the reluctance of Spanish firms to make use of the SE legislation, according to the Employers’ Association, is simply that there are not many Spanish firms with sufficient capital or otherwise meeting the necessary requirements. For example: there are fewer than 10 Spanish firms with an EWC. Such firms could be considered the first candidates for becoming an SE. As the 10th Directive on transnational mergers will soon be approved by the Spanish Parliament, Spanish firms are more likely to make use of it.
Armando Fernández Steinko (Universidad Complutense de Madrid)
The draft laws transposing the Directive and the Regulation were finally approved by the Government on 22 October 2005 after consultation with the social partners and the inclusion of some of their proposals. The Regulation draft will be probably be voted on in the Senate (upper house) within the next few weeks and in the Congress (lower house) probably after summer 2005. Transposition of the Directive is a more complex process. The Economic and Social Council ( Consejo Económico y Social) has already given its ruling incorporating the social partners’ main comments. The High Council of Justice and the Council of State must rule on the transposition drafts before they are approved by the Congress. The transposition draft of the Directive is almost a transcription of the EU text. In its introduction the draft stresses the importance of collective agreements in the Spanish Constitution (1978) and the subsidiarity principle for regulating transposition of EU laws. The Government and the social partners are satisfied with the transposition process. The employers raised general objections and exhibited scepticism regarding the SE statute but insisted that their objections were not so much against transposition as against the SE project as a whole. The trade unions were particularly receptive and cooperative.
Some of the main transposition issues are as follows:
The transposition draft of the Regulation expressly leaves open the possibility for the Government to oppose the transfer of an SE's registered office from Spanish territory due to a merger, etc. If the company is under the control of the Spanish authorities, a transfer may also be opposed (§319).
It stresses the right to sell their shares of shareholders who vote against the decision of an SE to change the country of its registered office, along with those of persons who oppose a merger, the creation of a holding or the takeover of a company registered in another EU country (§319, 324).
Creditors whose claims were established before publication of the date of transfer of the registered office may also oppose this decision (§314.b).
Both the monistic and the dualistic system of corporate government are permitted. This is an innovation and is considered a pilot project in the Spanish corporate system (§ 326).
Registration offices are to supervise the procedures for creating and transferring registered offices and issuing the necessary certificates.
TRADE UNIONS (CCOO & UGT)
The trade unions are basically satisfied with the negotiation process and the spirit of the EU statute, not so much because they expect many Spanish firms to make use of it, but because it may give rise to a public discussion of company democracy in Spain. Among other things:
- from the beginning CCOO has seen a need for a single draft transposing both the Regulation and the Directive;
- the trade unions believe that the possibility for trade unionists not belonging to the company or its subsidiaries to be elected to the negotiating committee should be extended to the regular management organs of the company.
Spanish employers still have fundamental reservations concerning the Directive project and, indirectly, transposition. They also remain sceptical about the likely effects of the SE regulation on the Spanish corporate system. This general reason, on top of particular objections, led them to withhold their signature from the Directive transposition draft negotiated between the social partners as part of the general social dialogue. Their main legal arguments against the SE statute have been commented on previously. Their reservations about the draft are mainly based on the argument that it goes against the principle of subsidiarity and does not respect Spanish industrial relations traditions. Their particular criticisms are as follows:
- The employees do not agree that the draft leaves open the possibility for the incorporation of trade unionists not belonging to a company or any of its subsidiaries to become members of the negotiating committee. They argue that this measure is not in keeping with the Spanish industrial relations model.
- The Directive does not necessarily make companies responsible for financing the presence of al least one external expert acting on behalf of labour in the negotiating committee and the management organs of the firm, as in the draft. Their objections to external experts include the fact that, if such experts do not respect the confidentiality of sensitive information (see below) companies have no means (for example, dismissal) of sanctioning their actions.
- The draft should more directly reflect the spirit of the Directive concerning the restriction of employees’ information rights. There should be restrictions not just in exceptional cases but also in non-exceptional cases.
- The employers do not accept the SE's obligation to bear the costs of training employee representatives because these costs are on top of the 60 paid hours allotted to such representatives each year for fulfilment of their duties.
At the end of June 2005, no new firms announced an intention to make use of the SE regulation. The only firm which has openly declared an interest in the SE regulation so far (Acelor), announced in spring 2005 that it had changed its mind.