Strengthening the transnational social dialogue: European Commission’s proposal for a revision of the European Works Councils Directive

On 24 January 2024, the European Commission (Commission) published a proposal for a revision of the European Works Councils (EWC) Directive (Directive). The existing Directive applies to community-scale (groups of) undertakings with at least 1,000 employees within the EU, operating in at least two members states with at least 150 employees in each (so-called Community-scale undertakings) and provides for information and consultation of employees in transnational matters, including cross-border restructurings, through EWCs. 

The Commission’s proposal aims at further improving social dialogue in the EU by strengthening the role and capacity of European Works Councils (EWCs) in transnational decision-making processes, including in relation to recent developments such as green and digital transitions. Further, it aims at strengthening gender balance of EWCs. 

We take a look at the main proposed changes here. A more detailed analysis of the Commission’s proposal can be found in our client briefing. 

Main proposed changes     

• Removal of the exemptions for legacy agreements: The exemption from the Directive’s scope for certain legacy agreements on transnational information and consultation (so-called “Article 13 agreements” and “Article 6 agreements”) will be removed, enabling employees at approx. 320 undertakings currently operating under (protected) legacy agreements to request establishment of an EWC in line with the Directive.
• Clarification of the concept of “transnational matters”: The concept of transnational matters is clarified by including a presumption of transnationality, which applies not only where measures considered by management can reasonably be expected to affect workers in undertakings or establishments in more than one member state, but also where measures can reasonably be expected to affect workers in an undertaking or establishment in one Member State, and workers in an undertaking or establishment in another Member State can reasonably be expected to be affected by the consequences of those measures.         
• Requirement of a response by management in the consultation process: The EWC shall be entitled to receive a reasoned written response by management to its opinion prior to adoption of the decision on the measures in question, provided that the EWC expressed its opinion within a reasonable time after having been informed in line with the Directive.   
• Amendments to treatment and non-transmission of confidential information: Management is required to provide justifying reasons when declaring information as confidential. The confidentiality will be upheld until, in agreement with management, the justification provided is considered to have become obsolete. Further, the possibility for management not to transmit information is limited to cases in which, according to objective criteria, the nature of the information is such that the transmission would seriously harm the functioning of the undertaking concerned. In such case, management shall inform the EWC of the reasons justifying the non-transmission of information. In this context, the duration of appeal procedures in relation to the request of confidentiality and/or non-transmission of information by management shall be compatible with the effective exercise of the information and consultation rights under the Directive. 
• Specification of financial and material resources of EWCs: The financial and material resources to be allocated to the EWC and to be laid out in the EWC agreement are specified by adding certain minimum aspects which need to be covered, including costs for the use of experts, legal representation and participation of EWCs in administrative and judicial proceedings and for the provision of relevant training to members of the EWC. The foregoing obligation also applies for pre-Directive agreements. 
• Strengthening gender balance: When negotiating new EWC agreements or renegotiating existing agreements, necessary arrangements shall be agreed and laid down in the agreement for attaining, as far as possible, and without prejudice to national laws on electing employee representatives, the objective of gender balance whereby women and men each comprise at least 40% of the members of the body.   
• Amendments concerning legal remedies and penalties: Member States are required to provide appropriate measures in the event of non-compliance to ensure that adequate procedures are available to enable enforcement of the rights and obligations deriving from the Directive in a timely and effective manner and further, member states must ensure that effective, dissuasive and proportionate penalties are applicable in cases of infringements to enable the rights and obligations deriving from the Directive. In the event of failure to comply with the national provisions transposing the EWC’s information and consultation rights, (at least) pecuniary sanctions shall be provided, and that when determining penalties for non-compliance with the Directive, the gravity, duration, consequences, and the intentional or negligent nature of the offence, an in respect of pecuniary sanctions, also the size and financial situation of the sanctioned undertaking and any other relevant criteria shall be considered. Additionally, member states are required to notify the Commission on how EWCs can bring judicial and/or administrative proceedings in their relevant jurisdictions.

What will this mean for businesses?

The Commission’s proposal provides for significant enhancements of the legal framework for informing and consulting employees through EWCs in transnational matters and of the role and powers of EWCs in this context. It remains to be seen what changes the draft legislation will undergo as a result of the upcoming debates in the European Parliament and in the member states, which might also be influenced by further opinions on the proposal given by professional organizations.   Ultimately, the impact of the final legislation on Community-scale undertakings will depend on the transposition into national law, which under the Commission’s proposal allows for a certain flexibility at least in some of the areas in which revisions are being proposed, such as the choice of appropriate remedies in case of non-compliance.

What’s next?

The Commission’s proposal will be discussed by the European Parliament and the Member States. Once the final legislation has been adopted and has entered into force, the Member States are to transpose the amendments to the Directive into national law within one year. The application of the new national rules will then be required two years later. As from commencement of the two-years deferral period, EWC agreements can be adapted to meet the revised requirements.