The Revised EWC Directive: Agreement at Last

Provisional agreement has been reached on new rules governing the operation of European Works Councils (“EWCs”). Some technical steps are required before the revisions come into force but we now have a good idea of the outcome of this lengthy negotiation process.

In this, the first of our EWC Series about the revisions to the Directive on European Works Councils 2009/38/EC (the “Directive”), we explore a question that is currently “front of mind”: will the proposed changes result in a more effective enforcement regime?

In later articles in the series, we will explore other key questions, including what steps should central management take right now and exploring the potential impact that changes to definitions and key concepts may have in practice. The verdict so far from our team (which has been advising on EWCs since 2000) is that this the most significant development in this area since the implementation of the Directive in 2009.

How effective is the current enforcement regime?

EWCs are bodies designed to allow information and consultation between workers and employers on European transnational matters. The Directive aims to ensure that the arrangements for informing and consulting with employees are implemented in such a way as to ensure their effectiveness, while also enabling central management to take decisions effectively.

Under the Directive, Member States are required to provide for appropriate measures in the event of failure to comply with the Directive, and in particular to ensure that adequate administrative or judicial procedures are available to enforce obligations under the Directive.

However, this has not happened in practice in some countries. In the 2018 review of the Directive, access to justice and inadequate sanctions were specifically highlighted as areas of concern. We explored how this has manifested in Ireland in our recent article (available here), which highlighted the gaps in the Irish enforcement regime, and explored potential solutions to address these issues.

What changes are proposed now that could impact the enforcement regime?

Many have acknowledged the need for improvement concerning the effectiveness of the regime. Until now there was not consensus on how to achieve this. Some of the proposals of the European Parliament raised concerns from the central management perspective about their potential to upset the balance on which the Directive is predicated: ensuring effectiveness of information and consultation arrangements without impacting the ability of central management to take decisions effectively.

The final text creates a balanced enforcement regime, with key wins for employee representatives in some areas but with some of the more radical proposals not being accepted.

1. No more exemptions for Article 3 / Article 13 Arrangements: Employers with information and consultation arrangements that pre-dated the effective date of previous Directives (i.e. before the late 1990s) had previously been entirely exempt from the Directive. This will no longer be the case, meaning that a significant number of new companies will come within the scope of the regime. Central management in this cohort now need to think carefully about their next steps – we will explore this in future articles.
2. No injunctions / GDPR size fines: Some of the more radical proposals to improve the effectiveness of the regime will not be implemented. This reflects the need to construct a regime that allows central management to take decisions effectively. It also reflects the reality that the Directive balances the need for effective information and consultation with the need for central management to be able to take effective decisions.
3. More focus on the roles of experts / unions: The role of the expert and Community trade unions is expressly addressed in the recitals of the Directive. Central management can expect increased focus on how these bodies participate in meetings or discussions.
4. Confidentiality under the microscope: Member States must now take action to prevent central management from making “excessive” use of confidentiality restrictions, by laying down objective criteria to assess whether claiming confidentiality is legitimate.
5. New guidance on sanctions: The revisions provide clarity on the things that Member States should take into account when determining appropriate sanctions for breaches of the regime, such as the gravity, duration and consequences of the breach, whether it arose due to deliberate action or negligence and (in the context of financial sanctions) turnover. However, as the Directive is not prescriptive in this regard, the final structure of the enforcement regime will largely depend on the decisions taken by Member States when drafting legislation implementing the directive.
6. New obligations concerning legal costs: Member States must ensure that reasonable costs of legal representation are borne by central management or take equivalent measures to ensure that lack of financial means is not a barrier of access to the courts. How this ultimately manifests will be determined by the approach of Member States: for example, in Ireland there is currently no obligation on parties bringing claims to the Workplace Relations Commission or Labour Court. It is unclear if the provision of access to these bodies will be considered a measure that ensures that there are no financial barriers to accessing justice.

Conclusion: Clarity in many areas, but implementation is key

The publication of the proposed Agreement provides welcome clarity in many areas when it comes to enforcement of the EWC regime.

A key win for employee representatives was the increase in scope of the regime – and the fact that there are no longer any exemptions places community scale undertakings on a level playing field when it comes to engaging in information and consultation arrangements.

However, how this will play out in practice will still be subject to variation on a state by state basis. This may inform the decisions of central management of new bodies coming in the scope of the regime, who – if their central management is located outside the EU - now need to select a representative agent.

In our experience, many employers in this position select Ireland as a representative agent for many important reasons, including the fact that its enforcement regime is more closely aligned to common law jurisdictions and is conducted through English. We are happy to support employers considering Ireland as a representative agent smoothly navigate this developing area.   

For further information please contact our Employment, Pensions and Benefits Group partner, Bryan Dunne, senior associate Rachel Barry or associate Colum Holland who advise on all aspects of EWCs and are on hand to provide support as needed.