Is the European Works Council Directive about to be amended?
On 2 February this year, the European Parliament adopted a resolution calling on the Commission to initiate a legislative procedure to amend the European Works Council Directive (Directive 2009/38/EC). Among other things, the resolution provides for extending the rights of European Works Councils, involving trade unions, requiring company managements to consult more with European Works Councils and facilitating the enforcement of the Directive for European Works Councils by enabling judicial appeals and imposing financial penalties.
I. What does the European Works Council Directive regulate?
The European Works Council Directive aims to improve employees’ rights to information and consultation in Community-scale undertakings with more than 1,000 employees, of whom at least 150 must be employed in at least two Member States. To that end, the Directive lays down a procedure whereby employees – represented by a special negotiating body – negotiate jointly with the central management of an undertaking or group of undertakings to reach an agreement on establishing a European Works Council. Should the negotiations fail and no such agreement be reached or procedure for employee information and consultation be agreed, a European Works Council will be established by national law.
II. Current legal situation and status of the legislative procedure
The rules and requirements for establishing European Works Councils have been regulated since 6 May 2009 in the EU Directive 2009/38 and in the national legal acts implementing them which, in Germany, is the European Works Council Act (Europäische Betriebsrätegesetz, “EBRG”).
The European Parliament has now voted in favour of completely revising the Directive. By resolution of 2 February 2023, the European Parliament adopted a report of the Committee on Employment and Social Affairs calling on the European Commission to submit a proposal for a revised European Works Council Directive by 31 January 2024.
The Commission now has three months, i.e. until the beginning of May, to either report to the European Parliament on the specific next steps to be taken in this project or to explain why it will not be pursuing the proposed amendment.
If this is to be further pursued, the Commission’s proposal initiating the legislative procedure will then have to be submitted by 31 January 2024. This proposal need not be identical to the resolution of the European Parliament; the Commission has broad discretionary powers in such matters.
III. Content of the European Parliament’s resolution
The resolution of the European Parliament (2019/2183(INL)) includes the following proposals to amend the European Works Council Directive:
- Extension of the information and consultation requirements
The term “transnational issues” will cover all situations where decisions are taken in one Member State with a direct or indirect effect on another Member State.
- Mandatory response of central management to European Works Council’s opinions
The central management of the undertakings or groups of undertakings will be required to give a reasoned response to each opinion of the European Works Council.
- Reinforcement of role of trade unions
Trade union organisations will be authorised to assist the special negotiating body and the European Works Council in their relations with central management.
- Gender balanced composition in the European Works Council
At least 40% of the seats on the European Works Council and any committee will be required to be held by underrepresented genders.
- Reduced timeframe for negotiations
In future, negotiations between central management and the special negotiating body will begin within twelve months (instead of six months) following the request. Instead of the current three-year period, the subsidiary requirements for establishing a European Works Council will be met by operation of law 18 months after the request if the parties are unable to conclude an agreement within this period.
- Clearer rules on confidentiality
Member States will clearly define the conditions under which central management is not required to inform the European Works Council or the Committee. Central management will inform the European Works Council in the specific case of the existence of these confidentiality requirements and their duration.
- Clearer rules on the timing of consultations between central management and the European Works Council
Member States will ensure that the information and consultation procedure is held within a timeframe that allows the European Works Council to consult the representatives of the respective employees concerned in the national and local establishments before the end of the information and consultation procedure. If there is a dispute between central management and the European Works Council as to whether an information and consultation procedure should be held, central management will issue a written statement explaining why no such procedure will be required.
- Legislation and penalties
Member States will be under an obligation to introduce legislation and penalties to effectively enforce the Directive, in particular:
- The option of requesting a preliminary injunction for the temporary suspension of central management decisions.
- Judicial appeal procedures against the unlawful application of confidentiality exceptions or any other failure by central management to inform and consult.
- Financial penalties, exclusion from public aid or subsidies and exclusion from public invitations to tender in the event of infringements of this Directive or of agreements concluded thereunder.
- Applicability of revised Directive
All agreements of a European Works Council, regardless of their original date, will fall within the scope of the new revised Directive and be subject to its new regulations.
- Amendment of the rules for a European Works Council applicable under national law
The rules applicable to a European Works Council under national law will be amended as follows:
- The European Works Council will hold meetings with central management twice instead of once every year.
- There will be more detailed duties of central management to inform and consult in exceptional circumstances.
- The role of representatives of recognised Union-level trade union organisations will be enhanced under these rules.
Should the Directive be implemented in accordance with the European Parliament’s resolution, this would significantly enhance the opportunities for involving European Works Council bodies, giving them far greater powers in key respects.
It remains to be seen whether the Commission will decide to pursue this further and submit a legislative proposal by 31 January 2024 and, if so, what amendments will be proposed.