International groups of companies with a European Works Council (“EWC”) must bear in mind that this EWC also has to be consulted if there’s to be a reorganisation within a single group company in a single Member State. There is admittedly a requirement that the reorganisation could also have an impact on one or more companies in other Member States. But those consequences needn’t yet have crystallised. On the other hand, the EWC does not have to be consulted before the national WC and trade unions are consulted, as is evident from a recent decision by the District Court in Rotterdam.
What was this all about?
Alcoa Spain, part of a group of companies involved in the production of aluminium, initiated a consultation process with the Spanish works councils in October 2018. The reason behind this was the possibility of a collective dismissal of 700 employees through the closure of two plants in Spain. This represented over 20% of the entire European workforce. At the same time as it started this consultation, Alcoa informed its EWC about the possible reorganisation and also held talks with the trade unions.
The EWC felt that it should have been the first to be notified, however, so that it could have exerted some real influence on the decision-making process. It took the matter to the District Court in Rotterdam and sought an order against Alcoa to terminate the negotiations with the Spanish works council and reverse all the consequences of those negotiations, on pain of a judicial penalty. Alcoa, for its part, considered that it was under no obligation to consult the EWC first, before entering into negotiations with the Spanish works councils and trade unions. It asked for the claims to be dismissed.
The EWC has powers in relation to transnational (cross-border) situations under the terms of the European Works Councils Directive. In practice, however, it’s not always easy to establish whether a situation is transnational or not. In this case, the Dutch court reached the conclusion that the decision, whose impact was confined to a single Member State (Spain), was still a cross-border situation as it might have repercussions for companies in other Member States. This was commensurate with the prior case law. A reorganisation in one Member State can still amount to a cross-border situation, as it is part of a European restructuring exercise. There is a requirement that the reorganisation in one country might have consequences for companies in other Member States, but those consequences need not yet have crystallised. In this case, the closure of the plants in Spain might result in a shrinkage at the Shared Service Centre in Hungary because there would be less support/backroom work to be done for the Spanish plants.
The court also held that the EWC did not need to be consulted before consultations were started with the national works council and trade unions. This was because the EWC Directive imposes no such obligation, as it assumes that consultations will go on side-by-side. The EWC agreement likewise says nothing about this. The EWC had drawn the short straw.
Briefly put, while the EWC is often consulted in practice ahead of local works councils, this is not a right that the EWC can enforce.