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Background

A European Works Council (EWC) is a body that facilitates information and consultation with European employees on transnational issues. EWCs are composed of employees representatives from each country that is a member of either or both of the European Union and the European Economic Area, in which a business has employees. They operate separately from national information and consultation bodies.

The concept of an EWC dates from the early 1990s, when the first EU legislation on EWCs was enacted (Directive 94/45/EC). That legislation was revised in 2009 to strengthen the rights of EWCs and their members (with Directive 94/45/EC being recast as Directive 2009/38/EC). To the frustration of the European trade union movement, however, those revisions did not alter managers fundamental prerogative to manage their businesses.

On 2 February 2023, the European Parliament adopted a resolution approving a report drawn up by the German MEP and former trade union official, Denis Radtke (the Radtke Report). The Radtke Report calls for fundamental and profound amendments to the current legal framework on EWCs. Its most significant suggestions include:

On 11 April 2023, the European Commission launched a first-stage consultation of European social partners on a revision of the Directive. It did so in line with President von der Leyens commitment that the European Commission would follow up on any resolution by the European Parliament calling for legislative reform.

However, and despite the first-stage consultation purportedly examining whether there is a case for EU action, the European Commissioner for Jobs and Social Rights had already indicated that unless the European social partners (BusinessEurope on the employer side and the European Trade Union Confederation on the employee side) indicate that they will negotiate changes to the Directive between them, he will bring forward new legislation by the end of 2023.

The first-stage consultation highlighted six main areas for potential reform, all of which are contextualised by reference to the relevant parts of the Radtke Report:

The consultation further drew out a range of other areas for potential reform, again based on the Radtke report:

Together, such a broad package of reforms would have profound implications for businesses. The Financial Times has recently called the proposed fines for failing adequately to inform and consult staggering and preposterous. It also noted that a company such as Amazon could face a fine of EUR 7.3 billion for what a court accepted was an unintentional breach of a process that, if done correctly, could have resulted in Amazon lawfully deciding to reject the EWCs opinion in any event.

On 26 July 2023, the European Commission launched a second-stage consultation of European social partners on a revision of the Directive. This reflected that it concluded after its first-stage consultation that there is scope for further EU action to improve the Directive, meaning that it is appropriate for it to consult European social partners on the potential areas for reform already identified.

The second-stage consultation will be open until 4 October 2023. Following this, European social partners may enter into negotiations to conclude an agreement between themselves for legislative approval or, alternatively, and noting that the prospects of agreement between the European social partners is low given their responses to the first-stage consultation, the European Commission may itself propose draft legislation.

The European Commission must consult with the European social partners before bringing forward any legislative proposals in the field of social policy. However, and as noted above, it might reasonably be considered to be unlikely that the European social partners will be able to agree reforms between them, especially given the immediate union-side reaction to the consultation. As such, it appears likely that the European Commission will proceed with proposing new legislation in due course.

If and when any new legislation is proposed, we will publish a further client update. In the meantime, businesses with concerns about these proposals may wish to consider seeking to engage with BusinessEurope before the second-stage consultation closes.

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Second-stage consultation launched on significant reforms to ... - Lewis Silkin