In March 2006, the Slovenian government adopted the Law on cooperation of workers in management of a European company (Societas Europea/SE), therefore transposing the employee involvement directive supplementing the SE directive. The following month, the parliament adopted the new Law on companies, thus also implementing the SE regulation. The extremely late transposition of both the SE regulation and the SE directive was attributed to the controversy surrounding the introduction of a one-tier management structure.
New laws adopted
Slovenia, along with a number of other EU Member States, failed to meet the transposition deadline of 8 October 2004 for the adoption of Council Directive 2001/86/EC supplementing the Statute for a European company (Societas Europea/SE) with regard to the involvement of employees, known as the SE directive (EU0206202F). The country also failed to make the necessary changes to comply with Council Regulation 2001/2157/EC on the statute for a European company by that date (SI0501303F, SI0511303F).
However, on 2 March 2006, Slovenia finally transposed the SE directive by adopting the Law on cooperation of workers in management of a European company (LCWMEC). In addition, the requirements of EU Directive 94/45/EC were also transposed through the passing of the Law on European Works Councils (SI0409102F, SI0208103F).
The LCWMEC was adopted by urgent procedure after the European Commission warned the Slovenian government, on 18 October 2005, that it would have to transpose the SE directive within two months in order to avoid legal action at the European Court of Justice. At that point, the transposition had been delayed by more than a year.
Subsequently, on 4 April 2006, the parliament also adopted the new Law on companies (LC), which implements the SE regulation. In addition, the LC introduces a one-tier management structure (i.e. a single board of directors) for all Slovenian joint-stock companies, alongside the existing two-tier structure (supervisory board and management board) that has been compulsory for larger joint-stock companies up to now. The late transposition of the law was attributed to the debate and controversy surrounding the introduction of the one-tier management structure, which delayed the adoption of the new LC and therefore the transposition of the SE regulation and SE directive.
Involvement of social partners
On 2 December 2005, the draft LCWMEC was discussed at the 139th session of the Economic and Social Council of Slovenia (Ekonomsko socialni svet Slovenije, ESSS), the country’s central body for tripartite cooperation.
The employers supported the draft LCWMEC. The Union of Free Trade Unions of Slovenia (Zveza svobodnih sindikatov Slovenije, ZSSS) (SI0210102F) submitted to the ESSS its comments on the draft LCWMEC. However, because the draft LCWMEC was already adopted by the government on 1 December 2005 and submitted to undergo the parliamentary process, these comments were received too late and most of them were not taken into consideration.
At the ESSS forum, a question was raised on whether the discussion was merely token as the government would probably disregard the remarks of the participants. ZSSS Executive Secretary responsible for activity at EU level and codetermination, Metka Roksandic, stated that the intention of the discussion was to change the draft LCWMEC so that the SE directive would be implemented properly, thus preventing any abuse of procedures. In Slovenia, there had already been a case where the workers’ right to co-determination was violated in a subsidiary company, which was part of a European company.
Position of trade unions
Another contentious issue concerned the new draft LC, which included provisions regarding board-level employee representation in relation to the one-tier management structure. Trade unions were of the opinion that the introduction of a one-tier management structure represented an attempt to destroy board-level employee representation in Slovenia (SI0312101F). They claimed that the provisions for board-level employee representation in the one-tier management structure diminished workers’ rights to such representation. As a result, the trade unions demanded that these issues be addressed by amending the Law on the participation of workers in management (LPWM), which was adopted in 1993 and which is the key law concerning employee participation in Slovenia.
ZSSS Executive Secretary responsible for labour law and employment policy, Gregor Miklic, highlighted that ZSSS was not against the one-tier system itself, but rather against the reduction of workers’ co-determination, namely participation in management. The trade union confederation therefore demanded the transfer of provisions concerning board-level employee representation from the draft LC to the LPWM.
Compromise solution
At the beginning of 2006, a compromise solution was reached. In the new LC, the provisions on the participation of workers in management (board-level employee representation) in the one-tier management structure (Article 703) are now to be included at the end of the LC in the chapter on transitional and final provisions. Article 703 temporarily regulates this issue until the LPWM comes into force. It is expected that the LPWM will be amended soon and that it will also regulate board-level employee representation in the one-tier management structure.
Article 703 of the LC stipulates that workers must nominate one representative to the management board for every three members on the board. Workers must also nominate their representative to commissions of the management board. The worker representatives on the management board are elected and recalled by the employee council. In cases where a company employs more than 500 workers, the worker representative is nominated as an executive director responsible for representing workers’ interests in relation to personnel and social issues; however, the worker representative cannot be elected president of the management board. Article 703 does not apply to small companies.
Constitutional court examines LC
On 24 April 2006, the Trade Union of Bus Drivers of Slovenia (Sindikat voznikov avtobusnega prometa Slovenije, SVAPS) – on the initiative of the Council of the Gorenjsko Trade Unions (Svet gorenjskih sindikatov, SGS) and the Association of Employees’ Councils of Slovenian Companies (Združenje svetov delavcev slovenskih podjetij, ZSDSP) – asked the Constitutional Court of the Republic of Slovenia (Ustavno sodišce Republike Slovenije, USRS) to examine the constitutionality of Article 703 of the LC. SVAPS, SGS and ZSDSP argued that some paragraphs of Article 703 contradicted the constitutional principle of equality in legal terms, as it gave the workers of companies with a one-tier management structure fewer rights to participation in management through board-level employee representation, compared with workers in companies with a two-tier management structure. They also highlighted that there were differences in relation to the rights of smaller and bigger companies with a one-tier structure.
Commentary
Despite arguments supporting the introduction of a one-tier management structure, trade unions have become suspicious about the goals of such an initiative. Since the outset, they have asserted that the real intention behind its introduction is to damage board-level employee representation in Slovenia.
Some experts argue that the introduction of a one-tier structure is necessary in order to implement the SE regulation. They also contend that the one-tier structure is more efficient than the two-tier system. However, they have not presented any convincing evidence to support such a claim. The Ministry of the Economy (Ministrstvo za gospodarstvo, MG) has stated that the regulation of management in a European company allows a choice between the one-tier and the two-tier structure, enabling the shareholders to determine their choice by statute. The MG points out that this does away with the tenet that the legislator must select and determine the management system of a company and the structure and competencies of the bodies. Therefore, it believes that there is no need to determine by law only a one-tier system or a two-tier system for domestic companies.
Štefan Skledar, Institute of Macroeconomic Analysis and Development