A recent decision by the preliminary relief judge of the court in Rotterdam addresses the obligations of international groups of companies to consult with their European Works Council (“EWC”) if planning a reorganization. Such employers should bear in mind that consultation with the EWC may be needed even if restructuring a single group company, within a single Member State. Generally, consultation is required if the reorganisation could also impact one or more companies in other Member States. As this recent case makes clear, however, the EWC may not need to be consulted before the national works councils and trade unions, unless such a preference in timing is agreed upon in the specific EWC agreement in question.
Background of the Case
Alcoa Spain, part of a group of companies involved in the production of aluminum, initiated a consultation process with the Spanish works councils in October 2018. The company took this step because of the possibility of a collective dismissal of 700 employees through the closure of two plants in Spain. This reduction 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 organization to be notified, however, so that it could have exerted some real influence on the decision-making process. It took the matter to the court in Rotterdam and sought an order against the company 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, contended that it was under no obligation to consult the EWC first, before entering into negotiations with the Spanish works councils and trade unions. The company asked the court to dismiss the EWC’s claims.
The Court’s Ruling
The court addressed two questions raised by the case. First, the court was required to determine whether the company had a duty to consult with the EWC at all. Second, the court considered whether the EWC must be consulted prior to the local works councils.
As to the first issue, the court acknowledged that the EWC has authority in relation to transnational (cross-border) situations under the terms of the European Works Councils Directive. In practice, however, it is not always easy to establish whether a situation is transnational or not. In this case, and consistent with prior case law, the Dutch court concluded that the company’s decision to close two plants, although the impact was confined to a single Member State (Spain), constituted a cross-border situation as it might have repercussions for companies in other Member States. A reorganisation in one Member State can amount to a cross-border situation, if it is part of a European restructuring exercise—even if the full consequences for companies in other Member States have not yet fully crystallised. Here, the closure of the plants in Spain might result in a shrinkage at the company’s 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 company did not need to consult the EWC before consultations were started with the national works council and trade unions. The court explained that the EWC Directive imposes no such obligation, as it assumes that consultations will go on simultaneously. Moreover, the specific EWC agreement, which governs the establishment and operation of the EWC, likewise said nothing about any order of negotiations. As a result, the EWC had no express authority to support its claim, and the court dismissed the action.
Briefly put, while in practice the EWC is often consulted ahead of local works councils, the EWC is not necessarily entitled to that preferential treatment.