Worker participation and the Company Law Package of 2018

Democracy at work: information, consultation and board-level employee participation

In early 2018, the Commission’s proposed Company Law Package was being discussed intensively before making it into the European Parliament, with a view to being passed before the European Parliament elections in May 2018. The European Parliament has put forward important amendments to improve workers’ rights to democracy at work in the Company Law Package.

On 25 April 2018, the European Commission published its Proposal for a Directive amending Directive (EU) 2017/1132 regarding cross-border conversions, mergers and divisions and its Proposal for a Directive amending Directive (EU) 2017/1132 regarding the use of digital tools and processes in company law.

The Commission’s proposal would enable companies to convert cross-border by changing their legal form in one Member State into a similar legal form in another Member State, to merge and to divide. Despite the Commission's declaration to to protect the social dimension, the primary objective of the proposal was to promote company mobility.

Information and consultation prior to and during the legal reorganisation of the company and workers’ involvement in the future reorganised companies must be ensured in the Company Law Package.

The Commission’s proposal skirts existing EU provisions on democracy at work or ignores them entirely; in line with the fundamental concept of the acquis communautaire, where the intersection between company law and workers’ rights is evident, each new piece of legislation should take prior legislation into account in order to ensure the cumulative coherence of the whole EU regulatory framework.

A summary analysis of the implications of the Company Law Package, along with a set of recommendations to improve worker involvement rights, strengthen procedures for discouraging abusive behaviour such as tax evasion, and reduce the potential for fraud through online company law tools, can be found in Hoffmann and Vitols 2018. There are two dimensions of workers’ involvement rights which must be strengthened: firstly, employees and their representatives at all levels of the company need to be adequately informed and consulted about the company’s plans: they must be involved in addressing the potential implications for employment and the strategies of the company.

Secondly, where the resulting company is of a European scale, information and consultation within the company must be complemented by transnational information and consultation arrangements, as is already the case for the formation of European Companies (SEs). Equally, where employee representatives have the right to representation within the governing bodies of the company, this form of representation must not only be maintained, it must also be extended to the workforces on a Europe-wide scale.

There is no need to reinvent the wheel: where the company law package intersects with workers’ rights, it must be more explicitly embedded into existing employment law, thereby not only strengthening workers’ rights in practice, but also increasing legal certainty for all parties.

However, the lessons from the application of the SE Directive and the Cross-Border Mergers Directive have not been learnt. ETUI research shows that both Directives have been misused to freeze out employee representation, even where a company later reaches thresholds above which representation rights would apply (Cremers and Vitols forthcoming; see also Sick 2015). Rather than cementing these current conditions, in which the new legal form is applied, there is a clear need for a dynamic instrument that is able to address changes over time.

The ETUC’s demands for safeguards to be included in the Company Law Package include:

Prior to and during the cross-border legal reorganisation:

embed the company law package explicitly into the EU acquis on infor- mation and consultation rights at national and transnational levels; and
ensure application of standard rules for employee involvement.

After the cross-border legal reorganisation:

ensure adequate European-scale information, consultation and board- level employee representation and protect acquired rights;
ensure the existence of genuine and competent management;
introduce new dynamic elements, including the right to renegotiate; and
impose a moratorium on legal reorganisations that would erode employee representation arrangements for at least ten years.

The ETUC position paper on workers' rights and the company law package, 'The new company law package 2018: A missed opportunity for more democracy at work', was adopted in June 2018.

One step forward, two steps back for democracy at work in the Company Law Package

Research conducted at the University of Maastricht for the ETUI indicates that cross-border corporate reorganisations are becoming increasingly widespread, despite the lack of an EU legal framework for cross-border conversions or divisions, and the existence of fundamental inconsistencies between Member States’ legislation on these matters (Figures 4.13 and 4.14) (Biermeyer and Meyer 2018).