1. EWC Recast Directive: Trade union demands for changes

EWC Recast Directive trade union demands

While not dismissing the need to improve practice, European trade unions presented a catalogue of demands for changes to the current legislative foundations for EWCs (ETUC, 2017a). These demands are largely built upon the foundations of solid research evidence and are clearly supported by the practical experience gained by unions in coordinating hundreds of European Works Councils (EWCs). The ETUC catalogue of 10 key demands can be grouped into several clusters. The first cluster comprises demands for the improvement of the existing definitions in the EWC Recast Directive. The first definition in this group is the central notion of the ‘transnational character of a matter’ (Article 1.4); it is currently formulated too generally and vaguely, hence EWCs are too often denied the right to information and consultation by companies unilaterally classifying matters as purely national. Trade unions demand that the existing definition of transnationality be complemented with the criteria set out in the Preamble (Recital 16).

A second definition requiring review is the exemption of the so-called Article 13 agreements (i.e. pre-Directive agreements) from the standards of the Directive. In 2018, 22 years after the entry into force of the EWC Directive, 37% of active EWCs still operate on the basis of such exempted pre-Directive agreements (www.ewcdb.eu, January 2018). Trade unions rightly argue that the reasons to maintain the exemption (which was originally designed as an incentive to stimulate the establishment of EWCs prior to 1996) can no longer be justified and should finally be abolished. The third definition for which the trade unions demand improvement is that of the ‘controlling undertaking’ (Article 2.1) which currently excludes common forms of corporate organisation, such as contract management, franchises, or joint ventures. Furthermore, the lack of objective criteria to determine the location of the ‘representative agent’ of companies whose headquarters lie outside the EEA invites arbitrary ‘regime shopping’. The fourth area for improvement are the vague and excessively restrictive provisions concerning confidentiality which are found in many negotiated agreements; too often, these are used to exclude or block information and consultation processes. When combined with the limited options of seeking judicial clarification or remedies, these definitions effectively cripple EWCs.

Other trade union demands point to the quality of the subsidiary requirements (see also ETUI (2014: 98) on their standard-setting impact), the lack of access to justice, and the enforcement of EWC rights. One of the most glaring examples of the latter is the lack of an unambiguous statutory obligation to set up EWCs where requests to set up Special Negotiation Bodies (SNBs) have been ignored, or where SNBs have negotiated fruitlessly for three years. As evidenced by research (Jagodziński 2015), the national frameworks in this area leave much room for improvement and this remains a significant hurdle for attempts to set up EWCs in the first place. The last cluster of demands concerns the lack of resources for EWCs. Firstly, as practice shows, EWCs with trade union support operate more efficiently; the problem remains, however, that trade unions are too often denied access to EWCs. One remedy is to formalise the right of experts to participate in all EWC and Select Committee meetings and all other activities of EWCs. Secondly, more resources and rights need to be geared towards an appropriate, issue driven interlinkage between the EU level of information and consultation and its national counterparts. Provisions to ensure this are currently left to the Member States to define, yet none have done so in any meaningful way.

2. Covid-19 and company restructuring

Infographic Covid-19 induced restructuring by R. Jagodziński

Workers’ rights remain sacrosanct in a lockdown From the very beginning of the pandemic, every multinational was confronted with a need to address the potential and/or actual impact of the disease and to implement distancing measures across all their sites around the globe. The measures introduced to contain the spread of Covid-19 impacted all areas of economic activity: retail, manufacturing, public services, transport, energy and utilities, construction, agriculture, and culture, to name just a few. Accordingly, employee representatives at all levels of the company also needed to address the measures proposed to mitigate these impacts: local employee representatives and trade unions, health and safety representatives, board-level employee representatives, and collective bargaining actors. In European-scale companies, European Works Councils and SE-Works Councils also had key roles to play in addressing the cross-border implications of measures enacted to try to stem the spread of Covid-19. This section will explore the ways in which the kinds of measures enacted by companies in response to the pandemic were (or should have been) subject to information, consultation and negotiation requirements. Not one of these processes is complete by itself: different institutions of employee representation address different aspects, and in multinational companies, the European Works Council has the responsibility and competence to address the transnational dimensions of these policies and responses.

The pandemic changed everything at once

Figure 6.4 above depicts some of the many interrelated issues that were thrown up by the pandemic and companies’ responses to it. In the initial phase of the pandemic, sites started to be locked down in an effort to mitigate the spread of Covid-19. As a result of the closely interlocked supply chains within and across companies, in the manufacturing sector in particular, there were knock-on effects which were not immediately related to health measures: some sites had to halt their activities simply because their suppliers had been forced to close down. Essential services such as utilities and transport, both in the public and in the private sectors, had to find a way to continue to function despite the pandemic. Working from home surged in those sectors whose activities made it possible. In other sectors, such as healthcare and logistics, workloads increased exponentially (for more details on the impact of Covid-19 on working conditions in the health sector, see Chapter 5). Protecting the health of these essential workers throughout the lockdown was an overriding concern, particularly in the health and public transport sectors. Once the economies started reopening, it then became a priority to ensure the safety of workers in other sectors, such as hospitality and retail. Companies, employee representatives and unions needed to manage a sudden surge in working from home, and to engage with the different national regimes of short-time work or technical unemployment schemes. As economic activity tentatively resumed, companies then had to address the labour law and health and safety concerns of bringing their employees back to work, which in many cases also raised issues of whether such returns to work were voluntary or obligatory (ETUC, 2020a). Finally, companies began to try to manage their recovery, by initiating new restructuring plans or by accelerating plans that had already been in development prior to the pandemic (Kirton-Darling and Barthès, 2020; Eurofound 2020b). Where these measures had to be taken across different national sites of European multinationals, the need to accommodate sometimes significant differences in national labour law and social security regimes added additional layers and challenges to an already complex process. The task of addressing these comprehensively and coherently fell not only to management, but also to employee representatives and their unions.

Every piece of the complex machinery of multi-level workers’ participation has its place

As illustrated in Figure 6.4, company-level responses to the Covid-19 crisis engage all levels of workers’ participation institutions. Workplace health and safety representatives are particularly front and centre in addressing the challenges and risks to workers created by the pandemic (see also the next page). At the local or workplace level, it is the local employee representation bodies, such as works councils or trade unions, which are to be informed and consulted by employers and which engage in negotiations about the ways in which the company’s Covid-19 measures are to be implemented. Board-level Employee Representatives, where these exist, also have a key role to play in ensuring that the needs and interests of the workforce are taken into account at the top echelons of the company’s decision-making structures when company-wide strategic decisions regarding the response to the pandemic are made.

Within European-scale companies, all these adaptations made to mitigate the growing crisis must take place simultaneously at all levels, increasing the need to coordinate across them. This is where the transnational level of interest representation within European Works Councils, European Company (SE) Works Councils, and in many cases at the board level have a crucial role to play. This transnational level must essentially function as a bridge between national employee representations, so that the information and consultation about company responses to the Covid19 crisis can take place across borders and at national level, depending on where decisions are being made and where they are being implemented. The European Trade Union Federations (ETUFs), which are the relevant European sectoral organisations, were able to draw upon a long history of support to their members active at the transnational level in EWCs and SE-WCs. Working together, the ETUFs compiled information briefings and advice to European Works Councils on how to address the challenges of the pandemic. The ETUC and the ETUFs wrote to Commissioner Schmitt, insisting that the pandemic meant that workers’ involvement rights needed to be strengthened and enforced more urgently than ever (ETUC et al., 2020). Collective bargaining, conducted primarily at the local, regional or national levels, rounds out the picture by securing collectively agreed frameworks and solutions. The modalities of short-time work, for example, were laid down in collective agreements in many countries. (For an overview of the European legal framework for workers’ rights to information, consultation and board-level participation, see ETUI and ETUC, 2017: 55.).

In sum, the response to the effects of Covid-19 in the world of work did not take place in a vacuum, but through an interactive multi-level system which seeks to get all the right people around the table to play their respective roles in social dialogue, information and consultation, negotiation and collective bargaining. Data on EWCs and SE-WCs also clearly shows that where trade union support is present, employee representation works more efficiently (De Spiegelaere and Jagodziński, 2019). It is too soon to tell how well this worked in practice. Initial evidence suggests a wide variety of responses: local and national-level employee representatives, health and safety representatives and trade unions seem to have played the roles clearly ascribed to them in the national context. At the European level, however, things were less predictable: some EWCs were closely informed and even consulted about company-wide measures adopted, while others played no role whatsoever.

3. Converging views on Board-level Employee Representation?

BLER regulations in EEA

The regulatory picture of board-level employee representation has not changed much recently (Conchon, 2015). Only one major change should be noted: as shown in Figure 4.15 above, Czechia has regained its place among the countries with widespread coverage of participation rights. A reform in 2012 removed the right of employees to be represented in jointstock companies, but it has been reintroduced from January 2017. Employees are now entitled to one third of the seats in supervisory boards in joint-stock companies with over 500 employees. Under the new regulations, however, joint-stock companies can choose their governance structure and may seek to avoid dualistic boards. Despite the absence of further regulatory changes concerning Board-level Employee Representation rights, the issue has come to the fore of the political agenda for several actors. Debates on workers’ participation seem now more alive than seen since the 1970s. Indeed, the UK, Belgium and Italy, which traditionally lack board-level participation rights (Page, 2011) have seen some developments in favour of the introduction of board-level employee representation.

In the UK, Theresa May announced in July 2016 her intention to involve employees and consumers in corporate governance. The TUC welcomed this initiative, expecting workers would get the right to sit and vote on company boards. In the end, the Green Paper on Corporate Governance Reform (November 2016) left stakeholders’ involvement as an empty shell. Rather than mandating the appointment of employee representatives to company boards, three options are proposed, which prioritise unilateral management initiative over binding rules: i) introducing consultative stakeholder advisory panels; ii) assigning a non-executive director the responsibility of watching over stakeholders’ interests; and iii) strengthening companies’ annual reporting requirements. In Belgium, where unions and political parties have historically opposed workers’ participation in company boards (Van Gies and De Spiegelaere, 2015), the debate may be reopened. The Socialist Party announced its support for a new form of private company with mandatory board-level employee representation. A concrete proposal should be defined by March 2017 after an internal reflection process: it would draw on full parity rules and a bicameral board structure in which one of the chambers fully represents employees’ interests (Ferreras, 2012). Italy also witnessed some evolution in the debate on workers’ participation.

Italian unions have traditionally resisted employees’ board-level participation rights but recently the three main confederations jointly declared BLER to be ‘fundamental’ to a more balanced industrial democracy. Their position does however depart from the German model of co-determination, and stresses strictly different roles for management/capital and labour (CGIL, CISL and UIL, 2016). The Spanish unions UGT and CCOO have also confirmed their support for workers’ board-level participation rights. During the crisis, corruption scandals in savings banks revealed insufficient transparency and control in the Spanish model of workers’ board-level representation. Stung by the damage caused to the reputation of trade unions and the near disappearance of BLER in Spain, close scrutiny and an internal debate led CCOO to declare a renewed interest in a BLER system resembling the German one (CCOO, 2013 and 2016). For its part, the ETUC has called for EU standard rules on articulated information, consultation and BLER rights in European company boards, building upon its 2014 resolution (ETUC, 2016). Despite important discrepancies, these positions reveal a converging agenda in Europe in which workers’ board-level participation rights are a political priority.

4. How does Board-level Employee Representation become European?

How does BLER become European

Board-level employee representation (BLER) continued to take on a European dimension slowly but steadily in companies registered under European company law (SE, CBM or SCE Directives) or, in some jurisdictions, under national law. In the case of established European Companies (Societas Europaea (SE)), the ETUI has identified 66 which have provisions for board-level employee representation (ETUI, 2017a). At least 25 of these SEs have BLER mandated in at least two countries (13 SEs count two countries, 9 SEs count three countries, and 3 SEs count four countries, as Figure 4.14a above shows). Germany stands out not only for having the vast majority of SEs with BLER headquartered in its territory (53 out of 66), but also excelling in terms of Europeanisation: the 12 SEs with the strongest worker representation on boards in multinational companies (i.e. in at least three different countries) are based in Germany, except for one in Austria (ETUI, 2017b).

Companies that emerge from a cross-border merger may see the Europeanisation of their BLER. The ETUI has identified 75 cross-border mergers between 2008 and 2012 where employee participation issues arose in merger plans (Biermeyer and Meyer, 2015). SEs may also be involved in cross-border mergers. Overall, however, it could often not be clarified whether an agreement had been struck by a Special Negotiating Body or if instead management had unilaterally applied the CBM Directive’s standard rules.

However, when it is not European but national law which brings about the internationalisation of mandates to cover subsidiaries in other European countries, serious challenges may arise. How should the workers’ side of the board in parent companies be comprised in such cases? In the absence of universally applicable rules in Europe, national legislatures have adopted various solutions. Some remain silent, allowing in practice the inclusion of workers abroad through voluntary negotiations (e.g. Germany or Sweden). Others, such as France, Denmark or Norway, explicitly provide for the possibility to extend participation rights to workers employed by foreign subsidiaries, under certain conditions (ETUI and ETUC 2015: 65) (see Figure 4.14b above). In Denmark and Norway, such workers are granted the right to vote and to be elected to the board of the parent company (Mulder 2017).

However, group Board-level Employee Representation can only be established by negotiated group arrangements, which are seldom used in practice. In Denmark, only one company is known to have applied it, and only 24 Norwegian groups have been found to have made such arrangements. In France, when employees are entitled to at least two board representatives, the general assembly of shareholders can opt for an appointment procedure in which the second member must be appointed by the European (or SE-) Works Council, if any exists. This solution grants a European mandate to the member appointed, who can be employed either in France or in a foreign subsidiary. The Institut Français des Administrateurs has encouraged internationalised companies to open the election procedure to foreign subsidiaries as a means to rebalance representation between workers in France and abroad (IFA, 2014).

However, insecurities arise from conflict between national laws and the lack of EU provisions on BLER. The European Court of Justice (ECJ) is currently considering the legal question of whether a Member State is obliged to explicitly include workers from foreign subsidiaries in the election procedures for the board of a parent company in order to comply with EU principles of non-discrimination on the grounds of nationality and the principle of workers’ freedom of movement (Arts. 18 and 45 of the Treaty on the Functioning of the European Union) (C566/15 Erzberger/TUI AG). A decision on this potentially landmark case was expected in summer 2017.

5. European Works Councils - Workers in transnational restructuring: closing the gap

EWCs and Brexit

When a company undertakes a transnational restructuring project, it is essential for employees and their representatives to have direct access to the transnational management of the company. Talking to the national management at the local or national level is not enough to be able to really influence the company’s decision or defend the workers’ interests. A European Works Council (EWC) can serve that purpose. It brings together employee representatives from different European countries and the transnational management. It enables the workers to be informed about the transnational strategy of the company and consulted about transnational restructuring plans, and can, ultimately, enable a move towards a coordinated European employee response.

European Works Councils, however, are not present in all companies facing transnational restructuring. Some of those companies might not meet the thresholds for the establishment of an EWC (1,000 employees in total, of which 150 are employed in at least two Member States). But even if they meet these thresholds, the establishment of an EWC is, as a rule, the outcome of lengthy negotiations initiated by an employee or the employer. Using data from the European Restructuring Monitor, maintained by Eurofound (Hurley et al., 2013), and the ETUI European Works Councils Database, Figure 4.10 above displays the number of national and European transnational restructuring cases in the last three years, and whether or not the companies involved in these cases had an EWC in place. The figures should be interpreted with some caution as the data on company restructuring has some drawbacks (De Spiegelaere 2017). The figures show that in the last three years, the impact of most restructuring cases was confined to the local or national level, that is, only affecting sites within a single country. However, about 7% of all restructuring cases had a European scope. In these cases, sites in more than one (European) country were involved. Here, an EWC is essential in order for a genuine process of transnational information and consultation of the employees to take place.

However, in about one third of all European transnational restructuring cases, there was no EWC established in the company concerned. The second figure looks at the jobs declared to be at stake in these national and European transnational restructuring cases. As companies involved in transnational restructuring tend to be larger, they represent a larger share of the ‘jobs at stake’ in restructuring. About one fourth of all jobs at stake in the last three years (as registered by the European Restructuring Monitor) were related to transnational restructuring measures. 8% of all jobs at stake were located in companies which did not have an EWC, accounting for about one third of all jobs at stake in European transnational restructuring projects. Remarkably, all companies working under the European Company (Societas Europaea (SE)) statute which were involved in transnational restructuring did have an SE- Works Council installed. One of the main differences between an EWC and an SE- Works Council is that for the latter, negotiations about workers’ involvement are obligatory for the establishment of the SE. Evidently, policy could quite easily rectify the divide between those with transnational representation and those without by adding a similar obligation to the EWC policy framework. The impending evaluation of the EWC Recast regulation could provide an excellent opportunity to close this gap.


6. European Participation Index (EPI): Uneven participation rights

EPI in 2013 (Vitols 2013) Works Councils in Europe

Previous editions of Benchmarking Working Europe applied the European Participation Index (EPI), an instrument for measuring the strength of worker participation in different countries (ETUI, 2009: 55; ETUI, 2011: 98-99; ETUI, 2012: 104).

The EPI includes three sources of worker influence on companies:

  1. board-level employee representation;
  2. workplace representation; and
  3. collective bargaining strength, as measured through the percentage of the workforce covered by collective bargaining and trade union membership.

The components are scaled: countries get an EPI score of between 100 (very strong participation rights) to 0 (no participation rights). The EPI is described in detail in Vitols (2010). In successive annual evaluations, countries that score higher on the EPI have performed better on all eight of the Europe 2020 headline indicators. Income inequality is also lower in countries with higher EPI scores. The original EPI was based on data gathered in 2009, at the start of the financial crisis.

An update based on data from 2013 shows that developments within its individual components and between specific countries have been rather differentiated. On the whole, however, worker participation rights have weakened since the crisis. The average EPI decreased from 55 to 52 between 2009 and 2013.

The EPI component with the greatest stability in the past half-decade has been Board-level Employee Representation. This component differentiates between three types of countries: those with widespread worker rights, those with limited participation rights (mainly stateowned or privatised companies) and those with no or very limited rights.

Between 2009 and 2013, only two countries have switched groups: Malta moved downward, from the ‘limited’ to ‘no’ category, whereas France moved upwards, from the ‘limited’ to the ‘widespread’ category. Because the French workforce is larger than the Maltese workforce, the ‘average’ EPI weighted by the size of workforce has therefore slightly increased.

A second component of the EPI, however, indicates an overall erosion of participation rights at the workplace. The extent of workplace representation in Europe can be estimated through large-scale establishment surveys, such as Eurofound’s European Company Survey (ECS) and EU-OSHA’s European survey of enterprises on new and emerging risks (ESENER). An analysis of the 2009 and 2013 waves of ESENER estimates a drop by 3% in the proportion of workers that enjoy formalised workplace representation through a works council or trade union. An estimated 68% of workers in establishments with ten or more workers had formal representation in 2009, but by 2013 this had eroded to 65%.

The third component of the EPI, worker voice through collective bargaining, also indicates an overall weakening since the financial crisis. The percentage of workers represented by trade unions through collective bargaining decreased by an average of 5% from 65 to 60%. Especially large decreases were experienced in collective bargaining coverage in Romania and Greece (down by 63% and 41%, respectively). Trade union density fell less drastically from 23.9 to 22.4%. Due to the small sample size of establishments in different countries, it is not possible to make detailed statements about EPI trends in specific countries. However, it is possible to create a rough ranking of countries based on their EPI score at a specific point in time. Figure 4.9 above shows that Finland, Sweden and Denmark have the highest score (around 85 out of 100 possible points). These countries have strong rights in all three components of the EPI. Several eastern European countries as well as Cyprus and the UK have EPI scores at the lower end of the scale. The EPI tended to decrease more in countries which had a lower score in 2009, indicating an increasing cleavage between countries with strong versus weak participation rights.

7. A rich palette of rights sets the benchmark for workers’ participation

Figure 4.6 BM 2017 Jagodziński and Hoffmann

Employees in Europe have had the right to a voice in company decision-making that concerns their jobs and working conditions for over 25 years. The principles laid down in the Community Charter of the Fundamental Social Rights of Workers in 1989 have since been further specified and developed. Thanks to almost 40 pieces of EU legislation laying down fundamental rights to information and consultation, democracy does not end at the factory gate or the office door (see Figure 4.6 above). Usually, these rights are exercised regularly via employee representation bodies or trade unions active at the workplace. Whether that employee representation is called Betriebsrat, RSU, comité d’entreprise or ondernemingsraad, and whether or not it is a trade union body, workers’ rights to have a voice in the company are comparable across Europe.

Next to this systematic involvement of employees, EU law also grants rights of involvement when it comes to very specific issues and situations, such as employment contracts, the use of temporary, fixed-term and part-time work, and dealing with changes of ownership and collective redundancies. If a company changes owners, merges with or is taken over by another company, then the employee representatives have the right to know about the plans and their potential consequences. Furthermore, employee representatives must be informed and consulted about all measures taken by companies to protect workers from dangerous or risky working conditions. This applies to measures such as work equipment and protective clothing, and also covers workplace risks associated with lifting heavy loads, noisy environments, mechanical vibrations, chemicals, carcinogens, biological agents and electromagnetic fields. There are specific approaches to the specific risks faced by construction workers, pregnant or breastfeeding workers, and workers in the mining, drilling and fishing sectors.

These rights are essential tools to ensure the close involvement of the workforce at the local level. However, the rights of employees working in a multinational company to be informed and consulted do not end at the national border. Indeed, within multinational companies these rights can be used in conjunction with one another to great effect. Management must inform and consult with representatives from the whole workforce across Europe about any issues or measures that have possible consequences in different countries, or measures that are decided by the central management. For trade unions and employee representatives, European Works Councils (EWCs) also provide a vital forum in which to discuss their common issues with management, and to communicate and coordinate with one another the strategies they are pursuing at the individual sites of the company. If a company is being restructured, then workers’ representatives have important involvement rights at the local level. Since these rights are more or less the same across Europe, all workforces in a multinational company can expect to be treated the same; if the representatives of employees of a multinational company in/ from various countries are aware of these rights, they can use them together in order to avoid being played off against each other by management.

This rich palette of common rights across the EU sets the benchmark for participation. It is in the implementation and enforcement of these rights that cleavages are seen between countries, between sectors, and between large and small workplaces. These gaps present significant impediments to the effective articulation of these rights across borders within European-scale multinational companies.