BEERG Perspective: EU's Labor Law Agenda - A...

Introduction

As we approach the summer break, we are more than half-way through the term of office of this EU Commission. We therefore thought it would be worthwhile to do a “stock-take” of the Commission’s labour and employment law agenda, widely regarded as one of the most ambitious since the heady days of Jacques Delors back in the late 1980s and early 1990s.

Working their way through the system are:

1. Directive on an adequate minimum wage and collective bargaining
2. Board room representation for women
3. Gender pay transparency
4. Platform economy workers and collective bargaining
5. The employment status of platform workers
6. Supply chain due diligence
7. The right to disconnect/remote work
8. A further revision of the European Works Council Directive

What are the chances of these laws making it onto the statute book, and how deep an impact will they have on human resource policies and practices?  In our view, most of the proposed Directives will become laws in the next year or two, and the impact of some of them will be significant. 

The proposed Directive on gender pay transparency is a case in point. It will call for complicated audits by companies and the need to negotiate action plans with employees’ representatives in certain circumstances. 

Others may satisfy the call for action from some group or other but are unlikely to move the dial in practice. The collective bargaining provisions of the Directive on an adequate minimum wage is one such measure. It is impossible to see how national governments can push collective bargaining coverage from lows of between 10% and 30% to 80% if workers simply do not want to join unions.

For the length of its EU membership, the UK always regarded EU labour laws with suspicion, and generally sought to block them or, failing that, to water them down significantly. In that, it was not unsuccessfully. With Brexit, there is no longer a “British brake” on such laws. Other countries which shared UK scepticism on labour laws, simply do not have the political blocking weight that the UK had. 

As a result of Brexit, the dynamics within the Council of Ministers has changed, even if the Council remains a good deal more hesitant about labour laws than the Parliament. The Parliament can afford to be radical about such matters as it does not have to transpose them into national laws, as do ministers from the Council. Reality bites ministers more deeply than it does members of Parliament. 

The above list does not include other legislation, such as that on AI Governance, which while not employment legislation as such, still has significant human resource implications imposing as it does obligations on management to inform and consult about algorithms where they are used to make personnel decisions.

Nor should the pivotal role of the Court of Justice of the European Union be overlooked. It often hands down far-reaching decision interpreting existing laws, such as its 2019 decision that all working time must be recorded, a decision most Member States still have to come to grips with. 

Finally, we should also keep in mind that while the UK is no longer an EU Member, is still retains most EU employment laws on its statute books, for now. Whether it will repeal any of these laws in the future remains uncertain. Whether it will keep in line with developing EU laws also remains uncertain. At the time of writing, the political future of the UK is unknown with Boris Johnson, the man more responsible for Brexit than anyone, being forced out of office as Prime Minister.

Whether a different Conservative prime minister, or a Labour one, would seek to build a more constructive relationship with Europe remains to be seen. But a Britain that is apart from Europe makes human resource management more difficult than it previously was.

Adequate Minimum Wage Directive

The purpose of this Directive is to establish a framework to improve the adequacy of minimum wages and to increase the access of workers to minimum wage protection. In all Member States, the Commission proposal aims at promoting collective bargaining on wages and improving the enforcement and monitoring of the minimum wage protections established in each country.

Where collective bargaining coverage falls below 80% of the workforce, governments will need to put an action plan in place to hit that target. The European Parliament and the EU Council of Ministers have reached an agreement of the text of this Directive. However, at the time of writing (July 11) the final, agreed text is not yet available.

We will comment on it in more detail when it is published, with a particular focus on the collective bargaining provisions. However, as we say above, how members states can push collective bargaining coverage to at least 80% of the workforce when workers are reluctant to join unions is the great unknown. It will be interesting to see how individual member states approach the transposition of this provision into national law.  

Board Room Representation for Women

The European Union has agreed measures requiring that companies ensure at least 40% of their seats on corporate boards go to the “under-represented sex,” which is typically women. The move comes after 10 years of stalemate over the proposals. The legislation requires listed companies in all 27 EU member states to have women take up at least 40% of non-executive board seats or 33% of all board director roles by mid-2026. Companies could be fined for failing to hire enough women on their boards and see director appointments cancelled for non-compliance with the law. Again, the final agreed text is not available at this time.

Gender Pay Transparency

The EU Commission argues that a lack of transparency around pay is one of the major blockers to achieving equal pay, which is itself one of the founding principles of equality law in the EU. The proposed Directive will establish pay transparency standards to make it easier for workers to claim their right to equal pay. If adopted, member states will have two years to implement the legislation in national law, so 2024 is the likely date for implementation. 

There are two main aspects of the strategy – pay transparency and access to justice.

Pay transparency measures will provide that job applicants and current workers will be entitled to information about pay levels. Workers will be entitled to see average pay levels broken down by sex for workers doing the same work or work of equal value. Employers will not be allowed to ask candidates about their pay history. Employers with at least 250 employees will be required to publish pay gap data. If there is a pay gap of at least 5% which cannot be justified based on gender-neutral factors, a pay assessment will be required, to be developed jointly with workers’ representatives.

The directive uses the deliberately wide term ‘worker’, which includes gig economy and agency workers as well as employees and others. ‘Pay’ as defined by the directive covers more than just basic salary. It will also include numerous other elements such as bonus and overtime, allowances, sick pay, and occupational pensions. Any pay differences must be based on objective criteria, not related to gender. Workers will be entitled to compensation including recovering back pay. Member states will also be required to impose fines for employers in breach of the directive.

Although many jurisdictions will already have pay equality mechanisms in place, they will have to check that they meet the terms of the directive. for those without adequate protections, this will be a significant change. This Directive is currently the subject of negotiations between the EU Council and the EU Parliament. 

Platform Economy Workers and Collective Bargaining

In so far as platform workers are seen as self-employed, European competition law currently prevents them from coming together and bargaining collectively, as such collective action could be seen as anti-competitive behaviour. This also extends to solo self-employed workers, such as independent IT contractors.

The EU is currently consulting on whether competition law can be interpreted in such a way that collective bargaining by self-employed platform workers and other solo self-employed workers would not be seen as “collusion” and anti-competitive. A final decision on the matter, following the consultation, has not yet been announced.

Platform Economy – Employment Status

The employment status of platform economy workers has been a controversial topic across EU Member States, and the UK, in recent years. While most courts decisions have tended to rule that such workers are employees, rather than being self-employed, some decisions have gone in the opposite direction. 

The EU Commission has proposed legislation that would see platform workers regarded as employees if they passed two of five tests. However, the EU Parliament rapporteur on the issue wants to go further and presume that all platform workers are employees, unless the platform can prove otherwise. 

This position in the Parliament is strongly opposed by centre-right politicians, who argue that many platform workers want to be self-employed. It will be later this year before Parliament finalises a position on the matter. It will then have to be discussed between the Parliament and the Council of Ministers. It is likely to be 2023 before the law is finalised.

Supply Chain Due Diligence

Within recent weeks, members of the European Parliament and representatives from EU Members States agreed new sustainability reporting rules that aim to end so-called “greenwashing” and lay the groundwork for a common set of global standards. The new EU sustainability reporting requirements will apply to all large (public and private) companies with more than 250 employees and a €40m turnover. Non-EU companies with substantial activity in the EU market (€150m in annual turnover in the EU) will have to follow equivalent reporting rules.

The Corporate Sustainability Reporting Directive (CSRD), which amends the 2014 Non-Financial Reporting Directive (NFRD), will introduce detailed sustainability reporting disclosures for large companies, prepared according to EU Sustainability Reporting Standards (ESRSs) currently being developed by EFRAG.  Lawmakers believe the new reporting rules will make businesses more accountable by requiring them to disclose their impact on people, and the planet, including the environment, human rights, social standards, and work ethics. 

The agreement also requires companies to have the information on their impact on the climate or human rights to be independently audited and certified, allowing investors to have access to reliable, transparent, and comparable data.

The rules will apply from 1 January 2024 for companies already subject to the NFRD. From 1 January 2025 for companies that are not presently subject to the NFRD and from 1 January 2026 for listed SMEs, small and non-complex credit institutions, and captive insurance undertakings.

The EU is also working on a separate Directive on Corporate Sustainability Due Diligence. Published last February, the Directive is still being discussed in the Council of Ministers and the European Parliament. It would require companies to audit their supply chains to ensure compliance with labour, environmental and human rights laws, and obligations. It would also require Member States to provide mechanisms for those who believe their rights have been violated to seek judicial remedies.

As of now, it is unclear how far down and across supply chains due diligence obligations would run. It is also unclear who would have legal standing to begin legal claims against businesses accused of violations.

Right to Disconnect / Remote Work

Covid19 forced a sudden and widescale move to remote work/télétravail/working from home. It would now seem that there will be no return to 5-day office working, and that some sort of hybrid pattern will be the template for the future. During the pandemic, rules and regulations around health and safety, working time, data privacy and data protection were quietly ignored, as in many instances were questions around pay and costs. 

Now that hybrid working becomes the “new normal” for those who can do so – and it is worth remembering that many millions will still be required to turn up at their places of work every day because that is the only way their work can be done – legislators and others are turning their attention to appropriate regulatory frameworks to govern such work.

For now, the main European social partners – unions and employers – have decided to see if they can negotiate an agreement on this issue that could then be given the force of law. Negotiations are likely to begin in the autumn. How long they will take is anyone guess. Whether national governments will wait for the outcome of the talks, or push ahead with their own legislation, remains to be seen. The Dutch government is currently pushing through legislation on the issue. 

Remote work/working from home is popular and political parties in search of re-election are hardly going to pass on it because unions and employers in Brussels are in negotiations. 

The European Parliament has recently called for measures from the EU Commission to tackle the issue of mental health in the digital workplace. The MEPs want the Commission to adopt a Directive establishing a framework for the right to disconnect at the European level. They want a definition of standards for working conditions when working remotely, in order to guarantee the voluntary nature of the work, employee work-life balance, and the maintenance of equal workloads. They are concerned with what they call “technostress”.

Revising the European Works Council Directive

If there is one thing we in BEERG know about, it is European Works Councils. 

EWCs have been a central feature of our work since we began some twenty years ago in 2003. We worked closely with colleagues in BusinessEurope when the Directive was “recast” in 2008/9. We have been involved in the negotiation of multiple agreements and, unfortunately, in court cases involving EWCs in the UK, France and Germany. 

No sooner was the 2009 recast agreed, than the trade unions began to call for a further revision. It did not take them long to realise that the 2009 recast did not deliver on their agenda. That agenda can be summarised fairly simply: EWCs should have the power and resources to be able to block change and restructuring until such time as acceptable terms are agreed. 

The latest attempt to rewrite the Directive has been initiated by a member of the European Parliament, Denis Radtke, who has written an “own initiative” report. You can find details of key parts of the report and our comments on it HERE. The Radtke report has yet to be approved by the Employment and Social Affairs Committee of the Parliament. It would then have to be approved by the full Parliament in plenary. At best, this will happen later this year.

If adopted, it will be sent to the European Commission along with a request that the Commission bring forward legislation based on the proposals in the report. The Commission is under no obligation to do so, but if it refuses to do so, it needs to set out the reasons for its refusal.

However, if the Commission decided to bring forward legislation, as such legislation is employment related, it would have to consult the European social partners over two rounds of consultation. During the second round, the social partners could opt to negotiate on the issue between themselves, with a view to any agreement being given the force of law. One way or another, this would take up most of 2023, probably moving in 2024. 

If the social partners could not see a basis for negotiations between themselves, then the Commission would have to present legislative proposals in the normal way, to both the Council of Ministers and the Parliament. But as the current term of the European Commission and the European Parliament come to an end in 2024, it is unlikely that any decisions would be taken until a new Commission and Parliament are in office, which would bring matters to 2025.

If a revised Directive was agreed during 2025, then the normal two-year transition period would apply, which means it would not come into force until 2027.

Meanwhile, in Ireland… of more immediate importance for many BEERG/HR Policy Global member companies is the need for the Irish EWC law to be amended to provide for a proper dispute procedure. Both the Minister and the Department have been insisting that the current Irish law is “fit for purpose”, but an influential committee of the Oireachtas (Irish parliament) disagrees. Meanwhile, the EU Commission has started infringement proceedings against the Irish government over flawed transposition of the Directive into Irish law. 

Closing Remarks

There have been two previous periods in which we saw bursts of EU labour law activism. 

• The 1970s, Social Action Program delivered the Collective Redundancies Directive, the Transfer of Undertakings Directive, and Directives on Equal Pay, and Equal Treatment.
• The late 1980s and early 1990s, under the Presidency of Jacques Delors, when the EU passed laws on Working Time, European Works Councils, Health and Safety, and in the Maastricht Treaty, gave the European social partners a role in the framing of labour and employment laws.

Since the early 1990s, labour and employment law has seemed to become a low priority for the EU, even though laws such as the Directive on Work-Life Balance for Parents and Carers, and the Transparent and Predictable Working Conditions Directive, were enacted. Both are due to come into force at national level in August 2022. 

While not an employment law Directive, the Whistle-blowers’ Directive which should have been transposed into national law by December 2021 but which is still making its way through most national parliaments, will also have human resource management implications. 

Starting with the Commission of Jean-Claude Juncker, and now with the Commission of Ursula von der Leyen, the EU has put a new emphasis on “Social Europe” and, as this paper shows, is moving at pace with an extensive employment and labour law agenda. When the measures listed in this paper are transposed into national laws, labour relations executives and human resource managers will find plenty of new challenges on the agenda. 

We hope we in BEERG/HR Policy Global can help you make come to grips with these challenges and provide a forum for the sharing of best practice among colleagues.

Written July 11th 2022