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 Societą, IPSOA, Milan. The author wishes to thank the Brussels office of the law firm De Berti, Jacchia, Perno & Associati for the support given.
(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.
(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.
(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!