European Works Council

From Max-EuP 2012

by Ulrich Runggaldier

1. Works council: term, subject matter and purpose

In German-speaking countries, the works council (Betriebsrat) is a firmly established legal institution. The establishment and functions of the works council are clearly prescribed by law: in accordance with both the German Works Constitution Act (Betriebsverfassungsgesetz/BetrVG) and the Austrian Labour Constitution Act (Arbeitsverfassungsgesetz/ArbVG), the works council is to be qualified as an organ of the workforce with partial legal personality. The works council itself is elected by the workforce and represents its interests to the company owner. It is incorporated into the works constitution, which regulates the structure of employee representation on a company, undertaking, corporation and multinational level as well as the rights of the workforce to participation and co-determination at these levels. Pursuant to § 39(1) Labour Constitution Act, on the basis of the provisions of the statutory works constitution, a balancing of interests is to be arranged between the company owner and the workforce. It is to be inferred from this provision that the balancing of interests within the framework of the works constitution is geared towards amicable procedures that serve to benefit the employee and the company (cooperative principle). This is almost identical to § 2(1) Works Constitution Act. In compliance with this Act, conflicts of interest are to be resolved amicably, without resorting to industrial action (ban on industrial action within the scope of the works constitution). In this respect, the institutions of the works constitution serve to ensure and maintain an undisturbed climate within the company.

A series of powers are bestowed upon the ‘workforce’ whose exercise is entrusted to the works council: essentially they concern general participation and co-determination rights, eg the right to advice, information and data, a general right to intervene and, finally, the right to participate in and co-determine social, staffing and economic matters. The addressing of social matters occurs mostly through the conclusion of appropriate company agreements.

A functionally equivalent term for ‘works council’ is not to be found in other leading jurisdictions of the European Union. Nevertheless, structures for employees’ representation at a company level exist, eg in Italy and France.

In Italy there is no legal institution comparable to the German works council. In particular, rights of participation and co-determination in line with the German works constitution are particularly absent. However, in recent years, representation structures controlled by the unions have been established within companies, known as the RSU (rappresentanze sindacali aziendali (company union employees representation structures)). They are protected by law (Art 19 ff Employees Statute 1970); however they have no advanced rights to co-determination. They are entitled to information and advice if this is provided for in the relevant collective agreement.

In French law, the employees can be represented by both the staff representative (délégué syndicale, whose main task is to inform the company management of the complaints of the workforce) and the works committee (comité d’entreprise). A works committee is to be formed in every undertaking consisting of at least 50 employees. The number of committee members is determined by the size of the undertaking’s workforce. Its members are elected for a term lasting two years. The undertaking’s director or chairman of the board of directors is simultaneously the chairman of the works committee (this demonstrates a marked difference between the German works council and the French works committee). The French works committee is responsible for the management of the social and cultural activities that are offered to the employees. Furthermore, it is responsible for informing the employees of the status of the undertaking and for hearing the resulting questions on a regular basis (Art L 431 f Code du travail). In undertakings that consist of more than one company, the employees generally elect both an enterprise committee (comité central d’entreprise) and a works committee (comité d’etablissement); in an enterprise group, an additional group committee (comité de groupe) can be established (these bodies correspond to the German Gesamtbetriebsrat and the Austrian Zentralbetriebsrat, the German Konzernbetriebsrat and Austrian Konzernvertretung).

In the United Kingdom, there are to date no institutions that correspond, even in general terms, to the German works council. However, as a Member State it must observe the provisions of Dir 2002/14, which state the employer’s obligations regarding information and consultation as well as employee participation.

2. Historical development of the ‘works council’ as a legal institution

The first statutory proposal to regulate the independent representation of interests within a company was submitted as a minority bill to the Reich Trade, Commerce and Industry Regulation Act (Reichsgewerbeordnung) at the National Assembly in Frankfurt (Frankfurter Nationalversammlung). It focused on the establishment of factory committees with an advisory function. However, the National Assembly was dissolved before it could begin debate on a new national trade and labour law. Years later, individual employers tackled the matter and founded workers committees in their enterprises, to which they gradually transferred a series of tasks allowing them to participate in the company. Towards the end of the 19th century, the legislature created the foundations for participating bodies drawn from the workforce (1891 Novelle zur Gewerbeordnung/Trade, Commerce and Industry Regulation Amendment Act in the German Reich; 1896 Gesetz über die Errichtung von Genossenschaften beim Bergbau/Law on the Establishment of Mining Cooperatives in Austria). Meanwhile, in many industrial companies, mostly on the initiative of trade union functionaries, shop steward organizations had formed on a voluntary basis without a particular legal basis.

The Act on Patriotic Services of 5 December 1916 (Gesetz über den Vaterländischen Hilfsdienst, RGBl 1916, 1.333) however signified a qualitative leap. As a result of this law, compulsory workers’ and employees’ committees were set up in all German companies with over 50 employees for the first time.

As a result of the November Revolution in 1918, the system for the organization of social relations was legislatively restructured for the first time with the ‘Ordinance on Collective Labour Agreements, Worker and Employee Committees and Arbitration of Labour Disputes of 23 December 1918’ (Verordnung über Tarifverträge, Arbeiter- und Angestellten-Ausschüsse und Schlichtung von Arbeitsstreitigkeiten). The comprehensive recognition of an equal entitlement to co-determination finally occurred by means of the Weimar Reich Constitution of 11 August 1919 (Weimarer Reichsverfassung, RGBl 1919, 1.383). Article 165 of this constitution regulated a system of co-determination at an enterprise level and in the economy as a whole. In fact, however, very little was implemented.

As a Works Councils Act (Betriebsrätegesetz) had already been passed in Austria in 1919, a corresponding Works Councils Act was also passed in the German Reich (Law of 4 February 1920, RGBl 147). The works council as regulated by this 1920 statute, although protected from reprisals by the employer, possessed only limited rights of co-determination, above all in staffing and social matters. The Works Councils Act provided, for the first time, for the participation of employee representatives in the supervisory council. The implementing legislation (Law of 15 February 1922, RGBl 209), passed in relation to this, contains among other things the principle that the statutory provisions apply equally to works council members deployed to the supervisory council and other supervisory council members.

During National Socialist rule, the Act on the Regulation of National Labour of 20 January 1934 (Gesetz zur Ordnung der nationalen Arbeit/AOG, RGBl I 45) abrogated the Works Councils Act (this also occurred in Austria through the Ordinance of 9 July 1938).

The new beginning after 1945 brought with it the reinstatement of the works constitution in Germany through the law of the occupying forces: although the establishment of works councils was permitted on the basis of the Kontrollratsgesetz no 22 of 10 April 1946, the right of co-determination was not expressly enshrined in statute. Immediately after 1945, shop stewards’ committees were spontaneously formed in Austria, which were initially based on the Works Councils Act 1919. As for Austria, a new Works Councils Act, which tied in with the basic notions of the Works Councils Act 1919, was only created by the Law of 28 March 1947 (Betriebsrätegesetz 1947). The 1947 law was amended on numerous occasions. Further important amendments were provided for in 1973 through the incorporation of the fundamentals of the Works Councils Act 1947 (BGBl 1947/22) into the newly passed Labour Constitution Act (Arbeitsverfassungsgesetz). Since the Labour Constitution Act came into effect, the Works Constitution Act has also been amended many times. The Labour Constitution Act amendment 1986, which comprehensively reformed the Works Constitution Act, deserves particular mention.

By November 1949, the majority of the Bundestag was challenging the German Federal Government to produce a draft of the Works Constitution Act (Betriebsverfassungsgesetz). This was passed by the Bundestag—with amendments—on 19 July 1952 as the Works Constitution Act. The law came into effect on 11 November 1952. Substantial amendments to this law were first provided for in the enactment of the Works Constitution Act 1972.

In Italy there were traditionally no employee representation structures comparable to the German works council. The primary representative organ was the commissione interna. Commissions of this kind were first formed in 1901 in the large companies of northern Italy. Between 1908 and 1914, this institution was generalized by collective wage agreements. A statutory regulation could, however, not be implemented. These bodies were dismantled by the fascist regime and fascist trade unions. After the collapse of the regime in 1943, the commissione interna was soon reintroduced. These commissions also had to assume the typical trade union functions. In 1947 and 1953, these functions were withdrawn from the commissione interna. Nevertheless, the commissione interna remained the most important organ of the workforce. In fact, the commissione interna regularly concluded collective business agreements—without statutory basis—with the employers (company agreement). In connection with the civil unrest of 1969, new representative structures emerged, eg the delegates or factory council (consiglio dei delegati—consiglio di fabbrica); eventually, in practice, the RSU prevailed. Due to a union transfer of responsibilities, the RSU is now able to conclude agreements with employers regarding company matters. The members of the RSU are elected by the employees (two-thirds) and the union representatives (one-third).

3. Legal development trends: the European Works Council (history, concept, legal status and functions)

a) History

The coalescence of the EU Member States into a unified economic region, which has occurred since the foundation of the European treaties, requires new legal structures and particularly the standardization of legal institutions in order to prevent countries from acting alone and retaining barriers. The establishment of works councils or functionally equivalent employee representation structures in the individual Member States is of particular importance from the perspective of the workforces concerned. Works councils can, however, become meaningless if an enterprise with its headquarters abroad operates a domestic branch. The statutory provisions of a works constitution with a corresponding codification of the works council only apply domestically. Therefore, the transnational enterprise with its headquarters outside the EU will simply not inform or consult the employee representatives of the domestically situated companies regarding changes to the company and company decisions. In this sense, the employees are unprotected. The institutions of the EU are taking steps in order to avoid precisely this situation. Thus, the European Works Council (EWC) was called into being and regulated by a corresponding directive. The Member States are to implement the directive with the effect that the shortfall in protection is remedied.

An initial proposal to create a European right of co-determination had been submitted as early as 1970 ([1970] OJ C124). In 1980, there was a second attempt to create a European Works Council for corporations with companies located in various Member States. In particular, this proposal intended that transnational undertakings would be obliged to inform and consult their employee representatives (Vredeling Directive [1980] OJ C297 and amended proposal of 12 August 1983). A third attempt at creating a directive concerning the appointment of European Works Councils to inform and consult employees in undertakings and groups of undertakings that operate on an EU scale ([1991] OJ C39/10 f; amended draft in [1991] OJ C336/11 ff) remained unsuccessful.

The proposals briefly outlined above failed due to the principle of unanimity and, in particular, the resistance of the United Kingdom. However, due to the Maastricht Treaty ([1992] OJ C191), a fundamental amendment with regard to the European Works Council came into effect. Through this treaty, the opportunity to take social policy measures without the approval of the UK was created. The treaty itself provided the EC Treaty (now TFEU) with the Agreement on Social Policy, which entered into force in 1993. Article 2 of this agreement made possible a directive on information and consultation of employees: Council Directive 94/45/EC on the Establishment of a European Works Council or a Procedure in Community-scale Undertakings and Community-scale Groups of Undertakings for the Purposes of Informing and Consulting Employees in Community Scale Undertakings and Groups of Undertakings ([1994] OJ L254/64 ff). The date by which the Member States were to implement the aforementioned directive was 22 September 1996. Germany fulfilled this obligation by means of the Act on European Works Councils of 28 October 1996 (Gesetz über Europäische Betriebsräte/EBRG); Austria with the introduction of §§ 171–207 to the Labour Constitution Act (BGBl 1996/601); Italy by passing legislative decree no 74/2002; Great Britain with the Transnational Information and Consultation of Employees Regulations 1999, SI 1999/3323, effective from 15 January 2000; for France, Art L 432-1 of the Code du travail is pertinent.

Directive 94/45/EC was revised and recast as Directive 2009/38/EC of the European Parliament and of the Council on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees. This was preceded by attempts to reach agreement on the contents of the revised proposal between employers’ and employees’ representatives on the European level and to base the directive on a framework agreement of the social partners. However, as in several other areas in the recent past, such agreement could not be reached.

The main aim in the process of redrafting the Works Council Directive was to promote the actual establishment and functioning of European Works Councils: when the Commission drafted the new proposal in 2008, European Works Councils had been established in hardly more than a third of the companies that fell under the scope of the directive. Accordingly, the new directive is meant to enhance the effectiveness of EWCs (eg by improving the definition of ‘information’ and ‘consultation’), to resolve legal uncertainties and problems (in cases such as restructuring) and to harmonize the directive with more recent directives on employee representation.

b) Principles and definition

Directive 2009/38 itself does not prescribe the way in which individual European Works Councils are to be organized and which tasks they are to perform. It is clear from the character of the directive as a basis for minimum standards that no binding organization is established by the directive. The directive is derived to a great extent from the principle of autonomy of social partners (recital 19) and leaves it to the employee representatives and the directors of the enterprise to agree on a system that seems practicable (European Works Council by agreement). The corresponding agreement can stipulate that a EWC with particular competences is established (Art 6(2)). It can, however, also be decided that in place of a European Works Council, one or more procedures for informing and consulting employees can be created that can cater to the particular circumstances of the undertaking or group of undertakings (Art 6(3)). The parties can also decide against establishing a EWC or another procedure for informing and consulting employees.

The directive concerns undertakings and groups of undertakings that operate on an EU scale and stipulates the obligation to inform and consult employee representatives. A European Works Council or procedure for informing and consulting employees is to be established to this effect unless decided otherwise by the parties.

Finally, the aforementioned directive defines both the term ‘Community-scale undertaking’ and the term ‘Community-scale group of undertakings’. Accordingly, a Community-scale undertaking has at least 1,000 employees in Member States with 150 employees in each of at least two Member States (Art 2(1a)). A group of undertakings, in line with the directive, consists of a controlling undertaking and its controlled undertakings. The group of undertakings must fulfil the following prerequisites:

it has at least 1,000 employees within the Member States;

it has at least two group undertakings in different Member States; and

it has at least one group undertaking with at least 150 employees in one Member State and at least one other group undertaking with at least 150 employees in another Member State (Art 2(2)(b) and (c)).

c) Establishment of a European Works Council or creation of a procedure for informing and consulting employees

The procedure for the establishment of a EWC or creation of a procedure for informing and consulting employees is laid down in the directive (Art 4 ff). Two fundamental structures in this procedure are the special negotiating body (SNB) and the central management.

The central management is defined by the directive as the central management of the controlling undertaking of a group of undertakings. The central management is responsible for satisfying the pre-conditions and ensuring the availability of the necessary means so that undertakings and groups of undertakings operating Union-wide are able to establish either a European Works Council or a procedure for informing and consulting employees. The central management is to bring about the establishment of a EWC or the creation of a procedure for informing and consulting employees either on its own initiative or upon the written request of a minimum of 100 employees or their representatives from at least two companies.

The special negotiating body is the negotiating partner of the central management to which employee representatives are delegated. The procedure for the selection or nomination of members for the SNB is determined by the Member States (German § 11 Act on European Works Councils; Austrian §§ 179, 180 Works Constitution Act).

The special negotiating body is to be elected or appointed in proportion to the number of employees employed in each Member State. More precisely, Art 4 of the directive prescribes:

representation by one member of each Member State in which the Community-scale undertaking has one or more establishments or in which the Community-scale group of undertakings has the controlling undertaking or one or more controlled undertakings;

supplementary members in proportion to the number of employees working in a Member State, whereby one additional representative is allocated if the percentage of employees in that state exceeds 10 per cent, 20 per cent, 30 per cent etc, respectively.

The task of the special negotiating body is to determine, by written agreement with the central management, the scope, composition, functions and term of office of the EWC or the arrangements for implementing a procedure for the information and the consultation of employees (Art 5(3) and (4)).

For this purpose, the central management calls a meeting with the special negotiating body. In this meeting, the following in particular are to be determined:

the undertakings of the Community-scale group of undertakings or the establishments of the Community-scale undertaking which are covered by the agreement;

the composition of the European Works Council, the number of members, the allocation of seats and the term of office;

the functions and the procedure for information and consultation of the EWC and the arrangements for linking the advisement and consultation of the European Works Council and national employee representation bodies;

where necessary, the composition, the appointment procedure, the functions and the procedural rules of the select committee set up within the European Works Council;

the venue, frequency and duration of meetings of the EWC;

the financial and material resources to be allocated to the EWC;

the duration of the agreement and the procedure for its renegotiation (especially where the structure of the undertaking changes; Art 6(1) and (2)).

The central management and the special negotiating body may decide, in writing, to establish one or more information and consultation procedures instead of a EWC (Art 6(3)).

In accordance with previous case law (ECJ Case C-440/00 – Kühne & Nagel [2004] ECR I-787; ECJ Case C-349/01 – Anker [2004] I-6803), Art 4(4) of the new directive stipulates that the central management must provide information required for commencing the negotiations, in particular concerning the structure of the undertaking or group and its workforce (notably the number of employees).

Moreover, the recast directive defines to a certain extent the legal position of the SNB, giving it the right to convene before and after its meetings with the management and to consult at least one expert at the expense of the central management (Art 5(4)). It has to cooperate with national bodies representing employees and basically limit itself to transnational issues (Art 6(2) in connection with Art 1(3)). Its members are entitled to protection and guarantees similar to those provided for national-level employees’ representatives and to training without loss of wages (Art 10).

Art 13 provides for the re-negotiation of agreements in force in cases of a significant change in the structure of an undertaking or group falling under the scope of the directive.

Finally, the transitional provision of Art 14 of the directive is of importance. In line with this provision, the directive is not applicable to Community-scale undertakings or Community-scale groups of undertakings in which, on the date for the implementation of this directive (5 June 2011), there was already an agreement concluded either on the basis of Dir 94/45 or even before the entry into force of the former directive (see Art 13(1) of Dir 94/45). Should these agreements expire, the concerned parties can decide to continue to apply them. Otherwise, the directive applies as from that date.

d) Subsidiary provisions

The subsidiary provisions of the directive provide for the option that the establishment of a EWC occurs by law. This applies when:

– the central management and the SNB make a corresponding decision;

– the central management refuses to enter into negotiations within six months of the first request (ie the request of at least 100 employees);

– and/or no agreement has been reached between central management and the special negotiating body within three years of receipt of the request.

By these provisions, the legislature wishes to prevent the central management from inhibiting the establishment of a EWC.

Pursuant to the subsidiary provisions, according to Art 7 of the directive in connection with Annex I, the following essential rules apply with regard to the legal implementation of the EWC (ie the European Works Council by act of law):

– the EWC is composed of employees of the Community-scale undertaking or the Community-scale group of undertakings who are elected or appointed in the same proportional manner as the SNB (see above);

– the EWC elects from its members a committee of maximum five members;

– the central management is to be informed of the composition of the Works Council;

– four years after the legally provided establishment of the EWC according to the subsidiary provisions, it is to be examined whether a EWC should be established by agreement or whether the subsidiary provisions should be continued in their application;

– the EWC by act of law is authorized to convene with the central management once a year for the purpose of information and consultation regarding the development of the state of business and the prospects of the Community-scale undertaking or the Community-scale group of undertakings on the basis of a report submitted by the central management;

– should exceptional circumstances arise that affect the employees’ interests to a considerable extent, particularly in the case of relocation or closure of undertakings, the committee is entitled to be informed and consulted;

– before any such meeting, the EWC and/or committee are entitled to convene without the management being present; expenses (including at least the consultation of one expert) are born by the central management.

The subsidiary provisions gain their greatest significance mainly from the fact that they serve as a fallback option for employee representatives in the negotiations: they create a significant incentive for central management to try and reach an agreement on a mechanism of representation that is in line with the particular needs of the undertaking or group.

4. Closing comments

Directive 2009/38 concerning the appointment of a European Works Council is the basis for further directives concerning employee co-determination, eg Directive 2001/86 of 8 October 2001 supplementing the statute for a European company concerning the participation of employees and Dir 2002/14 of 11 March 2002 to determine a general framework for informing and consulting employees in the EU. These directives are to ensure that cross-border undertakings and groups of undertakings grant all employees of these undertakings and groups of undertakings a minimum entitlement to participation and thus further enhance the social dimension of the EU.

Literature

Meinhard Heinze, ‘Der Europäische Betriebsrat in Österreich und Deutschland’ in Festschrift Theodor Tomandl (1998) 139; Detlev Joost, ‘Europäischer Betriebsrat’ in Münchner Handbuch, vol 3 (2nd edn, 2000) 1834; Martin Henssler and Axel Braun (eds), Arbeitsrecht in Europa (2003) 286 ff, 427 ff; Franco Carinci and others, Diritto sindacale (5th edn, 2006) 124 ff; Hartmut Oetker and Claudia Schubert, ‘Europäisches Betriebsverfassungsrecht’ in Hartmut Oetker and Ulrich Preis (eds), Europäisches Arbeits- und Sozialrecht B 8300 (looseleaf, 2007) 123.

Retrieved from European Works Council – Max-EuP 2012 on 19 May 2022.

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