European Works Councils – Another Brexit Victim

Denis McShane

European Works Councils (EWCs) are a living, functioning embodiment of Social Europe and the core EU concept that workers should have rights and, in exchange for accepting cross-border market liberalisation, including movement of workers between different labour markets, employees of Europe-wide firms must be consulted and informed.

A little known advantage of being in the EU for workers employed by international firms with more than 1,000 employees in the EU and at least 150 in two or more EU member states is the option to set up such a EWC. Normally, the process can be triggered by a letter from employee representatives from at least 2 countries.

These bodies do not negotiate wages. That remains firmly fixed within national labour law and national custom and practice on wage setting. Germany, for example, negotiates pay covering all the workers in the same industry. The federation of regional employers in the engineering or chemical or retail industries first agree a wage deal that is then generally accepted as the national benchmark.

German negotiators will take into account the state of the economy, any worries over inflation and the ability of firms to remain profitable in the face of global competition. Thus it was possible at the beginning of the 21^st century for unions to agree to hold down wage increases in Germany’s manufacturing sector in order to recapitalise firms and reorganise and upskill production so German firms stayed competitive against imports from Asia.

By contrast, in Britain, wage bargaining is still carried out company by company, often in an adversarial context. In France, politicised and ideological general trade unions negotiate broad agreements. There are complex rules about which unions can sign such deals. French unions represent only about 7% of the workforce but can still sign agreements that are universally binding.

Many French labour market practices such as working time, redundancies or the minimum wage are decided by national legislation so unions lobby, campaign and mobilise their activists to try and put pressure on politicians.

EWCs therefore do not change the contours of what matters most in terms of Europe’s many labour markets – namely pay and consultation over redundancies or changes in working practice. But they are an important mechanism for workers employed by the same firm to keep in touch and for the senior managers to hear about and try and resolve problems before they turn conflictual. American multinational firms operating in Europe have set up 171 EWCs. This is fewer than German firms which have 230 EWCs but more than Britain with 112 and France with 128. Altogether there are 1000 European Works Councils covering 19m employees with about 20,000 trade union or local works council nominated or elected representatives taking part in their meetings.

EWCs are enshrined in European and thus national law of all 28 member states, including the UK.  European Economic Area firms also have to set up EWCs. The British government has given a vague promise that all EU legislation currently on the UK statute book will be translated into British national law. But in the 1990s UK Euroscepticism took off over the issue of Social Europe and a key demand of British Conservatives and business organisations is that Social Europe practices and directives should have no legal force in the UK.

If any event, outside the EU, the two EU directives of 1994 and 2009 which provide the legal basis for EWC operations will no longer have legal force in Britain. Even if EU laws on EWCs are transposed into UK domestic law they will be outside EU rule-of-law and Theresa May has insisted that the European Court of Justice, the final arbiter on any Social Europe dispute, can and will have no role in British corporate life.

But British companies employing more than 1,000 workers with operations employing 150 workers or more in two or more other EU member states will still not be able to escape the obligation to set up an EWC and pay for its operation. This is the surreal nature of Brexit. Britain can puff out its chest and proclaim that only its parliament can decide British laws but the moment a UK firm wants to operate in Europe it will have to comply with EU law and regulations, including European Works Councils.

To guarantee that the UK post-Brexit does not become a free-riding labour market refusing to accept the common rules of Social Europe, firms with EWCs are now looking to re-locate their central management offices dealing with human resources and employee relations within an EU-27 jurisdiction.

EWCs often need to use specialist employment lawyers with cases taken under national labour law to courts and tribunals. American and British firms will want to manage their EWC operations from a jurisdiction that speaks and writes English and has access to an English-speaking labour court system.

Thus experts see an increased role for Ireland as no firm will want to run its EWC operation from a country that has repudiated EU cooperation and norms. It might also mean that, while many EWCs cover firms operating in Britain and workers from company sites can seek nomination and election to an EWC, there will no longer be a legally enshrined right for British employees to participate in EWCs.

European Works Councils are a symbolic and significant development in the history of social partnership. By leaving the EU, British workers and their unions will lose an automatic and legally enforceable right to get managers to discuss Europe-wide operations with employees.

For many anti-European ideologues, reducing workers’ rights is a major reason to quit the EU. As more and more workers feel left out of the modern economy and turn to populist demagogues promising simple answers often based on harsh treatment of immigrant workers, removing the safety valve of a management-worker forum like an EWC will be counter-productive.