Commission tables draft Directive on national information and consultation

On 11 November 1998, the European Commission issued a proposal for a Directive "establishing a general framework for informing and consulting employees in the European Community". The move followed the refusal of UNICE, the European-level employers' organisation, to enter into negotiations over a European agreement on the subject. The draft Directive provides for rules on the information and consultation of workers at national level - based on agreement or legislation - applying to undertakings with 50 or more employees. The European Trade Union Confederation welcomed the draft Directive, but considers that it does not go far enough on a number of issues. UNICE rejects European legislation in this area as unnecessary.

The possibility of the introduction of an EU-level framework for employee information and consultation was first raised in the European Commission's 1995 medium-term Social Action Programme. Calls for EU legislative action in this area became louder after the crisis sparked off by the closure of the Renault plant at Vilvoorde in Belgium (EU9704118F), which was seen by many to have demonstrated the inadequacies of current EU legislation in this area. Following the Renault affair, Pádraig Flynn, the Commissioner responsible for social affairs and employment, reaffirmed his commitment to take this issue forward and in June 1997 the Commission initiated a first round of consultations of the European-level social partners on the advisability of legislation in this area, under the procedure laid down in the social policy Agreement annexed to the Maastricht Treaty on European Union (EU9706132F). While the European Trade Union Confederation (ETUC) and the European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest (CEEP) welcomed this move, the Union of Industrial and Employers' Confederations of Europe (UNICE) argued that EU-level action in this area was unwarranted, as an extensive framework of provision for worker information and consultation already exists at national and transnational levels (EU9710157N).

In November 1997, the Commission opened a second round of consultations on the content of possible EU legislation on this issue (EU9711160N). The social partners had an opportunity at this stage - within a six-week deadline - to decide to attempt to negotiate a framework agreement, thus forestalling a Directive.

No negotiations

At the second stage of consultations, the Commission expressed a clear preference for a social partner initiative to reach a European agreement on this topic. However, while ETUC and CEEP indicated their willingness to negotiate on this basis, UNICE remained opposed and in March 1998 rejected joining such talks (EU9803192N). This was argued by many observers to be the result of strong opposition from its member organisations in Germany, Greece, Portugal and the UK, which saw EU action on national worker information and consultation rights as being in breach of the principle of subsidiarity. In addition, it was argued that, where European-level intervention is justified, there is already provision in the form of the European Works Council (EWC) Directive. In a press release, the then UNICE president,François Perigot said that "our member federations are virtually unanimous in their conviction that the European Union should not intervene in such a matter, which has no transnational implications."

ETUC maintained its position that the objective of a framework agreement in this area would not be to replace well-functioning systems for information and consultation at national level, but to set minimum standards for this basic right. National provisions that are more advantageous should take precedence over those laid down in a European agreement. UNICE's stance in relation to this matter was argued by Commissioner Flynn "to undermine the whole concept of partnership".

In response to UNICE's decision, ETUC called upon the Commission to begin drafting legislation. The Commission was, however, still hopeful for social partner action in this area and consequently set another deadline for a decision on negotiations, which fell after the German general elections in September 1998. It was widely believed that UNICE's inaction was based on the belief that a Commission proposal for a Directive in this area would not be approved by the Council in the light of what some observers perceived to be strong opposition from the German and British governments.

However, despite the election of a new social democrat-led government in Germany (DE9811281F), the extension of the deadline proved fruitless. On 16 October, a meeting of the UNICE council of presidents again declined to enter into negotiations with ETUC and CEEP (EU9810133N). This decision was received by some observers as all the more unexpected, as UNICE's new president, George Jacobs, had previously indicated an increasing willingness among a number of member organisations to reconsider this decision, at a time when a leaked text of a Commission draft Directive on the issue was circulating in Brussels (EU9807120N). It is widely believed that in the October meeting, the UNICE member organisations previously opposed to negotiations remained reluctant and were indeed joined by their counterparts from Italy and Sweden. Mindful of the reaction this decision was likely to receive from the Commission, Mr Jacobs was at pains to affirm that UNICE's decision cast no doubt on UNICE's willingness to occupy the "contractual area" created by the social policy Agreement.

Commission President Jacques Santer and Commissioner Flynn expressed their disappointment at UNICE's decision. Mr Flynn stated that: "we have shown our willingness to defer action on this very important subject, in order to allow UNICE to review its position. As there is no hope of negotiations under the social dialogue, the Commission will now bring forward a draft Directive on information and consultation."

Contents of the draft Directive

On 28 October, a full team of European Commissioners participated in a round-table debate on the draft proposal for a framework Directive on worker information and consultation at national level. The main items for debate were: the workforce-size threshold for the application of the Directive to undertakings; the planned sanctions if there is a serious violation of the rules; and the subjects covered by the Directive's recognition of workers' right to information and consultation.

On 11 November, the Commission tabled its proposal for a Directive establishing a general framework for informing and consulting employees in the European Community. The draft Directive is based on Article 2(2) of the Maastricht social policy Agreement and is therefore subject to qualified majority voting in Council. The text recommends (in Article 2(1)(a)) that the Directive's provisions should apply to undertakings with at least 50 employees, a rather higher figure than the threshold of 20 outlined in the draft leaked in October 1998 (see above). A threshold of 20 employees would have been congruent with the collective redundancies Directive. It is believed that the new threshold means that the draft Directive applies to 3% of European enterprises and 58.2% of employees. The draft also allows Member States to introduce a higher threshold - 100 employees - in respect of the minimum information and consultation requirements (in the absence of a voluntary agreement) on employment issues (Article 4(3)).

The Directive is seen by the Commission as building upon "piecemeal" existing Community law in this area and as enhancing the impact of the existing Directives on the approximation of the laws of the Member States relating to: collective redundancies - Directive 75/129/EEC as amended by Directive 92/56/EC, both consolidated in Directive 98/59/EC; and safeguarding employees' rights in the event of transfers of undertakings, businesses or parts of businesses - Directive77/187/EEC, amended by Directive 98/50/EC. By having a general framework for worker information and consultation at EU level, it is anticipated that these items of legislation will be rendered more effective, and this interconnection is explicitly referred to in Article 8 of the draft Directive. Article 8 also stipulates that the proposed new Directive would not prejudice either the provisions of the Council Directive on the establishment of European Works Councils (94/45/EC), or other employee rights to information, consultation and participation under national law.

The text goes to some lengths to provide definitions of information and consultation. Information is defined as:

transmission by the employer to the employees' representatives of information containing all relevant facts on the subjects set down in Article 4 (1), ensuring that the timing, means of communication and content of the information are such as to ensure its effectiveness, particularly in enabling the employees' representatives to examine the information thoroughly and, where appropriate, prepare consultations.

Consultation is defined as:

the organisation of a dialogue and exchange of views between the employer and the employees' representatives on the subjects set out in Article 4 (1) (b) and (c),

The draft Directive offers a substantial degree of flexibility in relation to the exact shape and scope of information and consultation arrangements to be instituted. It states in Article 3 that:

Member States may authorise the social partners at the appropriate level, including at undertaking level, to define freely and at any time through negotiated agreement the procedures for implementing the employee information and consultation requirements referred to in Articles 1, 2 and 4 of this Directive.

Such agreements may lay down arrangements which differ from the Directive's provisions defining information and consultation and on the procedures for, and content of, information and consultation, but must respect the Directive's general objectives.

Not dissimilar to the EWC Directive, the new draft Directive stipulates minimum requirements for information and consultation, should such autonomous negotiations between the social partners not lead to an agreement. Without prejudice to any national provisions or practices which may be more favourable to employees, Article 4 states that information and consultation shall cover:

1. information on the recent as well as "reasonably foreseeable" development of the undertaking's activities and its economic and financial situation;

2. the situation, structure and reasonably foreseeable developments of employment in the undertaking and, where the employer's evaluation suggests that employment may be under threat, the anticipatory measures envisaged, in particular in relation to employee training and skill development, with a view to offsetting the potentially negative impact by increasing the "employability" of staff likely to be affected; and

3. decisions likely to lead to substantial changes in work organisation or in contractual relations, including transfers of undertakings.

In relation to the second point, the draft allows Member States to exclude undertakings with under 100 employees from the information and consultation requirements on these issues (Article 4(3)). In relation to the third point, the draft Directive calls (in Article 2(1)(e) - see above) for attempts to be made to seek agreement prior to taking such decisions.

Article 5 of the Directive contains a confidentiality clause. This provides that employee representatives and any experts assisting them are bound not to disclose any information expressly identified as confidential (an obligation that remains after their term of office). More controversially for trade unions (see below), the Article also states (in words very similar to those of the EWC Directive) that:

Member States shall provide, in specific cases and within the conditions and limits laid down in national legislation, that the employer is not obliged to communicate information or undertake consultation when the nature of that information or consultation is such that, according to objective criteria, it would seriously harm the functioning of the undertaking or would be prejudicial to it.

Article 6 of the Directive provides for the protection of employee representatives to enable them to perform their duties properly.

Article 7 makes provisions for sanctions to be applied to employers (and employee representatives) which fail to respect the requirements set out in the Directive, which respond to some of the charges of inadequacy levied against existing provisions in the aftermath of the Renault Vilvoorde case. In general, Member States must provide for "appropriate measures" in the event of non-compliance. In particular, they should ensure that adequate administrative or judicial procedures are available to enable the obligations deriving from the Directive to be enforced, including procedures which may be instituted by the employer or the employees' representatives where either party considers that the other is in breach of the obligations provided for in Article 5(2) - ie the clause allowing employers to withhold objectively prejudicial information or consultation. Member States must provide for adequate penalties in the event of infringement of the Directive, which must be "effective, proportionate and dissuasive".

In the event of a "serious breach" by the employer of the information and consultation obligations relating to decisions referred to in Article 4(1)(c) - ie substantial changes in work organisation or contractual relations - or the corresponding obligations in voluntary agreements, where such decisions would have "direct and immediate consequences in terms of substantial change or termination of the employment contracts or employment relations", these decisions will have no legal effect on the employment contracts or employment relationships of the employees affected. The "non-production of legal effects" continues until such time as the employer has fulfilled its obligations or, if this is no longer possible, adequate redress has been established. Serious breaches are defined as:

The draft Directive stipulates (in Article 9) a two-year transposition deadline after adoption by the Council of Ministers. By that time, Member States must either adopt the laws, regulations and administrative provisions necessary to comply with the Directive or ensure that the social partners introduce the required provisions by way of agreement (though the Member States are obliged to guarantee the results imposed by this Directive at all times). Finally, no later than five years after adoption, the Commission - in consultation with the Member States and the EU-level social partners - will review the Directive's application with a view to proposing to the Council any necessary amendments (Article 10).

Commissioner Flynn presented the proposal to EU Labour and Social Affairs Ministers at their 2 December Council.

The reactions of the social partners

UNICE's reaction to the draft Directive was very much in line with previous responses on this matter. UNICE's Secretary General, Dirk Hudig, said that: "this proposal is harmful for companies, it constitutes totally unwarranted interference in Member States' systems of industrial relations ... it is an attack on companies' capacity to make decisions. Our ability to adapt and create new jobs in Europe is at stake."

In particular, UNICE is dissatisfied with the provisions on sanctions in Article 7. These are argued to be over-prescriptive and to place a disproportionate burden on business, as they are seen as forcing companies to seek an agreement with employee representatives before certain decisions can be made. In addition, Mr Hudig said that "the proposed cancellation of legal effects of management decisions on labour contracts is an extreme and disproportionate sanction." UNICE is currently preparing a formal position paper in reaction to the proposal.

By contrast, ETUC welcomed the Commission's decision to issue a draft Directive on the right to information and consultation for workers. The general secretary of ETUC, Emilio Gabaglio, said: "with this decision, the Commission has not only met a long-standing request of the ETUC, but has acknowledged that current industrial changes require that workers and unions have effective means to express their views in order to defend their legitimate interests." In addition, ETUC asserts that "information and consultation are, as the text of the Directive correctly underlines, a factor contributing to the success of the undertaking. There is a need for a European framework, as Community law is fragmented and national law has deficiencies."

However, although ETUC has welcomed the Directive, the position paper it has produced contains a number of criticisms and argues that the text does not fully meet trade union expectations. The first area of contention is concerned with the threshold for application, as ETUC would prefer to make the instrument available to all undertakings. Secondly, there are some perceived definitional problems within the text, with ETUC arguing that: a fuller definition of undertakings is required (the draft defines them as "public or private undertakings carrying out an economic activity, whether or not operating for gain, which are located within the territory of the Member States ... and have at least 50 employees"); and greater clarity is needed on ensuring that information and consultation rights should cover all employees, no matter what type of employment contract they have. ETUC also envisages the necessity of a wider and more inclusive definition of information and consultation, that allows information to be given in the planning phase before a decision is even made as well as on an ongoing basis. Furthermore, a broader range of subjects for information and consultation is said to be required, including production and sales, investments, transfer of production, mergers, and cut-backs.

ETUC also argues in its position paper that:

• Article 5(2), stating that the employer is not obliged to communicate information or undertake consultation if the nature of the information and consultation would harm the functioning of the undertaking, should be deleted, as there is no need for such a provision given that confidentiality on the part of experts and employee representatives is confirmed in Article 5(1);

• Article 6 should be rephrased. The current open statement that employee representatives should "when carrying out their functions, enjoy adequate protection and guarantees to enable them to perform properly the duties which have been assigned to them", should be fleshed out a specification of certain rights for representatives;

• in respect of Article 7's provisions on the "protection of rights" through the non-production of legal effects where information and consultation obligations are breached, ETUC expresses its support for the principle, but criticises the fact that such decisions would have no legal effect only where they would have "direct and immediate consequences". ETUC finds these notions to be imprecise and need to be broadened to include indirect and medium-term consequences. In connection with this, a tighter definition is required for what constitutes or what is understood by "important information"; and

• with regard to transposition (Article 9), the possibility of implementing the Directive through negotiations between social partners at national level is welcomed as an important element in ensuring that "the framework is as close as possible to information and consultation needs."

For its part, CEEP has welcomed the proposal and is currently preparing a position paper which will be distributed in the new year.

Commentary

The new draft Directive includes a number of provisions which serve to strengthen existing legislation in this area and go further than provisions set down in the Directives relating to collective redundancies, transfers of undertakings and EWCs. While these provisions are clearly designed to meet some of the criticisms levied against the existing legislative framework following the Renault crisis, much arguably remains open to interpretation - such as the provisions relating to the size of undertakings concerned (specification of the employees to be included in the calculation) and the definition of the "objective criteria" referred to in Article 5(2), which can allow employers not to disclose information deemed potentially harmful to the functioning of the undertaking.

Since the proposal is based on Article 2(2) of the Maastricht social policy Agreement and is therefore subject to qualified majority voting in Council, a key question will be whether such a qualified majority can be achieved in support of the draft. The role of the German government, which assumes the Presidency of the Council at the beginning of 1999 is considered likely to be crucial to the discussions, and some observers have argued that the new administration in Germany is opposed to the proposal. The UK government has made known its opposition to the proposal (UK9811162N), but remains officially outside the provisions of the Maastricht social policy Agreement until the Amsterdam Treaty takes effect, which is not expected until the summer of 1999. Until then, the UK government cannot vote in the Council on measures based on the Agreement. It therefore appears that many hurdles remain to be cleared before the adoption of the Directive is anywhere near a certainty. (Tina Weber and Peter Foster, ECOTEC Research and Consulting)