European and national works councils - a practical briefing

European and National Works Councils A practical briefing 3rd edition Contents European Works Councils 1 Executive summary 1 What is an EWC? 1 Which employers must have an EWC? 1 A moving picture: how EWCs are changing 1 The need for a strategic, considered approach to EWCs 2 British EWC law 3 Introduction 3 Responding to a valid request for an EWC 3 • The responsibility of central management 3 • The special negotiating body (SNB) 3 • Greater involvement of trade unions 4 • SNB negotiations 4 • What happens if no agreement is reached? The ‘fallback’ EWC 5 The duty to inform and consult with an EWC 6 • Triggering information and consultation: transnational matters 6 Linking national and EWC consultation 6 Confidentiality 7 The use of external experts: SNB and EWC 7 • The legal right to an expert 7 • Who are ‘experts’? 7 Employer to fund the EWC 8 EWC training 8 Enforcement 8 Pre-existing EWCs 8 • Article 13 agreements 8 • Pre-existing EWCs and the 2011 changes to EWC law 9 Applying TICER: a summary 10 Current EWC pressure points for employers 11 Setting up an EWC: practical considerations 12 Advantages and disadvantages of an EWC 13 How an EWC typically works 13 National works councils in EU countries: An overview 14 Works councils operating in the private sector 14 Role and regulation differs between countries 14 Trade unions and works councils 14 A snapshot of national works councils in UK, France, Spain, Italy, NLs, Hungary, Poland, Germany 14 1 European and National Works Councils: A practical briefing European Works Councils Executive summary The establishment of a European Works Council (EWC) is a major step for any business. It is not just that it opens up the prospect of convening meetings of employee representatives from across Europe with senior managers, it is also the cost of these meetings and the management time spent in preparation, attendance and in the follow up. For union-free employers, EWCs provide an opportunity for trade unions to make inroads into their business. For senior executives from outside Europe who are unfamiliar with continental works councils, they can also demand a change in mindset. Typically, this involves acting earlier to provide information and to consult over proposals, as opposed to simply announcing decisions involving workplace change. As such, briefing the board of a multinational on EWCs can be a challenge. But experience tells us that it is unwise to duck such issues, particularly where the risks of getting it wrong can include adverse publicity, delays to restructuring as well as fines and other legal complications. What is an EWC? The 1994 EWC directive (since replaced by a 2009 directive) provided for the establishment of EWCs, or a procedure to inform and consult employees on transnational issues, and there are now over 1000 EWCs in existence. Typically, this involves dealing with a forum of employee representatives from across the EU member states about workplace change with cross-border implications. Such employee representatives may come from the local trade union, however, this depends on the country; in some, the EWC operates independently of the unions, while in others, the unions dominate the EWC make-up. Which employers must have an EWC? EWC laws apply only to multinational employers with 1,000 plus employees throughout the European Economic Area (EEA: the EU plus Norway, Iceland and Liechtenstein) and at least 150 employees in two separate EEA states. There is no obligation to set up such arrangements in the absence of a request from at least 100 employees in two or more countries. However, once a request is received, an EWC must be put into place. A moving picture: how EWCs are changing From the late 1990’s, European trade unions began to dismiss some EWCs as little more than ‘talking shops’ and lobbied successfully for greater EWC rights, resulting in the 2009 EWC directive (implemented from 2011) which has the potential to delay restructuring and add significant costs. Unions have become increasingly adept at enforcing their EWC rights in national courts, sometimes at great cost to the businesses involved. For example, in 2001 a court order suspended the closure by Marks and Spencer of its French stores until EWC consultation took place. In 2006, the merger of Gaz de France and Suez was delayed after the EWC won a court order demanding an expert report analysing the social consequences of the merger. In 2007, a Belgian court prevented British Airways outsourcing its customer service department in Austria until it had informed and consulted its EWC. More recently, there have been examples of employee representatives taking advantage of the 2011 changes in EWC law, for example, terminating older EWCs in order to replace them with more employee-friendly agreements, and of trade unions collaborating with representatives to demand the time and resources to conduct ‘meaningful’ EWC consultation, including the provision of paid-for accountants to critically analyse an employer’s business case for change. In addition, global trade unions are targeting multi-national businesses with or without an existing EWC, having spotted the opportunity for topdown organising within an employer across borders through an EWC. As such, businesses contemplating transnational restructuring and other corporate change are well advised to take their EWC more seriously than has perhaps previously been the case. Those without need to be aware of the increased risk of union-orchestrated requests to set up an EWC. 2 European and National Works Councils: A practical briefing The need for a strategic, considered approach to EWCs EWC decisions are not to be taken lightly given the cost, delay, reputational and other risks. Existing EWCs With an existing EWC, a considered and strategic approach is required to prepare the business to, for example: • Avoid disputes and unacceptable delay in corporate decision-making associated with some EWC processes • Protect corporate confidentiality in key business decisions • Manage the complexities associated with the disclosure of sensitive information to the EWC • Respond to requests to amend, or terminate, existing EWC agreements to take advantage of the 2011 employee-friendly changes • Manage the link between national and EWC information and consultation, and • Pro-actively address the growing role of EWC experts. Requests for a new EWC Businesses facing an EWC request need to consider their response carefully, including: • Agreeing a strategy around the timing of information and consultation and how it is defined in the agreement • The use of ‘experts’, their role at meetings, funding and conditions for access to them including confidentiality • How national and EWC levels of information and consultation are to be linked and managed • Whether to seek one group-wide arrangement, or one or more arrangements for different businesses within the group – this may not be easy to secure but could be more appropriate where the undertakings involved are diverse • The subjects central management are prepared to discuss with representatives at this level and which they want to exclude • How many representatives to have on the EWC and the mix of nationalities (it may be possible to agree with a large SNB that the final EWC will be smaller, eg through grouping together some countries where employee numbers are low) • The number of meetings per annum and the venue and whether IT, such as webcasts and teleconferencing, can be employed to help control costs • Whether to have a small ‘select committee’ meeting more frequently; its composition and role • Confidentiality rules and the disciplining/prosecution of those in breach • Control of meetings – who chairs, how the agenda is set and meeting minuted • How EWC matters will be communicated back to employees including the respective roles of local managers and EWC employee representatives • How EWC member training will be managed and funded (with the aim of controlling time off and costs), how training providers/content are approved • Facilities to be made available to the employee representatives (eg for access to their constituents and for language translation) and how other funding/ expenses will be managed (including caps on expenses and other control measures), and • How the composition of the body will adapt to meet changes in the group or company as businesses are acquired or shed. 3 European and National Works Councils: A practical briefing British EWC law Introduction The Transnational Information and Consultation of Employees Regulations (‘TICER’) 1999 set the governing rules for the creation, operation and enforcement of EWCs in the UK. From 5 June 2011, TICER 1999 were amended by TICER 2010 in order to implement the 2009 revised directive. With a regime of moderate fines for any failures to observe the Regulations, rather than the requirement in some other EU jurisdictions to halt or undo workplace changes until EWC consultation has been completed, TICER has continued to make the UK a popular choice of jurisdiction for those multinationals based outside the EU when setting up new EWCs. It should be noted that this briefing is written on the basis of TICER and UK jurisdiction applying. There are material differences in the way in which individual member states have transposed the EWC directive into local laws. Responding to a valid request for an EWC The responsibility of central management For the directive to apply, the business, or group of businesses, must have 1,000 plus employees throughout the European Economic Area (EEA: the EU plus Norway, Iceland and Liechtenstein) and at least 150 employees in two separate EEA states. Upon receipt of a written request for an EWC from at least 100 employees in two or more countries, responsibility then lies with the ‘central management’ of the employer, or group of employers, in whichever EU state that management is located, to respond. If that central management is located outside the EU/EEA, a ‘nominated agent’ is usually appointed to act as local representative. In the absence of a nominated agent, the establishment or undertaking with the greatest number of employees in any one member state will act in that capacity. TICER apply when the central management (or its representative agent) of the employer group is situated in the UK. Employers on the receiving end of a valid request need to act fast and take the initiative, while educating management so that they are better able to participate in the ensuing negotiations. European employee bodies (federated unions and national works councils) are now highly experienced in negotiating EWC agreements, are well-funded to do so and will have fixed views on how the agreement should look. The special negotiating body (SNB) Once a valid employee request has been received, a Special Negotiating Body (SNB), must be established within six months to agree an EWC arrangement. On the SNB, each member state is entitled to one SNB seat for each 10 per cent, or a fraction thereof, of the total number of employees employed in all the member states taken together. For example, where a member state has 32 per cent of total employees, it would have 4 SNB members. The SNB representatives are selected or elected in line with the requirements of the EWC law in the member state from which they are appointed. Detailed balloting arrangements for the election of UK SNB members are contained in TICER, or alternatively there is provision for the nomination of SNB members by a qualifying and pre-existing consultative committee. The SNB is entitled to hold pre-and post-meetings in advance of, or after, meetings with central management without central management being present. Such meetings to take place ‘within a reasonable time’ of the meeting with management. NOTE: The law regulating EWCs described below (from ‘responding to a valid request for an EWC’ to ‘enforcement’) reflects TICER as amended in 2011. This regulation may not apply to older EWCs and readers should refer to the section; ‘Pre-existing EWCs’ to verify the position. European and National Works Councils: A practical briefi ng Greater involvement of trade unions A change in the law, introduced in 2011, requires the SNB to inform the EU social partners (which includes ETUC – the European Trade Union Confederation) of the date negotiations will start for an EWC and the composition of the SNB, even where the workplace is union-free. This has the potential for specialist national and international union offi cials to become more involved in the setting up and ongoing functioning of EWCs, which would undoubtedly change the tone and content of negotiations. It may encourage trade unions to seek collective bargaining arrangements, as opposed to just information and consultation rights. SNB negotiations At the outset of the SNB negotiations, the parties need to decide between either: • Option 1: setting up an EWC which meets certain minimum requirements (see box below), or, • Option 2: creating or endorsing an alternative, less formal, procedure for informing and consulting on transnational issues. There is a third option; putting in place the fallback EWC procedure, provided for in TICER. However, this is regarded as more demanding and infl exible and therefore employers have hitherto sought to negotiate their own bespoke arrangement. TICER MINIMUM EWC REQUIREMENTS (option 1 above) – an agreement must specify: • the undertakings or establishments covered • the composition of the EWC, the number of members, the allocation of seats and the term of offi ce. There is a requirement to take into account, so far as reasonably practicable, of the need for a balanced representation of employees with regard to their role, gender and the sector in which they work • its functions and the procedure for information and consultation and arrangements to link EWC information and consultation with corresponding national information and consultation duties. Where there is no such express linkage in the agreement, then TICER requires national and transnational consultation to be linked where there are substantial changes in work organisation or contractual relations so that one begins within a reasonable time of the other • the venue, frequency and duration of meetings • where the parties decide to establish a select committee, it should state the composition, procedure for appointing its members, the functions and procedural rules • the fi nancial and material resources to be allocated to the EWC, and • the date of entry into force, the duration of the agreement, arrangements for amending or terminating the agreement, the circumstances in which the agreement is to be renegotiated including where there is structural change and the procedure for its renegotiation. 4 5 European and National Works Councils: A practical briefi ng If parties opt for the alternative option 2 procedure, then the agreement must specify by what method the representatives shall have the right to meet to discuss the information given to them. SNB negotiations can continue for a maximum of three years from receipt of the request. A failure to agree at the end of this period will result in the application of the fallback arrangement below. Employers need to consider whether the SNB representatives are playing a waiting game with the aim of securing the fallback arrangement, in preference to a negotiated agreement. This inevitably weakens management’s hand in that negotiating hard to secure a business-friendly EWC will usually fail as the SNB may prefer a three year wait for the fallback option. What happens if no agreement is reached? The ‘fallback’ EWC TICER set out the arrangements for the setting up and running of a fallback EWC (see box), where the parties fail to agree their own arrangement or the employer refuses to commence SNB negotiations. THE FALLBACK EWC • The fallback EWC rules provide for the composition of the EWC, the election of a select committee and the replacement of the fallback version with one subsequently agreed by the parties. • The fallback EWC has the right to meet with central management once a year, to be informed and consulted on the basis of a company report on the progress of the business and its prospects. The meeting must cover: – information on the organisation’s structure, economic and fi nancial situation, the probable development of the business and of production and sales – information and consultation on the employment situation, including the use of agency workers (if any) and probable trends, investments, substantial organisational changes, the introduction of new working methods or production processes, the transfers of production, mergers, cut-backs or closures and collective redundancies (assuming they are transnational). • Where there are exceptional circumstances affecting the employees’ interests to a considerable extent (such as collective redundancies, relocations or closures of establishments), the select committee or the EWC has the right to be informed and consulted and to meet with appropriate management as soon as possible. • Central management must meet the cost of the EWC and representatives have the right to a pre-meeting without management and may be assisted by experts (although national rules may limit funding to only one expert). In practice, this ‘expert’ usually turns out to be a full time trade union offi cial, or sometimes an accountant in order to interpret fi nancial information. • Consultation must be conducted in such a way which permits the EWC members to obtain a reasoned response from central management to any opinion expressed by those representatives to the company reports presented by the employer. This may involve further meetings and additional time required for consultation. 6 European and National Works Councils: A practical briefing The duty to inform and consult with an EWC TICER require the provision of sufficient information early enough to allow representatives to undertake a detailed assessment of its possible impact and for them to express an opinion to management during the consultation process. The opinion must be provided ‘within a reasonable time’ of the receipt of the information, and ‘may’ be taken into account by management within the context of their effective decision-making. What is a reasonable length of time will differ according to a range of factors including the complexity of the information, the number of jurisdictions and employees affected and the timescales for national consultation. Some employers will seek to agree time-scales in their agreements for the giving of an opinion, to help provide certainty during restructuring and other business change. The duty to inform and consult was changed in 2011 and requires the sharing of more detailed and confidential information at an earlier stage than previously existed under the law. It: • may be used as a stalling tactic in some situations • increases the risk of confidentiality leaks (see below) • is used to support requests for the involvement of ‘experts’ to provide an opinion • provides greater scope for disputes and litigation over the timeliness and quality of the information and consultation. Deciding in advance what, in practice, is sufficient information (and how it will be provided) is critical to managing these risks and may need to include information on the costs, benefits, alternatives, impact, rationale and more in relation to substantial changes. The fallback provisions anticipate that management will produce a reasoned response to any opinion given by the EWC; management in all EWCs should be prepared for their representatives requesting the same. Triggering information and consultation: transnational matters The matters on which information and consultation apply are generally restricted to ‘transnational’ matters – in other words, those which concern all the operations of the business in Europe, or those which concern undertakings or establishments in at least two different qualifying countries. There may be some scope for disputes over this transnational definition, reflecting a recital to the 2009 directive suggesting that matters affecting just one member state might be ‘transnational’. As such, employers should be aware that future litigation may result in the definition being widened. Linking national and EWC consultation TICER requires the EWC agreement to determine arrangements for linking national and transnational information and consultation, the aim being to improve clarity and certainty between EWCs and national representatives. Employers should be aware that the EWC may push for its consultation to take place ahead of national consultation. However, this risks a potential award for compensation/financial penalty in terms of breaching national duties. Employers are advised to plan the interface between national and EWC consultation, ensuring that linkage does not stop one operating independently of the other (so that delays in one does not frustrate the other). In addition, it should be noted that some trade unions are leveraging the need for linkage to pressure employers into setting up national works council bodies. However, this is not a legal requirement under TICER. 7 European and National Works Councils: A practical briefing Confidentiality EWC laws assume that worker representatives will see and hear unpublished corporate information. Otherwise, information and consultation about upcoming developments would not be effective. Management can withhold information if substantial harm would be caused by its disclosure. However, the exercise of that right can be tested in the courts; UK courts are generally regarded as more balanced than some other jurisdictions. In any event, management which is new to EWCs have to get used to the idea of sharing a large amount of information in circumstances where it would ordinarily be instinctively reluctant to disclose. As a result, it is normal to include confidentiality provisions in the EWC agreement setting out the consequences for representatives and their expert(s) of breaching confidence. In addition, provisions clarifying the types of information that will be treated as confidential or non-disclosable to the EWC and detailing the control of documentation are also recommended, as well as requiring representatives and experts to personally sign confidentiality agreements. The use of external experts: SNB and the EWC The legal right to an expert During negotiations for an EWC, the SNB have the right to be assisted by experts of its choice and those experts may attend meetings in an advisory capacity. The company is required to fund one expert only who at this stage may typically be a specially-trained trade union EWC expert. Once the EWC is agreed, there is no general and ongoing legal right to the services of an external expert. However, there is such a right where the fallback provisions apply in ‘so far as this is necessary’ for the EWC to be able to carry out its tasks. This, together with the fact that representatives now have the right to produce an opinion as part of the consultation process (above), is fuelling the increasing number of requests for external experts. In addition, clauses providing for access to, and the funding of, experts have become a common feature of EWC negotiations and re-negotiations. Who are ‘experts’? Typically comprising a mixture of full-time trade union officials and specialist accountants, EWC experts are employed to assess information provided by the employer during one-off restructurings and the like. A recent communication from the Unite union described how, upon the announcement of a company sale triggering EWC consultation, it ‘used the new UK legislation to request the services of an independent expert to conduct an in-depth assessment of the potential impact of this proposal on the company’s workforce.’ These services, it suggests, cost ‘in the region of 40,000 euros’. Employers should bear this trend in mind, given the longer timescales involved for experts to undertake an assessment, the costs, the information sought by experts as well as requests for direct contact with management and access to the company’s facilities. This will, in turn, require a balancing exercise as to what is reasonable and proportionate in the circumstances, within the context of EWC law. In addition, confidentiality clauses need to be reviewed to ensure they cover third party experts and are sufficiently robust. One option is to offer representatives the services of an internal expert, for example, a business accountant, where they do not have the requisite skills or expertise to analyse the information provided. In addition, where timescales are short and the smooth running of the information and consultation process is paramount, it may be in the interests of the business to provide an analysis of the information to the representatives, to avoid delay and to reduce the scope for external experts to become involved. Another option is to resist requests for the use of experts to analyse routine financial, economic and organisational information provided at regular EWC meetings (in the absence of substantial changes impacting on employment). This reflects the fallback TICER provisions which provide only for such information to be shared (not consulted upon). In the absence of this greater consultation right, any argument in favour of having to hire an expert is weaker. 8 European and National Works Councils: A practical briefing Employer to fund the EWC TICER requires central management to provide the members of the EWC with ‘the means required’ to enable them to fulfil their collective duties. Government guidance states that such means may include travel, translation and accommodation costs and facilities to support EWC duties and makes the point that the means must be ‘required’, and therefore does not include superfluous expenditure. Separately, the Government noted that it was unclear whether ‘means required’ includes the legal costs of EWC representatives taking legal action against central management for non-compliance with TICER and this remains to be tested by case law. Given this situation, employers are advised to define clearly what they are agreeing to fund and to provide in order to reduce the risk of a broader definition, in the event of a future court challenge. EWC training Representatives have a right to paid time-off to receive training, such training to be funded by the employer. The main issue here is retaining reasonable control over the timing and content of such training (particularly when provided by trade unions). Enforcement Enforcing an EWC set up in the UK is divided between three main bodies: the Employment Tribunal (ET), the Central Arbitration Committee (CAC) and Employment Appeal Tribunal (EAT). TICER provides protections and time off rights with pay for representatives who serve on SNBs and EWCs and these are enforced in the ET. Complaints about breaches by central management of their obligations under EWC law are made to the CAC. Also, employees may complain to the CAC about the failure of the EWC to provide feedback on their work. There is a six month time limit applying to CAC complaints (from the alleged breach occurring). If it upholds a complaint, the CAC is empowered to make declarations and order any of the parties concerned to act or cease acting in a particular way. The EAT hears appeals against decisions taken by the ET and CAC and, upon application by the EWC, SNB or an employee, may issue a penalty notice of up to £100,000 in cases where the CAC has decided that central management has breached one of its duties. The penalty applies primarily to those EWCs agreed since 16.12.99, however, in exceptional circumstances it could apply to earlier EWCs where they fail to comply with the new adaptation clause (see explanation below of Article 13 EWCs). Pre-existing EWCs In broad terms, existing EWCs are categorised as either Article 6 or Article 13 agreements: the latter being the oldest form of EWC. This categorisation remains important given the uneven application of the law, particularly the 2011 changes, to different forms of EWC. In the UK, Article 6 agreements are those signed since 16 December 1999. They fall under British TICER law, as described above, unless they were revised or newly agreed in the two years before 5 June 2011. In practice, very few were and therefore the overwhelming majority fall under TICER, as amended in 2011 and as described above. Article 13 agreements The 1994 directive provided an incentive, set out in Article 13, which encouraged employers to agree their own transnational information and consultation arrangements before the directive was implemented in each member state, or, at the latest by 22 September 1996 (although for the UK, the relevant date is 15 December 1999). These so called Article 13 agreements needed only to specify how information and consultation on transnational issues would be handled and, importantly, were exempt from the requirements of the 1994 directive (provided they covered the entire workforce within the EEA) and, to a large extent, this exemption has carried forward under the 2009 revised directive. Qualifying Article 13 agreements are excluded from TICER meaning that they are not subject to the duties and enforcement regime imposed by the law and described above. There is, however, an exception: a provision in TICER, that deals with all EWCs (including Article 13 agreements) during mergers, acquisitions and other significant structural changes, triggers the renegotiation of the EWC where the agreement does not provide for the continuance of the EWC in such circumstances by means of an adaptation clause (or it does but there is a conflict between clauses where more than one EWC is involved) and there is an employee request to renegotiate. 9 European and National Works Councils: A practical briefing Where this adaptation provision is triggered, TICER provide that some of the provisions regulating SNB composition and negotiations apply. However, the last government confirmed its understanding that the 2009 directive and TICER 2010 maintains, to a large extent, the existing exemptions of EWCs despite the adaptation clause being triggered. In other words, such renegotiated agreements would maintain their status, for example, outside the scope of TICER for Article 13 agreements. However, where the company party to the EWC itself ceases to exist as a result of the change, for example, after a takeover, then a new EWC agreement may fall under the full extent of TICER. Unfortunately, employers need to be aware that the last government’s approach to maintaining exempt status may come under attack as we are aware that European and UK trade unions disagree over the interpretation of the 2009 directive in this respect. Pre-existing EWCs and the 2011 changes to EWC law The regulation of EWCs described above (from ‘responding to a valid EWC request’ to ‘enforcement’) reflects the current law under TICER and includes the 2011 changes. However, it is important to note that some older EWCs are partially exempt; this has been touched upon in the description of Article 6 and 13 agreements above. In summary, the 2011 changes introduced by TICER, or TICER itself, may not apply to existing EWCs. Whether they do depend on several factors including when the EWC was established and whether it was revised in the two years before 5 June 2011: • TICER, as amended and described above, apply to all new EWCs agreed on or after 5 June 2011. • They also apply to those EWCs established between 16.12.99 and before 5 June 2009, unless they were revised in the two years before 5 June 2011. If such an EWC was revised (or newly agreed) in this two year period (very few were), then only TICER 1999 will apply together with the TICER 2010 adaptation provisions. The date the agreement was signed/revised determines which regime applies. • The 2011 changes do not apply to existing Article 13 agreements (those pre-dating 16 December 1999) with the exception of the adaptation provisions (see an explanation of adaptation under ‘Article 13 agreements’ above). Given the potential complexity of the way TICER applies to different EWCs, the position has been summarised in ‘Applying TICER: a summary’ (see overleaf). The key changes to TICER implemented in 2011 are as follows: • more demanding information and consultation duties, with a related increase in the use of external experts • the greater involvement of trade unions • an obligation on central management to provide the means required to allow EWC representatives to fulfil their duties – the trade unions are pushing for such means to include employers funding litigation brought by the EWC against the employer • changes relating to the SNB, for example, a right for SNBs to meet pre- and post- meetings with central management, without management being present • paid time-off for training, such training to be funded by the employer • a requirement for agreements to provide how national and EWC information and consultation is linked • the meaning of ‘transnational’ is defined, however, the introduction to the 2009 directive gives a wider meaning. The unions will seek to rely on this wider meaning • the CAC has become the main enforcement body and the maximum penalty has risen to £100,000. 10 European and National Works Councils: A practical briefing Applying TICER: a summary EWC SIGNED ON OR BEFORE 15.12.99: WHAT LAW APPLIES? Such Article 13 agreements are excluded from TICER (with one exception – see ‘Pre-existing EWCs – Article 13 agreements’ above), meaning that they are not subject to the duties and enforcement regime imposed by the law. A qualifying Article 13 agreement must: 1. specify how transnational information and consultation are to be handled 2. cover the entire workforce within the EEA, and 3. have been agreed on or before 15.12.99. Risks arising from recent changes to EWC law? 1. Requests for renegotiation to incorporate recent changes at or before renewal date, or notice to terminate and a request for a new EWC 2. Significant structural change may trigger the duty to re-negotiate the EWC 3. TU experts challenge whether it is a genuine Article 13 agreement. EWC SIGNED BETWEEN 16.12.99 AND BEFORE 5.6.09: WHAT LAW APPLIES? Such Article 6 agreements are governed by TICER, including the 2011 EWC changes, with one exception: those Article 6 EWCs that were renegotiated or agreed in the 2 years before 5.06.11 (see hybrid agreements below). Risks arising from recent changes to EWC law? 1. Such agreements need to be read in light of the employee-friendly 2011 changes 2. There is uncertainty currently over how far the terms of such agreements will be applied by CAC, if at all, where they differ from the 2011 changes. EWC SIGNED/REVISED BETWEEN 5.6.99 AND BEFORE 5.6.11. WHAT LAW APPLIES? Such hybrid agreements are governed by the original 1999 TICER, with only a limited number of the 2011 changes applying, these include: significant structural change may trigger the duty to re-negotiate the EWC and the 2011 changes to remedies and enforcement. Risks arising from recent changes to EWC law? 1. Such renegotiated agreements are rare in practice and, typically, contain clauses reflecting some or all of the 2011 changes (failing which, informed employee representatives refused to sign or revise agreements during this period). As such, many will need to be read in light of the employee-friendly 2011 changes. EWC SIGNED ON OR AFTER 5.6.11. WHAT LAW APPLIES? Such recast agreements are governed by TICER, including the recent 2011 changes. 15.12.99 04.06.09 04.06.11 11 European and National Works Councils: A practical briefing Current EWC pressure points for employers The introduction of employee-friendly changes to EWC regulation in 2011 have acted as a catalyst for employee representatives and trade unions to demand greater consultation rights, to make in-roads into qualifying organisations currently without an EWC and to transform existing EWCs, particularly those older EWCs sometimes unfairly described as ‘talking shops’ and which may have escaped attention until now. Given the complexity of applying the changes to existing EWCs, employers are advised to seek advice for their individual EWC. However, we are seeing an increasing number of companies with existing EWCs (irrespective of the type of EWC) receiving requests for renegotiation or even notices to terminate some Article 13 agreements, followed by a request for a new EWC. This reflects better organisation amongst trade unions as they identify those EWCs which remain unchanged over recent years. In addition, most EWCs are renewable, often on a four yearly basis, and representatives are being advised of new EWC rights as part of preparations for renewal negotiations. As such, employers with EWCs are well-advised to prepare, in particular: • Businesses with an Article 13 agreement These older EWCs are vulnerable to change, despite many having ticked over on an informal basis for many years and have not required much investment in management time or money until now. Employers with such older EWCs should prepare for change. Trade union strategy is to upgrade these agreements to bring them in to line with the recent legal changes. As many of these older EWCs were not designed to be evergreen and are renewable after a certain term, businesses should be prepared for requests for wholesale renegotiation, to include, for example, the strengthened information and consultation duties. Where such a request arises in the context of significant changes in the corporate structure, such as a merger, the adaptation provisions described above sets out the steps the employer must take to ensure the EWC adapts to the new environment. In other words, in this situation, the employer must normally engage with requests for renegotiation from representatives. In other circumstances, businesses may not be under a legal obligation to respond to renegotiation requests, but, in practice, their hand may be forced. For example, in the event of a stalemate, the representatives may simply serve notice to terminate the old EWC and trigger the process for a new EWC to be formed under the new law in its place. Investing in the EWC that you have, valuing its role in managing labour relations and improving employee communications can help to dampen down calls for change. An EWC built on strong relationships is less likely to have disaffected representatives open to influence from outside trade unions. But, even where EWC relationships are good, employers should be prepared for pressure to change. Global trade unions are targeting EWCs, with or without the support of employee representatives, having spotted the opportunity for top-down organising within an employer across borders through its EWC. This has been made easier for them by the 2011 changes which have supported the rise in trade union ‘experts’ advising employee representatives and providing training to them. • Businesses with EWCs agreed between 16.12.99 and 5.6.09, not revised Employers should be aware that their unrevised agreements need to be read in the light of the 2011 changes and that there is uncertainty currently over how far existing agreements will be applied by CAC, if at all, where they differ. Businesses are advised to review such agreements to identify the scope for challenge by representatives and to communicate the 2011 changes to managers involved in EWC procedures. 12 European and National Works Councils: A practical briefing • In-scope businesses which do not currently have an EWC There is no automatic requirement for in-scope businesses to establish EWC arrangements. Options are: – take the initiative and put in train a process for negotiating a compliant arrangement; or – do nothing and await a valid request, either directly from 100 employees in two or more member countries or from their representatives. Where employee relations are good and employee information and involvement is working effectively, it is fairly unlikely that a valid request will be forthcoming. In such situations, taking no action would seem sensible. However, businesses should realise that trade unions are becoming increasingly active in orchestrating EWC requests. Their objectives for so doing include building their membership and influence within the business and extending EWC information and consultation into collective bargaining. Therefore, before deciding to take no action, employers are well advised to risk assess their operations for such a request. If a valid request is received, seeking expert assistance, giving time to detailed planning and information-gathering, assessing risks and controlling communication are all key to achieving a good outcome (for further information, please see ‘responding to a valid request for an EWC’ above). It is also worth noting that once a valid request is received, an EWC will come into existence. There is no opportunity for the employer to campaign against having an EWC and there are no ballots for or against the request. A valid request triggers a process whereby the employer is limited to influencing the type and detail of the EWC agreement, not whether it happens at all. • Focus on mergers and acquisitions which involve EWCs As noted above (under ‘Article 13 agreements’), the 2011 changes require the adaptation of all EWCs following significant change in the structure of the business, for example, after mergers and acquisitions. TICER provides for two ways in which the business can adapt: – by putting into effect a pre-existing adaptation clause which has anticipated the change, or, – where there is no such clause or there is more than one (for example, where there is a merger and both employers have EWCs) and they conflict, then entering into a renegotiation when requested by the employees. There is limited guidance as to how these provisions in TICER work in practice. In the past, where two businesses who were not equal merged, and were in the same line of business, the junior party’s EWC was usually wound up by agreement and the senior party’s EWC was updated and expanded. If the junior party did not have an EWC and the other did, the same applied. If it was the other way around, then the senior one simply adopted and updated the junior EWC. As an alternative to the foregoing, the parties might have kept the EWCs separate. Given TICER’s requirement to have effective adaptation clauses or to start negotiations for a new EWC, businesses must be aware that the law has changed thereby ruling out their own ‘home-made’ practical solution. Setting up an EWC – practical considerations Potential advantages of an EWC • Less internal friction and divergences across cultures and national boundaries • Assists in the integration of businesses post acquisition • Encourages a wider, global perspective and lessens pre-occupation with narrow, local issues • Helps employees understand the commercial rationale behind company level decisions, policies and their implications • Improves understanding of the labour relations climate across different jurisdictions – this can be invaluable when planning future business decisions with European wide implications • Generally improved communications • Improved employee retention rates. 13 European and National Works Councils: A practical briefing Potential disadvantages of an EWC • Costs, time and loss of resources – the law provides that the cost of maintaining EWC’s should be borne by the employer. The annual cost of running EWC’s will clearly vary widely depending on the number of representatives attending, the frequency of meetings, the number of countries involved and the scale of translation into different languages that is required. An initial provision of at least £150,000 per year would not be unrealistic • Providing trade unions with a foothold in otherwise union-free workplaces • Cultural clashes between employee representatives from different areas. Might friction develop, for example, between North European and South European representatives? In addition, there are often difficulties in engaging smaller countries in the EWC • Potentially damaging perception of HQ country dominance • Risk of delegates pursuing national agendas inappropriately when a wider agenda should be followed, or, of seeking to promote political agendas • Failures by delegates to communicate EWC activities to employees, or inconsistent and inaccurate communication to other employees • Representatives confusing consultation rights with negotiation rights • Potential leaks of confidential information • Encouragement of more local works councils in countries where there were none before • Risk of trade unions seeking to expand EWCs beyond their remit, for example, to incorporate commitments in relation to corporate social responsibility and international (for example, ILO) and similar global labour standards for countries outside the EU. Both areas are normally not legally enforceable against an employer unless it decides, sometimes inadvertently, to enter legally binding agreements such as an EWC agreement. How an EWC typically works • In some cases, central management meet their information requirements through an annual report supplemented by briefings from senior management at the annual meeting. Consultation at EU level is then concluded at one sitting through discussion at the meeting. However, EWCs renegotiated in the light of the 2011 changes are more likely to have more than one annual meeting, for example, providing for two to four full EWC meetings a year. In addition, such EWCs typically invest more time in preparing in advance for such meetings, including providing reports for representatives in advance of the meetings. • The meeting with the EWC, taking place during the course of a day, is effectively a general catch up for the employee representatives and the opportunity to hear from senior management. It is chaired by management and there will be one or two other management representatives at the meeting to deal with specialist agenda items. It is not advised that the CEO be a permanent management representative as it is sometimes useful for management to claim a need to ‘take instructions’ if difficult questions are asked. The meeting is held in the designated EWC language, with translation facilities available for other language needs. The same applies to the minutes of the meeting. One expert will usually attend to assist the employee delegates. • Given the need for travel, a pre- and post-meeting for the representatives and the meeting itself, two to three days are usually devoted to scheduled EWC meetings. • Where European restructurings crop up between meetings, then emergency one-off meetings of the select committee (where there is one), possibly augmented by representatives from countries directly concerned, rather than the full EWC, tend to take place. The more detailed consultation with employee representatives continues to be handled at local level in the individual countries affected by the restructure, much as before. 14 European and National Works Councils: A practical briefing National works councils in EU countries: an overview Works councils operating in the private sector National works councils are standing bodies made up (wholly or partially) of elected employee representatives which provide a channel for worker involvement and representation at workplace, establishment or national company level. They are to be contrasted with European or global works councils which provide for worker involvement in cross-border developments, such as pan- European restructurings. Role and regulation differs between countries The role of national works councils varies from country to country and can range from managing cultural activities to being informed and consulted about the introduction of new HR policies, collective dismissals, business transfers and sometimes takeovers involving a share acquisition. In some countries, there is a right to co-determination or a right to give an opinion on an issue before a management decision is made. Injunctions as well as criminal and financial sanctions may result from a breach of works councils obligations. Delays to commercial decision-making and protecting confidential stock market information also present practical challenges. The regulation of national works councils derives from two main sources: long-established national rules which differ between member states and more recent EU rules which set out minimum procedures for establishing national and/or European works councils, but only where sufficient employees take the initiative to trigger their establishment. As a result, works councils differ significantly from country to country in terms of composition, decision-making, election procedures, thresholds, roles and powers. Most countries have fixed minimum thresholds for works councils, for example, in France a works council must be set up in companies with at least 50 employees. In other countries, there is only a requirement to set up a works council, once the threshold is triggered, if employees chose to act. This is the case in Germany where employees may decide to elect a works council, providing there are five or more employees in an establishment. Trade unions and works councils The interface between trade unions and works councils also differs between countries. In some, such as Austria and Germany, works councils are the sole eligible employee representative structure. In others, the trade union dominates employee representation, as in Italy. Some countries have dual representation, with both unions and works councils performing a representative role. In such cases, there may be a division of responsibilities with the trade unions concentrating typically on collective bargaining while the works councils are more involved with information and consultation. A snapshot of national works councils in UK, France, Spain, Italy, NLs, Hungary, Poland, Germany follows. United Kingdom In the UK (and Ireland), permanent works councils, elected by employees, continue to be rare with, typically, trade unions taking on the collective representation role. In the majority of workplaces in the private sector, employees deal with their employer on an individual basis without works councils or trade unions. However, in the absence of a recognised trade union, ad hoc employee representatives must be elected in the event of largerscale redundancies or a business transfer for information and consultation purposes (in accordance with EU laws). A failure to inform and consult in these circumstances risks financial penalties, but there is no power to delay commercial decision-making. France A French works council must be formed in each company (or establishment) with at least 50 employees. The works council manages social functions (leisure, sports etc) as well as ensuring the employees’ interests are protected in relation to organisational and economic changes in the company. French works councils have extensive consultation rights (including in relation to mergers, transfers, acquisitions, share acquisitions, collective redundancies and other changes to the company’s economic and legal organisation). A failure to inform and consult may result in an injunction to delay the change so that the works council is given sufficient information European and National Works Councils: A practical briefi ng and time to produce its opinion. Such a failure may also constitute a criminal offence, risking fi nes and even imprisonment. Trade unions have no legal role in the context of information and consultation, although in practice they may act in the background, giving support to works councils. Germany There is no requirement to set up a works council and employees may chose to do so, providing there are fi ve or more employees in an establishment. Unlike many other European works councils, German works councils have co-determination rights in addition to information and consultation rights. However, co-determination is limited to certain matters (eg changing working hours), with statute setting down the level of participation required depending on the circumstances. Co-determination rights typically require the employer to reach an agreement with the works council. If no agreement can be reached the conciliation board or, in some cases an employment tribunal, will look at the issues and decide the matter. Breaching works council rights can result in fi nancial compensation, void dismissals and, in some instances, injunctions to prevent the employer instituting change. In most cases, trade unions have no legal role in the context of information and consultation and works councils are the sole eligible employee representative structure. Italy In Italy, the trade unions represent workers at a collective level to negotiate collective agreements and for information and consultation purposes. If a company employs more than 15 employees in an establishment, the employees are entitled to elect a works council to act on behalf of the national trade union that negotiated, and is party to, any applicable collective agreement. As such, works councils carry out trade union activities (including strike action) and play a signifi cant role in large scale redundancies and transfers (an agreement with the works council can save redundancy costs). A failure to consult can result in delays to business transfers, compensation claims, unfair dismissals and, in some cases, the risk of employee claims for reinstatement and back pay. Netherlands An employer with 50 or more employees is required to set up a works council. The works council has the right to be informed on a range of fi nancial/economic/structural issues, to be consulted and give opinions on certain signifi cant proposals (including takeovers, redundancies and reorganisations) before a decision is taken and at such time that it might exercise meaningful infl uence. Where the works council gives an opinion critical of a proposal, the employer must delay taking action for at least a month to allow the works council to appeal to the courts. A successful appeal may result in the employer having to reverse its decision. To avoid this, employers should seek to comply with the procedural requirements under the Works Councils Act. However, successful appeals on the substantive issue are marginal and reasonable commercial proposals are not unduly blocked by the courts. The works council also has the right to give its consent to some social matters (eg data protection, working time arrangements and a remuneration system) and to submit proposals. A decision without such consent may be nullifi ed by the works council within a month. The works council can block the execution of a nullifi ed decision in legal proceedings. In turn, the employer can request the court to grant consent, which it will do if it decides the works council is unreasonably withholding consent. During collective redundancies with 20 or more dismissals, the employer must also inform trade unions and will typically negotiate a Social Plan, setting out the termination package for affected employees. In practice, there is usually close cooperation between the works council and trade unions. 15 16 European and National Works Councils: A practical briefing Spain In Spain, the joint bodies of workers’ committees and employee representatives fulfill the role of works councils. Workers’ committees may be elected where there are 50 or more employees, while employee representatives are elected in smaller workplaces. In practice, the vast majority of elected representatives come from the trade unions and workers’ committees are highly unionised. Workers’ committees have extensive information rights, have the right to give an opinion in certain circumstances (eg on restructuring and changing hours) and must be consulted on collective redundancies and other substantial changes. The courts do not have the power to directly block management decision-making for a failure to inform and consult, however, a failure to inform and consult could lead to the management decision subsequently being declared null and void by the courts. In addition, a breach risks administrative fines ranging from 6,250 up to 187,515 Euros and representatives may also claim compensation before a court. Unusually, workers’ committees can negotiate collective agreements covering pay and conditions. Poland Legislation providing for the creation of works councils was introduced from 2006 in line with EU Directive on informing and consulting employees. A works council must be established in enterprises with at least 50 employees, if requested by the employees. It has the right to obtain information on economic issues and be consulted on certain employment and work organisations issues. Initially, the law provided that, where there were representative trade unions in the company, they would choose the members of the works councils. This has now been changed to allow elections by the workforce. A failure to inform and consult can result in a fine or imprisonment. Most works councils have been set up where unions are already present and the unions remain the most important body representing the interests of employees. As such, trade unions must be informed about transfers, working conditions and possible changes to employment conditions and consulted where there are collective redundancies or proposals to change or terminate the contracts of represented employees. Hungary Legislation provides for the election of works councils in undertakings with more than 50 employees, if requested by employees. Works councils have the right to information on a range of issues, including the employer’s economic situation, working conditions and wages. A works council must also be consulted at least 15 days in advance about measures having an impact on a large number of employees such as restructuring, as well as on the protection of personal data, changes to work organisation, performance targets and more. During the consultation the employer should take no action in relation to the planned measures and the works councils has the right to produce an opinion in response to the employer. Where it does, the employer cannot go ahead with a proposal for at least seven days. Breach of works council information and consultation rights risks action against the employer before the labour court. Workplace trade union representatives have a range of information and consultation rights also, some of which overlap with those of the works council and the majority of works councils are made up of trade unionists. 17 European and National Works Councils: A practical briefing FOR FURTHER INFORMATION, PLEASE CONTACT: Martin Warren Practice Group Head Tel: 0845 498 7559 Int: +44 292 047 1147 martinwarren@eversheds.com Thomas Player Partner Tel: 0845 498 7574 Int: +44 292 047 1147 thomasplayer@eversheds.com Marc Meryon Partner Tel: 0845 497 0888 Int: +44 207 919 4500 marcmeryon@eversheds.com Frank Achilles Partner Int: +49 89 545 65 215 frank.achilles@eversheds.de www.eversheds.com For a full list of our offi ces and contact details please visit EHRG.1011 10/14 ©Eversheds LLP 2014. Eversheds LLP is a limited liability partnership, registered in England and Wales, registered number OC304065, registered offi ce One Wood Street, London EC2V 7WS. Please note this material is not intended to be exhaustive or a substitute for legal advice. You are advised to seek specifi c advice upon any given problem.