The Commission Proposal on Workers Information and Consultation

A (Failing) Continental Recipe for European Companies in the World Market (*)

^{~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~~*~}

^by^{FEDERICO REGALDO}

^{Ph.D. scholar at the
University of Florence}

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^{The European
Commission adopted, on 11 November 1998, following the initiative of
Commissioner Padraig Flynn, a proposal for a Council Directive establishing a
general framework for the information and consultation of employees in the
European Community.}

^{The Commission's
proposal obliges employers with more than 50 employees within the Community to
inform and consult their employees about several topics typically of
management's competence. For "information" the Commission's proposal
means "the transmission by the employer to the employee's representatives
of information containing all relevant facts (...) 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"}⁽¹⁾^{. On the other hand, the term
"consultation" draws on the notion contained in the Directive on the
European Works Council}⁽²⁾^{and provide for "the
organisation of a dialogue and exchange of views between the employer and the
employee's representatives (...)"}⁽³⁾^.

^{Information
and consultation must be granted, in primis, with reference to
"situation, structure and reasonably foreseeable developments of
employment within the undertaking and, where the employer's evaluation suggests
that employment within the undertaking may be under threat, the anticipatory
measures envisaged, in particular for employee training and skill development,
with a view to offsetting the potential negative developments or their
consequences and increasing the employability of the employees likely to be
affected"}⁽⁴⁾^{. Member States, however, may
exclude from the obligations referred to in this paragraph undertakings with
fewer than 100 employees.}

^{Furthermore,
information and consultation must be ensured with regard to "decisions
likely to lead to substantial changes in work organisation or in contractual
relations, including those covered by the Community provisions referred to in
Article 8 (1)"}⁽⁵⁾^.

^{Finally,
the proposal of Council Directive obliges to ensure the mere information
"on the recent as well as the reasonably foreseeable development of the
undertaking's activities and its economic and financial situation"}⁽⁶⁾^.

^{The
proposal of Council Directive also lays down severe penalties for the employer
in breach of the obligations to inform/consult its employees. In particular,
where a decision has a direct and immediate consequence in the form of a
substantial change in, or termination of, the employment contracts or
employment relations and there has been a failure to inform and consult, the
decision will have no legal effect on the employment contracts or employment
relationships of the affected employees.}

^{The
Social Affairs Council of 2 December 1998 simply took note of the proposal
which at first appeared likely to be discussed during the German Presidency and
then translated into a common position, but it now seems that the proposal does
not constitute a priority for the Council. Indeed, the legal basis for adopting
the directive lies in Article 2(1) and (2) of the Agreement on Social Policy
attached to the Protocol on Social Policy, which then refers to Article 189 C
of the Treaty, with the result of requiring a mere qualified majority in the
Council and not the unanimity.}

^{On
the other hand, even though the common position had to be adopted by the
Council, the legislative process would still necessitate the European
Parliament's approval and this has become problematic since last June's
elections and the socialists' defeat.}

^{The
impact of the above proposal is not negligible, since the thresholds of 50
workers impose the obligations to inform/consult on 2,75% of undertakings,
employing around 47% of European workers. Therefore, it is well grounded the
opinion of UNICE's Secretary General: since the proposal, if adopted, would
hinder the undertakings' decision making process in such a way as to force them
to invariably seek an agreement with employee representatives, it represents
the introduction of co-decision "by the back door", for the adoption
of which qualified majority is not sufficient, being necessary unanimity in the
Council.}

^{At
any rate, it is worth to stress that the debate flourished around the proposal
of Council Directive on information and consultation of the employees ignored
 once again  the American approach towards business and
company law}⁽⁷⁾^.

^{In
other words, there is no sign of an economic analysis on the legal
intervention's impact, due to take place within a very sensitive field, wherein
the harmonisation of the rules could maybe leave room for the competition
between Member States.}

^{At
the edge of the Millennium, the decision making process of the Community is
still linked to a not even Eurocentric, but purely continental logic}⁽⁸⁾^{, and does not take
into account the reality of globalisation}⁽⁹⁾^{, a phenomenon
which will inevitably reduce the room for undertakings overburdened with
non-economic functions.}

^{As a
way of example, one should think that some of the middle-sized undertakings
representing the leading strength of the Italian north-east and which will be
obliged to cope with this proposal, compete world-wide not only and not
particularly with German undertakings, characterised by the co-decision
philosophy, but rather with Asian and American ones, the latter being sensibly
far from this model.}

^{The
results of this attitude are already there: in Mercedes/Chrysler, Deutsche
Bank/Bankers Trust or the pharmaceutical mergers, money flows from Europe to
the United States and not the other way round}⁽¹⁰⁾^.

^{The
inflexible insistence of the Community on a model of consultation which
resembles more and more to co-decision bolsters up old opinions on the apparently
undisputed German dominance within the Community, a situation that somebody has
happily described as an ancient game, consisting in charging the other European
Countries for the cost of internal policy choices}⁽¹¹⁾^.

^(*)^{This Article is based on an essay
published in the January '99 issue, p. 127, of the law review Le Società,
IPSOA, Milan. The author wishes to thank the Brussels office of the law firm De
Berti, Jacchia, Perno & Associati for the support given.}

⁽¹⁾^{Article
2(1)(d) of the proposal of Council Directive, in OJ C 2/3 of 5.1.1999.}

⁽²⁾^{Article 2(1)(f) of Council Directive 94/45EC of 22 September 1994 on the
establishment of a European Works Council or a procedure in Community-scale
undertakings and Community-scale groups of undertakings for the purposes of
informing and consulting employees, in OJ L 254 of 30.09.1994, p. 64.}

⁽³⁾^{Article 2(1)(e) of the proposal of Council Directive, cit.}

⁽⁴⁾^{Ibid.,
Article 4(1)(b).}

⁽⁵⁾^{Ibid.,
Article 4(1)(c). The provisions referred to in Article 8(1) (Article 2 of
Council Directive 98/59EC, in OJ L 225 of 12.08.1998, p. 16 and Article
6 of Council Directive 77/187EEC, in OJ L 61 of 5.3.1977, p. 26) apply
respectively to collective redundancies and transfers of undertakings,
businesses or parts of businesses.}

⁽⁶⁾^{Ibid.,
Article 4(1)(a).}

⁽⁷⁾^{As an example of this approach, it may be cited CHARNY, Competition among
Jurisdictions in Formulating Corporate Law Rules: An American Perspective on
the "Race to the Bottom" in the European Communities, in WHEELER
S., The Law of the Business Enterprise, Oxford University Press, Oxford,
1994. Amongst the European authors which have applied this model to EC law,
even though not specifically to EC business or company law, see ANTONIOLLI, La
struttura istituzionale del nuovo diritto comune europeo: competizione e
circolazione dei modelli giuridici, Trento, 1996.}

^{As far as the American
model is concerned, it is very well known that the USA are the most advanced
Country in the world in many and many aspects and that, from the most
challenging space mission to the most delicate surgical operation, the tragic
reality is that USA leads and Europe follows. At a very theoretical level
 the one of the legal system and certainly not the one of somehow
questionable and ever-changing local rules - also the law may be included
amongst these aspects. While the late XVIII century was French, because of the
Positivism and the Codification and the late XIX was German, for the Systematic
school and the BGB, in our century, from Cardozo onwards, the law schools that
have said something new to mankind are generally not located in Europe, but
rather on the other side of the Atlantic. I refer to the Legal Realism, the
Economic Analysis of the Law or the Critical Legal Studies, which fully
developed in Yale, Chicago or Harvard and not in the most reputed European law
faculties. Besides that, the USA represent the oldest common market with a
common currency in modern history. These are the main reasons why it is
generally worth to take the American experience in due consideration.}

⁽⁸⁾^{English have been left almost alone to conduct the opposition: with regard to
the participation of workers in the management of large companies, Sir Adrian
Cadbury, during his speech at the XV International Congress of Comparative Law
held in Bristol last August, noted the disproportionate representativeness of
(German) workers in comparison with shareholders (foreign, for the two-thirds)
in a large German company.}

⁽⁹⁾^{Globalisation  one may consider it good or bad  is there and
Europe should try to cope with it in the best possible way. There is not much
more which can be done. Protectionism has already proved to fail and it would
also damage the underdeveloped Countries. It is sad to consider that somewhere
there are children working 16 hours per day to produce goods for Western
Countries, but liberalisation in trade at least allows a money flow from
Western Countries to the underdeveloped ones and a consequential improvement of
living and working standards. If Western Countries are not buying because of
protectionism, the - although limited - money flow reduces to zero!}

⁽¹⁰⁾^{See the interview to P. KENNEDY, under the title Il declino adesso minaccia
l'Europa, in Il Sole-24ORE of 8 December 1998.}

^{(11) PAOLAZZI, Abbagli
tedeschi, in Il Sole-24 ORE of 17 November 1998.}^{The author, however, does not
specifically deals with the subject of workers participation.}