Co-determination is a structure of decision-making within an enterprise whereby employees and their representatives exert influence on decisions, often at a senior level and at a relatively early stage. Co-determination may operate in parallel to, and complement, other industrial relations mechanisms of employee representation and influence. It does not substitute for other instruments that enable employee influence on management decision-making, such as collective bargaining.
Co-determination is rooted in the industrial relations traditions of a number of EU Member States. In Germany, for example, there are two distinct levels of co-determination: at the establishment level (via the works council) and at the enterprise level (such as on the supervisory board of a company). In Austria, works councils have the right to negotiate a ‘social plan’ in decisions involving restructuring that may lead to job losses. To take another example, employees in Denmark have the right to elect one-third of the members of the company board; through this mechanism, workers exercise a powerful voice in votes on matters that can have a major impact on the workforce.
On 18 July 2017, in a case cited below, the Court of Justice of the European Union (CJEU) affirmed that the area of representation and collective defence of the interests of workers in the management or supervisory bodies of a company established under national law ‘has not been harmonised or even coordinated at Union level’.
Nevertheless, elements of co-determination feature in a number of EU directives. These directives require that employees and their representatives are informed in advance of decisions that will affect their interests. They also set out procedures for employee consultation and other forms of participation in the decision-making process.
The most general illustration of this approach at establishment or enterprise level is Council Directive 2002/14/EC, which established a framework for informing and consulting employees across the European community. Although the directive does not allow employees or their representatives to determine decisions, it requires management to consult ‘with a view to reaching an agreement on decisions within the scope of the employer’s powers’. Beyond this, Directive 2009/38/EC establishing European Works Councils (EWCs) promotes ‘consultation’, allowing employees’ representatives to express opinions based on information provided by employees ‘about the proposed measures to which the consultation is related … within a reasonable time, which may be taken into account’ by the management. As such, the directive does not provide full co-determination rights; however, according to Article 6 of the directive, there is nothing to prevent EWC agreements from providing workers with a right of co-determination on some issues.
Some directives expressly recognise co-determination rights in relation to changes in company status or companies’ transnational mobility. In these instances, the relevant directives safeguard co-determination rights in the involved companies. For instance, Directive 2001/86/EC – which supplements the European Company Statute – ensures employee involvement in European companies through informing and consulting employees. It even protects board-level participation when such participation already exists in one of the companies involved in the process of creating a European company.
The validity of the right to co-determination in relation to EU legislation was challenged before the CJEU in a case concerning German legislation on employee representation, which requires that workers in Germany – but not necessarily workers in other Member States – can vote for the supervisory board. In a judgment issued on 18 July 2017, the Court stated that
EU law does not … prevent a Member State from providing that the legislation it has adopted be applicable only to workers employed by establishments located in its national territory, just as it is open to another Member State to rely on a different linking factor for the purposes of the application of its own national legislation.
The CJEU ruled that Germany’s co-determination legislation did not violate the free movement of workers nor constitute discrimination. The ruling stated that EU law does not prevent a Member State from providing that the legislation it has adopted be applicable only to workers employed by establishments located in its national territory.
Since 2016, the European Trade Union Confederation (ETUC) has been asking for a new EU framework directive for workers’ information, consultation and board-level representation. This is a recurring demand of the trade union movement as part of its campaign for ‘more democracy at work’.
Consultation in the enterprise ; directive on cross-border mobility of companies ; ETUC ; European company ; European Cooperative Society ; information and consultation ; management prerogative ; participation.
Eurofound (2020), Co-determination, European Industrial Relations Dictionary, Dublin
https://www.eurofound.europa.eu/en/european-industrial-relations-dictionary/co-determination