European Works Councils are vital to protect fundamental and democratic rights

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Employees of Caterpillar were better protected from recent restructuring than some, thanks to European Works Councils. [Kitmondo Marketplace/Flickr]

European Works Councils protect fundamental and democratic rights, but too many employees are still not protected by them. If Europe is serious about becoming a truly social Europe, this has to change, writes Stan De Spiegelaere.

Stan De Spiegelaere is a researcher at the European Trade Union Institute.

A large-scale company restructuring with collective lay-offs is a life-changing event. The affected employees face a direct loss of income, experience insecure about their future and embark on a sometimes lengthy search for new employment. But the remaining employees are also struck by reorganised work routines, the loss of colleagues, higher workloads and insecurity about the future. Proper information and involvement of employees is thus essential. It’s a democratic right, it reduces the negative impact of a restructuring and smooths its implementation.

But what if the decision is taken by a manager on the other side of the globe? How can employees be properly involved in such cross-border company decisions? In that case it’s better to be employed in a company like Caterpillar than in JP Morgan, Groupon or until recently even Microsoft.

Why? Because a planned restructuring in Caterpillar puts into motion a whole set of actors and institutions. Management and employee representatives meet in local works councils, union delegates are informed and invited to negotiate a social plan and staff are informed.

All those meetings enable employees to be well informed and consulted about the plans, which is essential for both the workers and the company. First of all, it is a basic democratic principle that the main victims of the plan, the employees, should be well informed. Second, proper involvement also reduces the negative effects of a restructuring on the employees who lose their jobs, and on the remaining employees, for example by negotiating social plans, transition measures or outplacement. Third, by being involved, employees can propose alternative solutions which might turn out beneficial for both parties. It is no coincidence that proper involvement of employees is considered a fundamental right by the European Union.

But with globalisation, the situation has become more complex.

In Caterpillar, the decision to scale down activities was not taken by the Belgian, French or British management. It was taken by the global management and imposed on the different national levels. Talking to the local management helps, but doesn’t allow the employees to fully understand the scope of the cross-border restructuring, nor does it allow them to really challenge the management with proper alternatives. The main problem is the employees are talking to the people executing the decisions, not the ones making them.

Luckily, at Caterpillar, employee representatives from different countries meet at least once a year in the so-called ‘European Works Council’, a meeting of top-management with employee representatives from all over Europe. This resulted in the Caterpillar employee representatives organising a common rally and proposing alternatives directly to the American management. Whether it will have any effect remains to be seen, but at least the employees had a chance to voice their concerns and alternatives to those in charge.

While it’s still far from perfect, Caterpillar employees are better off compared to employees from, for example, large financial institutions like JP Morgan, the Bank of Cyprus or hip companies like Groupon. These companies also engage in cross-border restructuring but don’t have a European Works Council. And they are not alone.

According to recent data, about 10% of all large-scale company restructurings in Europe involve employees in different EU countries. These company decisions should trigger a European level workers’ involvement process. However, in one third of those cases there is no European Works Council, leaving tens of thousands of employees without proper involvement in life-changing events every year.

Employees in these companies have national channels of involvement though. They can, depending on the country, be informed and consulted about the local implications of a restructuring. However, they have no means or levers to get an overall view, let alone to challenge that overall vision by providing feedback and alternatives.

So why do so many employees facing job loss lack the basic right to be informed and consulted at the cross-border level?

Well, because employee involvement at European level is an option, not an obligation. Companies don’t have to establish a European Works Council. They only have to do so when they employ a certain amount of employees (1,000 or more) and when there is an official request from employees from different countries.

In well-organised sectors like the metal sector that is not a problem, in the banking sector or in the now up-and-coming companies of the digital world (think Groupon, Uber, Deliveroo…) it often is. Where unions and local work councils are present, European Works Councils are more likely to be established. However, employees in companies lacking those institutions have as much of a need (and right) to be properly informed and consulted about what is coming to them as any other employee, and that on the appropriate cross-border level.

So what to do? We can sit and hope for the best. Hope that enough employees will take the initiative to talk to their foreign co-workers to establish proper information and consultation. We have been doing this for years now and more than a 1,000 European Works Councils have been established. While this is clearly a lot, it’s still far from covering all eligible companies.

Another option is to reverse the roles. Let the management be responsible for taking the initiative to establish a European Works Council. If the employees don’t want one, they can refuse. But let it be the managerial obligation to at least formally ask. Such an obligation already exists for companies functioning under the European Company status and remarkably, not a single of these companies lacked a proper European level works council when they were restructuring.

If Europe is serious about becoming a truly social Europe, it’s time for it to act and guarantee fundamental rights to employees, which are also fundamental democratic rights.

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