BEERG Newsletter - BEERG Comment: Radtke EWC proposals are seriously flawed

This morning, January 19, the European Parliament votes on the Radtke Report. As outlined previously Radtke proposes a range of major changes to the European Works Council Directive, all of which are based on flawed assumptions - most significantly the plan to give EWC representatives the power to seek injunctions where they believe they have not been properly informed and consulted. Radtke believes that central management should bear the EWC’s costs in any judicial proceedings, with no limits on management’s liability to pay such costs, and a potential fine of up to 4% of global turnover to be imposed on top.

The Radtke Report was written by the German MEP Denis Radtke (CDU/EPP MEP), a former union official with the German chemical workers union, IGBCE. It was endorsed by the Parliament’s Employment and Social Affairs Committee in December, and it is expected that the full parliament will back the report today. The Radtke Report recommendations will then be sent to the European Commission, which alone can propose laws. The Commission President, Ursula von der Leyen has committed to react positively to any legislative initiative from the parliament. So, it can reasonably be assumed that the Commission will bring forward legislative proposals in response to Radtke.

As a revision of the EWC Directive is an employment law matter the Commission is obliged by the European Treaties to consult the social partners, BusinessEurope and the European Trade Union Confederation (ETUC). It can be anticipated that the two-round consultation process will run through most of 2023. Were the social partners to reach an agreement between themselves then that would form the basis of a revised Directive. But history suggests that they are unlikely to do so. The European Parliament has asked that the Commission bring forward legislation not later than January 2024 but, as we understand it, the Commission does not feel itself obliged by that deadline.

Whatever the Commission proposes at that point will have to be considered by both the Parliament and the Council. As there are European Parliament elections in May 2024 and the reappointment of the Commission later in the year, it is unlikely that a proposal on the revision of the EWC Directive would be a priority. It would be 2025 before it received detailed consideration. If agreement was reached on it in 2025, allowing for the normal two-year transposition, it would be 2027 before it came into force. 

Unusual

Injunctive relief in labour disputes is unusual and not a widespread practice in EU Member States. Nor is the funding by management of judicial proceedings against itself by its own employees established practice. 

Indeed, funding another party to take a case against you in any branch of law is almost non-existent, especially where conflicting collective interests are an inherent part of the process. No one should be forced to pay to have themselves hurt, especially where there would be no limitations on the need to provide funding to the other party.

Giving EWCs this legal power is likely to upend the relationship between EWCs and national representative bodies who do not have similar power. It offends against the principle of subsidiary at the very least. Local works councils and/or unions would ask EWCs to seek injunctions on their behalf, arguing that the issue in play was transnational or had the potential to be transnational. 

The weaponization of EWCs through litigation and injunction would add significant uncertainty and potential costs for companies who seek to compete and invest on a global basis. These proposals would make Europe less competitive as an attractive place for jobs and investment when faced with challenges from emerging economies, China’s continuing economic development, and now, the U.S. industrial policy that favours domestic investment, as evidenced in the Inflation Reduction Act of 2022.  As Sam Fleming noted earlier this week in the Financial Times

Both Joe Biden’s $369bn green subsidy deluge and high energy prices have provoked a paranoid response among EU politicians fearful of seeing investment siphoned off by America — as well as China, prompting demands for Brussels to come up with a plan.

Whatever that plan might be, it isn’t Radtke. 

The supplement to this newsletter takes issue with the Radtke Report’s core proposals that EWCs should have the right to ask for injunctions and explains how damaging this proposal would be for European competitiveness, if implemented. 

Other changes

It should not be forgotten, however, that Radtke proposes a range of other changes to the current Directive. These include: 

• The ending of all Article 13 agreements
• Union officials, along with experts, to be entitled to sit on SNBs and EWCs and to be able to join meetings with management
• The SNB timeline to be reduced form 3 years to 18 months. 
• Severe restrictions of the use of confidentiality by management to withhold information
• Subsidiary Requirements EWCs to be entitled to two full meetings with management a year.
• The definition of transnational to be recast in such a way that practically all decisions are seen as transnational
• EWCs to be able to consult with local employees’ representatives during an information and consultation process

Certainly, the Directive could be improved. There is much in the current version that is unclear and imprecise, language that is open to conflicting interpretations. Greater clarity would be helpful to all parties.  When the European Commission responds to the Radtke Recommendations and brings forward legislative proposals we will look in them at detail.

For now, we want to advise against the “direction of travel” in Radtke, based on his core proposals of giving courts the power to hand down injunctions at the request of EWCs, who believe their rights have been infringed because they have not been properly informed and consulted. 

Hurt feelings and beliefs are never a good basis on which to base laws. 

• See the supplement to this newsletter for a more detailed explanation of why we think the Radtke Recommendations are seriously flawed and a danger to European competitiveness. 
• This supplement can also be downloaded as a PDF via these links: LINK1 or LINK2 
• EWCs will also feature on the agenda for our Network Meeting in Brussels on February 1 and 2.