Works Councils in the European Union (EU)
May 18, 2010 QuickCounsel Download PDF
Multinational companies with operations in Europe cannot overlook the importance of legislation aimed at providing workers with input on workplace issues. A company’s actions can be declared void if management fails to comply with the laws on labor unions and works councils: most often, disregard of the requirements results in business plans being significantly delayed.
Twenty-seven countries are currently members of the EU, a regional trade and political organization. The EU has the right to promulgate directives which set forth the minimum obligations for member states regarding certain common goals, which obligations must be complied with by a certain date. Member states decide whether to enact new national laws or to amend existing laws to implement the goals, and can enact legislation that is more stringent than the directive.
EU Directives and Work Councils
The EU has passed directives that establish rules on aspects of employment law, including works councils. A works council is a body that represents a company’s workers for the purpose of receiving information from and consulting with the company’s management on a range of issues affecting employees. A works council is different from a trade union. Labor unions in Europe often work at an industry level rather than a company level.
Directive 94/45/EC requires the establishment of a European Works Council (“EWC”) by a business:
Directive 2002/14/EC requires all EU members to adopt certain minimum legal standards regarding information and consultation between management and workers. Rather than applying to companies with employees in two or more European countries, this directive is aimed at national works councils for companies of just 50 employees or more.
European states can and have adopted much lower thresholds with legislation that goes much further in granting power to works councils. Some countries have legislation that gives the works councils the right to withhold its opinion on a transaction, thereby effectively blocking the transaction. Some companies have both an EWC and a national works council; some just have a national works council. The role of works councils varies from country to country and company to company.
As reflected in corporate policies, sample press releases, and agreements, a company with business operations in Europe is typically required to inform and consult with works councils about company progress and prospects on an annual basis, and between those annual meetings if the company is contemplating significant changes that may affect jobs. Planned relocations, plant closures, outsourcing, pay rates, acquisitions, divestitures and collective dismissals are all topics which require a company to deal with its works council.
While works councils are taking a greater place in the consultation processes throughout Europe, one or more other employee representative bodies also may be involved in information and consultation procedures. The size of the company tends to have an impact on the body consulted. In France, for instance, employee delegates are required in all companies with at least 11 employees, while works councils are required only once the 50-employee threshold is reached.
While there might not be a requirement under the Directives that a company reaches an agreement with its works council if there are to be job losses in a particular situation, company management must make a good faith attempt to reach such an agreement with the council on how to proceed.
It is important that companies and their legal advisers recognize that the laws on labor unions and works councils differ greatly from country to country in Europe. Any company planning to undertake big changes must take into account the obligation to consult with worker representatives. Consultation will often take longer than non-European management might think, so timetables need to reflect this appropriately.
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