Analytics, Employment, EU – Baltic States, Industry, Legislation, Markets and Companies

The aftermath of the financial crisis in 2007/8 has triggered a widespread debate about the causes, social and environmental consequences of the lack of adequate workers council’s participation in corporate strategies. Such councils are expected both to streamline the work of a company as well as eliminate possible risks. Very often workers councils can pave the way to attractive and long-term investment. The article discusses the role of workers councils in various corporate forms, particular attention is given to the international organisational forms, such as European Company and revealing the social dialogue issues in the European Semester.

Social partners within state structures

Presently, there are some well-developed tripartite and bipartite structures in EU member states, which produced a range of agreements between social partners and state/public authorities. However, difficult socio-economic conditions connected to the 2008-crisis have made social dialogue difficult.

Thus, the Commission has been committed to work more closely with social partners in improving the quality and effectiveness of social dialogue at all levels and to develop solutions jointly for the main challenges facing Europe.

President Juncker at his initial steps in the new Commission at the end of 2014 promised to start a new round of social dialogue in Europe. See Political Guidelines and Work Programme of the Commission in http://europa.eu/rapid/press-release_IP-15-4542_en.htm.  

To deliver on the initiative, two Commissioners were included in the new Commission since 2014 with the social affairs’ competence: Vice-President for Social Dialogue, Valdis Dombrovskis and “regular” Commissioner for employment, social affairs, skills and labour mobility, Marianne Thyssen.

See more in http://ec.europa.eu/social/main.jsp?langId=en&catId=1.

Bipartite social dialogue

According to the “founding” integration EEC Rome Treaty (1957), one of the Commission’s tasks in the social field was to promote close cooperation among the states with regard to the right of association and collective bargaining between employers and workers. However, this provision started to be implemented several decades after.  

Set up in 1985, the initiative of Commission President Jacques Delors towards a European social dialogue involved major social partners: European Trade Union Confederation, the Union of Industries of the European Community and the European Centre of Public Enterprises.

In 1992, the Social Dialogue Committee (SDC) was established as the main forum for bipartite social dialogue at European level. The SDC currently meets three or four times a year and comprises 64 members (32 representing employers and 32 representing workers) either from European secretariats or national organisations. Meanwhile, the Single European Act created a legal basis for the development of a ‘Community-wide social dialogue’. In October 1991, UNICE, ETUC and CEEP adopted a joint agreement which called for mandatory consultation of the social partners on the preparation of legislation in the area of social affairs and a possibility for the social partners to negotiate framework agreements at Community level. This request was acknowledged in the Agreement annexed to the Maastricht Protocol on Social Policy, which was signed by all Member States with the exception of the United Kingdom. At national level, the social partners were thereby given the opportunity to implement directives by way of collective agreement.

Tripartite social dialogue

From the very start of the European integration process, it was considered important to involve economic and social stakeholders in drawing up Community legislation. The Consultative Committee for Coal and Steel and the European Economic and Social Committee bear witness to this. Since the 1960s a number of advisory committees have existed, the role of which is to support the Commission in formulating specific policies. In general, these committees, such as the Committee on Social Security for Migrant Workers are made up of representatives of national employers’ organisations and trade unions, as well as representatives of the Member States. From 1970, the key tripartite social dialogue forum at European level was the Standing Committee on Employment, composed of 20 representatives of the social partners, equally divided between trade unions and employers’ organisations.

Reformed in 1999, the Committee was fully integrated into the coordinated European employment strategy. On the basis of a joint contribution from the social partners, the Council launched a Tripartite Social Summit for Growth and Employment in March 2003 (Council Decision 2003/174/EC) which has replaced the Committee on Employment. Facilitating ongoing consultation between the Council, the Commission and the social partners on economic, social and employment questions, it meets at least once a year and one of its meetings must be held before the Spring European Council.

Formalising a process that had been developing since 1997, the Summit now officially consists of the current EU Council presidency and the two subsequent presidencies, the Commission and the social partners. The three Council presidencies are normally represented by the heads of state or government and the ministers in charge of employment and social affairs; equally, the Commission has two representatives, who are usually its President and the member responsible for employment and social affairs. The social partners’ members are divided into two delegations of equal size, comprising 10 workers’ representatives and 10 employers’ representatives, with special attention being paid to the need to ensure a balanced participation between men and women. Each group consists of delegates of European cross-industry organisations either representing general interests or more specific interests of supervisory and managerial staff and small and medium-sized businesses at European level. Technical coordination is provided for the workers’ delegation by ETUC and for the employers’ delegation by UNICE. Following the ratification of the Lisbon Treaty, the role of the Tripartite Social Summit for Growth and Employment is now acknowledged under Article 152 TFEU.

Source: Marion Schmid-Drüner, Social dialogue, in: http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_5.10.7.html

Europeanisation in corporate management

The European Company (SE) has added additional facets on obligatory worker involvement at European level particularly by including – for the first time – participation rights at company board level. As of 8 October 2004 it became possible to establish a European Company (SE). The main purpose of the SE statute (EC 2157/2001) is to enable companies to operate their businesses on a cross-border basis in Europe under the same corporate regime. An important feature of this new company form is (by means of the associated SE Directive of 2001/86/EC) that obligatory negotiations on worker involvement in SEs were introduced which include the question of representation of the workforce at board level.

Same assessments of the 2009 EWC Recast Directive’ implementation in national legislation have already been done in the Sustainable Company book series produced by the GOODCORP network of academic and trade union experts on corporate governance.

See more in:  http://www.worker-participation.eu/European-Company-SE

A vital step was made in 2016 concerning workers participation in business management; the year coped with the 20 years’ anniversary since the first European Works Councils (EWC) directive came into force in the EU. On this occasion, the European Commission is planning an evaluation of the EWC recast directive that will undoubtedly lead to debate on the need for further review of European regulation of EWCs. The year 2015 marked the fifteenth anniversary of adoption of the EU directive on workers’ involvement in the European Company (SE).

A broad selection of key figures on the basic characteristics of EWCs and SE WCs, as well as the companies in which they operate was made in 2015. See: Stan De Spiegelaere, Romuald Jagodzinski. European Works Councils and SE Works Councils in 2015: Facts& Figures, 2015. – 50 pp.  

European Works Councils are important European institutions, particularly, in the potential effects on the Europeanisation of industrial relations, and its future development. The statistical data provide insight for practitioners (works council members, trade union coordinators, experts, trainers) and stakeholders into the distinctive features and characteristics of EWCs and SE WCs.

European Works Councils’ types

Depending on the company, the date and the characteristics of the agreement founding an EWC, we can distinguish between different types of European Works Council. Most of the EWCs (49%) are the so-called Article 6 EWCs. These EWCs are fully regulated by the EWC Directive of 1994 and the 2009 Recast Directive. On the other hand, 39% of the existing EWCs are ‘pre-directive’ EWCs. Here, the first agreements were signed before 22 September 1996. These EWCs are not fully covered by the EU Directive of 1994 and its Recast of 2009.

About 9% of all EWCs are EWCs founded in a company with the European Company statute (SE). This statute is common across the entire EU and in terms of worker rights allows for information and consultation in the form of the SE works council (essentially identical to the EWC) and participation rights on the board level. The share of SE works councils has been growing steadily over time; the share of SE WCs in the pool of all EWCs was only 4% in 2011.

There are some differences between the SE works councils and other EWCs; it is however important to note that most SE works councils are established in German undertakings with a developed experience and structures of worker participation.

About 10 per cent of current EWCs are established in SEs and the share is rising over time; but only 2 per cent of current EWCs have decided to enlarge their scope from Europe to the world. However, about 40% of EWCs are still not fully covered by the rules of the directive or its recast.

Source: Spiegelaere & Jagodzinski. European Works Councils and SE Works Councils in 2015 (p. 13).

Of all the active EWC bodies, at least 35% have already renegotiated their agreement. In the main it is the pre-directive EWCs that have been renegotiated as these agreements are older. Nevertheless, approximately half of the pre-directive EWCs have not been renegotiated meaning, that these EWCs have not had the opportunity to incorporate some regulatory or company changes. The SE WCs have been rarely renegotiated as most of them have been established much more recently. Moreover, SE WCs are generally established in companies which already had a working EWC but changed their legal structure.

More than ¾ of all EWCs are in the metals, chemicals and services industries.

151 EWCs have been set up in companies with their HQ in the US; 20% of EWCs are established in companies headquartered in Germany.

The ETUI's Worker Participation 2030 project looked at the future of worker participation under four different scenarios. It is aimed at people who want to know more about scenario-building and are considering setting up their own worker participation scenario project.

The handbook on the 2030 project introduces the SE and its mechanism of employee involvement. It explains the negotiation procedures and provides ‘tips and tricks’ for a decent preparation of negotiations. Based on the experience of several experts, it gives an overview of key aspects of an SE agreement and includes an extensive set of overviews, graphics and comparative tables. It has been designed first and foremost to help practitioners to prepare and conduct negotiations on agreements on employee involvement in SEs.

See: http://www.worker-participation.eu/About-WP/Publications/Worker-involvement-in-the-European-Company-SE-A-handbook-for-practitioners#  

Legislation’s overview

Since 1994, the EU has established mechanisms for information and consultation procedures for workers in transnational companies (European Works Councils Directive 94/45/EC).

In 2009, the EWC Directive was reviewed and amended (Recast EWC Directive 2009/38/EC). It is expected that in 2016 there will be a formal conclusion of a new evaluation procedure designed to ascertain whether the improvements of 2009 have had any impact on the EWC's conditions of operation and whether any further amendments should be considered.

In October 2001, the EU formally adopted the legislation on the European Company, also known by its Latin name Societas Europaea (SE). This SE legislation expected to ensure the new opportunities for employee representation at European level.

It consists of a Regulation on the European Company Statute (EC 2157/2001) and an accompanying Directive on employee involvement within the SE (2001/86/EC). Since the entry into force of these two pieces of EU legislation three years later, companies can freely opt for this new corporate form. Throughout Europe, more than 900 SEs have been registered in the meantime.

The principal intention of the SE legislation on the part of the European legislator has always been to enable companies to operate more easily across European borders. However, it also opens up new possibilities for employee representation at European level. Indeed, the SE Directive takes worker involvement within multinational companies one step further. Before an SE can be registered, management and worker representatives have to negotiate an agreement on how the workers will be involved in the future SE. The scope of these negotiations includes not only the establishment of a transnational information and consultation body (SE Works Council) but also participation rights. Participation is understood as the right to elect or nominate

some of the members of the SE’s administrative or supervisory board.

The SE Directive reflects a European approach which considers employee involvement not only as an important element of the European social model but also as a firm part of its economic governance model. Art. 27 of the EU’s Charter of Fundamental Rights recognises the workers’ right to information and consultation within the undertaking at the same level as other civil and political rights.

This notion is incorporated in the Lisbon Treaty (art. 153 TFEU), where it is stated that the EU shall support and complement the activities of the member states in such fields as: representation and collective defence of the interests of workers and employers, including codetermination.

Employee (board-level) participation is a well-established feature of many national corporate governance systems in the EU.

Likewise, 18 of the EU28+3 countries (Iceland, Norway and Liechtenstein) have national legislation for board-level participation. Employee involvement, including representation in the company boardroom, thus represents a well-established and important element of social and economic Europe. The following quote from the final report of an EU commissioned expert group (so-called Davignon group) makes clear that worker involvement is not only an important social achievement but today also represents a commandment of economic rationality:

‘The type of labour needed by European companies — skilled, mobile, committed, responsible, and capable of using technical innovations and of identifying with the objective of increasing competitiveness and quality — cannot be expected simply to obey the employers’ instructions. Workers must be closely and permanently involved in decision-making at all levels of the company.’ (See: Group of Experts ‘European Systems of Worker Involvement’. Final report, 1997, p. 5)

As was shown in the 2011 ETUI’s Benchmarking Working Europe report, countries with stronger involvement rights at different levels perform better on all of the eight Europe 2020 headline indicators than the group of countries with weaker involvement rights.

See more on http://bit.ly/qXOTSc. 

In this sense, one can conclude that strong worker rights contribute to good economic and social performance. In this context, it is important to emphasise that the initiative to start negotiations on arrangements for the involvement of employees in the SE has to come from the management side and involves the highest organs of the company. Contrary to a European Works Council (EWC), therefore, it is not a choice of the employees.

However, once a company has announced its intent to set up an SE the employees’ side should prepare itself properly. Indeed, the negotiations represent a challenge for employee representatives and trade unions, for several reasons:

— The setting up of an SE is a fairly complex and technical procedure; for local employee representatives it is usually a ‘once-in-a-lifetime experience’.

— The usual negotiation time of (up to) six months places responsibility on both sides to quickly reach an agreement on employee involvement; without this, the SE generally cannot be registered.

— The negotiations bring together employee representatives from very different national backgrounds. For the success of the negotiations it is crucial that the worker side manages to speak with a single voice. (See: Stolt M. and E.Wolters, 2011, p.7).

On the side of the European trade unions there is a clear will to take advantage of the potential benefits of the SE Directive. In 2008, the ETUC for this reason set up — by a unanimous resolution of its member organisations — the European Worker Participation Fund (EWPF). The fund is financed by the (partial) transfer of the remuneration of SE board-level employee representatives.

At the same time, a European Worker Participation Competence Centre (EWPCC) was set up and located at the ETUI. Financed by means of the fund, the EWPCC shall support employee representatives in the SE, be it negotiators, members of an SE Works Council or board members in fulfilling their task. Also, national trade unions can ask for funding of related activities. Therefore SE practitioners as well as their trade unions should not hesitate to make use of the expertise and assistance provided by the EWPF and the EWPCC (see pp. 98-100 and 101-102).

See: Stolt M. and E.Wolters. Worker involvement in the European Company (SE). A handbook for practitioners. – European Trade Union Institute (ETUI), Brussels, 2011, –154 pp.

Every SE is specific and so will be its agreement on employee involvement. It was the intention of the SE legislation to provide local actors with the autonomy they need to negotiate an agreement on employee involvement that best fits their specific needs. Therefore to reach a substantive agreement would need employee involvement as well as following the necessary rules.

Table. SE: general information

Company (SE) at a glance

= SE/Societas Europaea: general approach

— A new supranational company form; possible since 8/10/2004;

— A public limited liability company; governed partly by European law, partly by national law;

— Set up within EU territory + Norway, Iceland, Liechtenstein;

— An option for companies, not an obligation;

— Company‘s name must be preceded/followed by ‘SE’;

— Minimum subscribed capital: EUR 120,000

= High degree of cross-border flexibility and mobility:

— Free choice of board structure: monistic (single-tier) or dualistic (two-tier);

— Possibility to merge across borders; possibility for a cross-border transfer of seat;

— But: registered office must always be in the same member state as the head office.

= Obligatory European procedure for employee involvement:

— Transnational information and consultation body (SE Works Council);

— Participation at board level (according to ‘before and after principle’)

Source:  Stolt M. and E.Wolters, 2011, p.11.

Social dialogue in the European Semester

EU member states agreed that a “new social dialogue” should provide for a more substantial social partners’ involvement in the European Semester as well as in the EU socio-economic policy-making. Bedsides, stronger emphasis on national social partners’ capacity building and a clearer relation between social partners and the Commission’s “better regulation agenda” shall be maintained.

Social dialogue as a fundamental component of the European social market model gained full recognition in the “founding treaty” – EEC Treaty (1957) with the Amsterdam Treaty reform (1997) to follow. No wonder, that the present EU basic law (Lisbon Treaty, art. 151-156, TFEU), stipulate that social partners (representatives of management and labour) have to contribute actively to designing European social policy. Thus, the promotion of dialogue between management and labour is recognised as the EU and EU and the member states common objective (art. 151 TFEU).

Thus, the aim of social dialogue is to improve European governance through the involvement of the social partners in decision-making and in the policies’ implementation process.

Following the initiative of Commission President Jacques Delors, the Val Duchesse social dialogue process was set up in 1985 with the aim of involving social partners [represented by the European Trade Union Confederation (ETUC), the Union of Industries of the European Community (UNICE) and the European Centre of Public Enterprises (CEEP)], in the internal market process. A number of joint statements on employment, education, training and other social issues resulted from the meetings of these social partners in 1985.

Effective social dialogue is the cornerstone of the European social model. It is a prerequisite for the functioning of Europe’s social market economy and crucial to promote both competitiveness and fairness.

In March 2015, the European Commission together with the social partners kicked off a "new start for social dialogue", marking 30-years of the mentioned “Val Duchesse process” involving European social partners in building the internal market. 

The Commission identified that social dialogue can contribute in six specific areas: "the European Semester"; "industrial relations and capacity building at national level"; "the EU's macro-economic strategy"; "social dialogue and better regulation"; "the digital single market" and "skills, education and training needs in a changing working environment".

http://europa.eu/rapid/press-release_IP-15-4542_en.htm

In the framework of the European Semester, the Commission reinforced the consultation of social partners in various areas:

·         The Commission consulted the European social partners on their views and the challenges ahead before the publication of the 2016 Annual Growth Survey (meeting on 23 September 2015).

·         The Commission, through its Representations in the Member States, stepped up and encouraged discussions with national social partners on the Country Reports and Country-Specific Recommendations at key milestones of the Semester.

Social dialogue’s perspectives  

Important progress has been achieved in implementing the commitments made one year ago as part of the 'new start for social dialogue'.

The Commission will continue these efforts in the coming years, guided by the following two main principles:

1) EU social dialogue cannot deliver without a well-functioning and effective social dialogue at national level, which requires a corresponding institutional setting.

2) Tripartite concentration, involving public authorities, needs to build upon a strong bipartite social dialogue; it will be valid both for the EU and the member states.

Reference: European Commission, press release “New start for social dialogue- one year on”, Brussels, 16 March 2016. In:

http://europa.eu/rapid/press-release_MEMO-16-823_en.htm?locale=en