European Works Councils

European Works Councils are set to become established forums in large UK multinationals. In this article Sandy Henderson explores the options available to management.

The Transnational Information and Consultation of Employees Regulations 1999 (currently laid before Parliament in draft form) will implement the European Works Council Directive into UK law with effect from 15th December 1999. The Regulations will bring the UK into line with other European Union (“EU”) member states, where the Directive had to be implemented into national law by 22nd September 1996.

UK companies employing at least 1,000 individuals within the European Economic Area (the EU plus Norway, Iceland and Liechtenstein) with at least 150 employees in each of at least 2 of those countries may, from 15th December 1999, be requested to set up a European Works Council (“EWC”) by written request of 100 or more employees (or by the employees’ representatives). Within 6 months of a request, central management must set up a special negotiating body (“SNB”) and start negotiating an EWC agreement. If they do not, a Statutory Works Council (“SWC”) will be imposed on them.

The rules governing the number and distribution of seats on the SNB which apply to UK companies (and companies headquartered outside the EEA which designate the UK operation as their representative agent) are:

• 1 seat per EEA country in which the company operates, PLUS
• 1 extra seat per EEA country employing 20% to 39.99% of the EEA workforce.
• 2 extra seats per EEA country employing 40% to 59.99% of the EEA workforce.
• 3 extra seats per EEA country employing 60% or more of the EEA workforce.

The Government may decide to allocate an extra seat to an EEA country for each additional 10% of the workforce above 60%. The number of employees is averaged over the 24 month period ending with the month before the month when the request to establish an EWC was made. UK Employees working less than 75 hours per month can be counted as half an employee or as a full employee, as the central management determines. If more than 1 seat is available to the UK business (which may include more than one establishment), central management may split the business into constituencies of roughly equal size, reflecting (wherever possible) existing establishments or groupings. No sub-division of establishments is permitted.

SNB members for the UK must be elected by secret ballot and all the votes must be fairly and accurately counted. The company must appoint a suitably qualified independent scrutineer to ensure the ballot is properly conducted. The result must be announced as soon as possible. Inaccuracies in the counting may only be disregarded if they are accidental and do not affect the result. All UK employees on the election day are eligible to vote. They (or any employees’ representative) are all eligible to stand as candidates.

The SNB will act by majority decision and may be assisted by experts. Negotiations, which must take place “in a spirit of co-operation with a view to reaching an agreement”, should cover: which establishments are to be covered; how many EWC members there will be; how seats will be allocated among establishments; the term of office of each EWC member; the information /consultation function and procedure; the venue, frequency and duration of EWC meetings; the financial and material resources to be made available to EWC members; the duration of the EWC agreement and the procedure for its renegotiation. All other issues affecting the constitution and procedure of a Works Council are a matter for negotiation. Management is obliged to bear the SNB’s reasonable expenses relating to the negotiations but is not obliged to pay for more than one expert instructed by the SNB. Elected representatives may not be victimised for carrying out their duties as Council members and have the right to paid time off work to perform SNB or EWC duties.

The SNB could:

• decide (by a two-thirds majority) not to negotiate an EWC agreement (in which case no new request to convene the SNB may be made in the next 2 years).
• negotiate an EWC agreement with central management.
• negotiate (instead of an EWC) one or more information and consultation procedures (“ICP”) dealing with “transnational questions which significantly affect workers’ interests”.
• fail to negotiate an EWC agreement within 3 years of the request, in which case the SWC will be established (subject to extension for a further 6 months if there is a prospect that negotiations may be concluded and the parties agree).

The employer is entitled to impose confidentiality restrictions on the information provided to EWC and SNB members and to withhold information where “according to objective criteria it would seriously harm the functioning of the undertaking or be prejudicial to it”. It is likely to be a criminal offence for EWC or SNB members to divulge information in the UK which has been given to them in confidence. The SNB or EWC can appeal against the withholding of information to the Central Arbitration Committee (“CAC”). Failure to comply with an order to disclose information would be a contempt of court.

The CAC will decide disputes before an EWC is established concerning: the validity of a request to form an EWC; the validity of a voluntary EWC; employee numbers; and the constituencies for ballots. Disputes must be referred within 2 months of the date of a valid request to form an EWC or within 1 month where the dispute concerns the validity of the request to form an EWC. There will be no right of appeal (other than by way of judicial review) against decisions of the CAC. The Employment Appeal Tribunal (“EAT”) will decide disputes after the EWC is established concerning: the operation of an EWC or of an ICP; and the failure to establish an EWC or ICP when required. The EAT may order an omission to be remedied and, possibly, impose a civil fine of up to £75,000. As the SNB and EWC has no resources of its own, central management is expected to bear the costs of all applications (except frivolous ones).

The competence of the Statutory Works Council (“SWC”) is limited to business and operational matters concerning at least 2 EEA countries. Seats on the SWC are allocated in the same way as for the SNB. Members of the SWC are elected by secret ballot in the same way as the SNB except that all members of the SWC must be employees (i.e. they cannot be non-employee representatives). A secret ballot need not be used where all employees are already represented by employee representatives, in which case the members of the SWC may be elected or appointed by employees’ representatives. Central management must pay the operating expenses of the SWC, the accommodation and travelling expenses of the SWC members and provide them with appropriate resources (e.g. interpreters, translators, meeting facilities). After 4 years, the SWC must consider whether to open negotiations with management to conclude a voluntary EWC agreement. The SWC would then take the role of the SNB in any negotiations.

The SWC must meet every year and be informed and consulted (on the basis of a report drawn up by central management) on the progress of the business within the EEA and its prospects. In exceptional circumstances affecting employees’ interests to a considerable extent (particularly relocations, site closures or collective redundancies), SWC members have the right to be informed of and (by calling a special meeting to be held as soon as possible) to be consulted about “measures significantly affecting employees’ interests”. The fact that central management has to participate in an information and consultation process does not affect its management prerogative. The chairmanship of the SWC will alternate annually between an appointee of central management and an appointee of the employees’ representatives. Where an SWC has many members, they and central management may agree to establish a select committee comprising 3 SWC members at most. It is left to the SWC to establish its own rules of procedure.

The business of the annual meeting of the SWC should relate in particular to: the structure of the business and its economic and financial position, the probable development of the business and of production and sales, the employment situation and probable trend, investments, substantial changes concerning organisation, new working methods or production processes, transfers of production, mergers, cut-backs or closures of businesses or establishments (or important parts of them) and collective redundancies. SWC members are obliged to inform local employees’ representatives (or, where there are none, the workforce itself) of the content and outcome of the information and consultation procedures (subject to any confidentiality restrictions imposed by management).