BEERG Newsletter - EWCs: MEP wants to hit management with billion-euro fines

In a new report, Dennis Radtke, a German Christian Democrat Member of the European Parliament, wants the European Works Council Directive amended to allow courts to “temporarily suspend” management decisions where it is alleged that EWC information and consultation rights have been infringed.

Further, companies found to have breached information and consultation obligations would receive eye-watering penalties:

The financial penalties referred to in paragraph 2, point (a), shall amount to a maximum of at least €10,000,000 or 2% of the undertaking’s total annual worldwide turnover in the preceding business year, whichever is higher. 

In the case of intentional infringements, Member States shall provide for a maximum financial penalty of at least €20,000,000 or 4% of the undertaking’s total worldwide annual turnover in the preceding business year, whichever is higher.

This wording suggests that companies could be fined up to €10M for inadvertently infringing information and consultation obligations, as opposed to intentionally doing so.

When you consider that, at best, all an EWC can do is to offer a non-binding opinion on proposed decisions, injunctions and billion Euro fines seem excessive and disproportionate. What possible justification can there be for the $9.4 billion fine that Amazon could be hit with because management inadvertently infringed the EWC’s right to offer an opinion that is not binding in any way? Or even $1.12 billion that could be imposed on HP? 

This table illustrates the size of the fines which 6 well-known US companies could be liable for because, without meaning to do so, they inadvertently failed to follow procedures in the eyes of the EWC, which then complained to a court about the matter. 

What sort of a signal do potential fines of such magnitude for a relatively minor offence in the scheme of things send to investors? To put these proposed fines in perspective, the Financial Times on Wednesday, May 25^th reported:

Glencore will plead guilty to multiple counts of bribery and agree to pay a $1.5bn penalty following US and UK investigations that uncovered corruption at one of the world’s largest commodity traders. The Serious Fraud Office yesterday charged the group’s subsidiary Glencore Energy UK with seven cases of profit-driven bribery and corruption in connection to oil operations in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria, and South Sudan.

The SFO said: “Glencore agents and employees paid bribes worth over $25mn for preferential access to oil, with approval by the company.” Glencore said it would pay about $1.5bn in overall penalties: $1bn to US authorities, $40mn to Brazilian prosecutors and the amount due to the UK to be finalised at a hearing next month. The company made a $1.5bn provision for the settlement in February.

So, for accidentally infringing the EWCs’ information and consultation rights Amazon could face a fine of up to €11 billion, but for multiple, intentional cases of bribery Glencore just gets hit with $1.5 billion. Doesn’t seem right, does it? 

We have published a detailed BEERG Perspective commentary (PDF) and online here on the Radtke Report to accompany this newsletter article.