BEERG Feature Newsletter - EUI Legislative...

As business in Brussels resumes after the summer break, we look at where we are with various pieces of legislation, some specifically labour oriented, and other which have a very different focus but also, potentially, a strong labour relations dimension.

Tom Hayes.

Minimum Wage Directive

This Directive was finally agreed in October 2022 and will have to be transposed into national laws by the end of 2024, roughly a year from now. The Directive has two main objectives. First, to ensure that all EU Member States have an adequate minimum wage in place. Second, to “rebuild” collective bargaining by setting as an objective for Member States that 80% of the workforce should be covered by a collective agreement. European trade unions believe that this objective can only be achieved through a return to sectoral collective bargaining. 

For most BEERG member companies it will be the second objective that will be of concern. Trade union density across the EU stand at around 25% overall, 15% in the private sector. While some countries, such as France, Italy, and Spain, have collective bargaining coverage out of all proportion to union membership through erga omnes extension mechanisms, most EU countries do not. For example, Ireland has collective bargaining coverage of around 33%, Poland around 19%. How are these countries supposed to jump to 80%. Workers cannot be forced to join unions if they do not want to, and it is unlikely that governments in either of those two countries will want to force employers into sectoral bargaining with unions with little or no membership. 

Member companies should keep a close eye on legislative developments in this regard in individual countries over the coming year and make representations to governments where appropriate.

Pay Transparency Directive

Agreed earlier this year, this Directive must become law by June 2026. It is based on the premise that openness about pay will help eliminate the gender pay gap in Europe of around 13%. Companies will need to give employees and their representatives pay comparison data by group or grade. Company-wide data will be insufficient. Much of the detail as to how this should be done needs to be worked out at national level.

Where the data shows an unjustifiable, gender pay gap of more than 5%, then employers will need to engage with employees’ representatives in an in-depth assessment to find out why the gap exists and what can be done to close it. It seems to us that where there are no existing employees’ representatives then mechanisms will have to be put in place to provide for the election/selection of representatives. 

Members are advised to engage closely with their national employer organisations/industry associations to make sure that the Directive is transposed into national laws in a reasonable and pragmatic way, with due regard for national systems of industrial relations.

We also advise that members now start doing the preparatory work that will be necessary to comply with the provisions of the Directive. How you could approach this will be on the agenda for our meeting in Brussels later this month.

Platform Workers Directive

This Directive, which is still under negotiation, is designed to provide a European framework of rights for workers in the gig economy. For now, we are a long way from consensus among those involved in the legislative process, the Commission, Council and Parliament. 

For example, how is the “platform economy” to be defined? Is it simply the likes of Uber, Deliveroo, Just Eats and the other platforms that come to mind when discussing the “gig economy”? Or does is also stretch to any worker engaged through digital channels, such as those working for Amazon’s Mechanical Turk, or even IT contractors engaged by non-platform companies? 

But the biggest division is around the “presumption of employment”. The Commission’s original draft leaned heavily towards assuming that all platform workers are employees unless the platform can prove otherwise. The Parliament went even further in this regard. However, the Council’s draft is much more nuanced as ministers are concerned not to put the jobs of the 25 million who work through platforms at risk. That figure could grow to 40 million over the next few years. Expect negotiations on this between the three parties to be tough. Platform companies will be lobbying hard to protect their “our workers are self-employed” business model.

One thing is certain. There will be an obligation on platforms, however defined, to inform and consult workers and their representatives over the use of algorithms in automated human resource decision making. The language on this in the final text could then act as a template for such provisions in other legislation. 

Corporate Due Diligence

On 1 June 2023, the European Parliament agreed its position on the proposed Directive on Corporate Sustainability Due Diligence (the CSDDD). The CSDDD requires in-scope companies to conduct due diligence on, and take responsibility for, human rights abuses and environmental harm throughout their global value chains. The Council of Ministers had already agreed its position in late 2022.

Again, finding agreement among the legislators will not be easy. Should the obligations just cover the supply chain, or should they also involve the value chain, making companies responsible for how the goods and services they supply are used by the end customer? Should the finance sector be included or excluded? How deep should the due diligence obligation run? To just first line suppliers, or right down to the bottom of the chain wherever that may be? 

Unions are pushing hard for an active role in the due diligence process and have suggested that European Works Councils should also be involved. Questions around the scope and extent of grievance and remediation processes also need be worked out. As we have written before, care needs to be taken that the remediation procedures do not become a plaything for every activist and NGO with a visceral dislike for business in general and multinational corporations in particular.

Proposed Regulation Banning Goods Made with Forced Labour

On 14 September 2022, the European Commission presented a proposal for a regulation to prohibit products made using forced labour, including child labour, on the internal market of European Union (EU). The proposal covers all products made available within the EU market, meaning both products made in the EU for domestic consumption and for export, and imported goods. 

The provisions of the proposal would apply to products of any type, including their components, regardless of the sector or industry. Member States would be responsible for the enforcement of the regulation's provisions. Their national authorities would be empowered to withdraw products made using forced labour from the EU market, following an investigation. Customs authorities could identify and stop products made using forced labour at EU borders.

The European Parliament wants to go further. The rapporteurs leading the work on the file are proposing to broaden the scope of the regulation to cover services involved in the transportation, storage, packaging, and distribution of products, where forced labour could take place.

“We propose to focus on four sectors that are closely linked with the production chain and which are proven to have high instances of forced labour […], without changing the legal structure of the proposal,” co-rapporteur Samira Rafaela (Renew) said during a committee meeting on Tuesday 18 July.

However, the European Commission is critical of this proposal, as the focus of the regulation is on products.

“We do have considerable concerns about how this would actually work from the point of view of enforcement,” Jakub Boratyński, director of the internal market directorate DG GROW, adding that this could also “open the doors to a variety of quite challenging issues for a multitude of SMEs involved in the distribution sector”.

Artificial Intelligence Act and AI Liability Directive

The Act will be a Regulation rather than a Directive meaning that it will have effect across the European Union without having to be transposed into national laws. The Liability Directive will have to be transposed.

Clearly, neither of these proposed laws are primarily employment laws, having a much wider remit. The Act will set the EU’s governance framework for the use of AI. The Directive will offer systems of redress to those who believe they have suffered harm because of decisions made using AI. 

The Act describes human resource decision making involving algorithms and AI as “high risk”, meaning all decisions will have to be subject to human oversight. As with the Platform Directive, there will be strong information and consultation obligations imposed on companies, with an extensive role for employees’ representatives, assisted by experts where appropriate.

The Directive may also allow a role for workers’ representatives (unions and works councils) to represent workers in “class actions” when AI detriment is alleged. 

Proposed Revision of the European Works Council Directive

In 2022 Denis Radtke, a former official with the German trade union IG Chemie and now a Christian Democrat MEP, wrote a report calling for a radical revision of the EWC Directive. It proposed that EWCs should be able to secure interim injunctions when they believed that their information and consultation rights had been violated and that the courts should be able to impose GDPR-size fines of up to 2% of global turnover or €20m, whichever is the greater. Radtke’s proposals were taken up by the European Parliament which asked the EU to bring forward amending legislation and offered a template for such legislation. 

Because of a political commitment by the EU Commission President, Ursula von den Leyen, to respond to Parliament’s legislative initiatives, the Commission started a consultation process of the European social partners on the issue. As we write, the second stage of that consultation process is under way. At this stage, the social partners could offer to negotiate between themselves to see if an agreement could be reached, but we are not convinced this will happen. 

It is now clear, in the absence of a social partner agreement, that the Commission is committed to bringing forward amending legislation. We think that the earliest such legislation could see the light of day is in the first quarter of 2024. Allowing for the usual time it takes for new laws to go through the legislative process and given that there will be European Parliament elections and a change in the makeup of the Commission college in 2024, the earliest such legislation could be adopted is late 2025. Allowing for a two-year transposition, it would not come into effect at national level until 2027.

Obviously, as EWCs are very much part of the core mission of BEERG, we will be tracking developments closely.

Remote Work: Social Partner Negotiations

The Covid pandemic saw an explosion of “remote work/working from home”, where possible, as companies struggled to cope with lockdown restrictions. Since then, as Covid has abated, there is a robust debate over whether there should be a wholescale return to the office, of whether WFH is now here to stay. Some form of hybrid model seems to be emerging as the system of choice, but it will be some time before things finally settle. 

It also needs to be kept in mind that somewhere between 50 - 60% of the workforce will never be able to WFH and need to turn up every day at a place of work. A sort of new industrial divide between those who can work remotely in “laptop land” and those who need to be “on hand” could easily be created. This needs to be thought about and avoided.

While various European countries have already introduced laws on the “right to disconnect”, at European level the regulatory framework on remote work is now being discussed between the social partners, employers and unions. If they reach an agreement, they could ask that the agreement be made legally binding. For now, there is nothing more to be said as the social partners negotiate. 

Finally... some other issues to watch

There are some other issues we should keep in mind as we survey the European landscape. 

First, the Russian invasion of Ukraine continues to have an effect on energy and food prices, driving up inflation, which in turn drives the pay demands of unions in collective bargaining negotiations. 

Second, the General Data Protection Regulation (GDPR) will impact employee relations as data protection authorities, and the courts, across the EU hand down rulings on what it means and how it is to be interpreted. For instance, the Court of Justice of the European Union (CJEU) has ruled that the chair of a German works council cannot be a Data Protection Office because of possible conflicts of interest. 

Data transfers between the EU and the US have been made a lot easier as a result of the new EU/US Data Privacy Framework, though it is inevitable that privacy activists will challenge its compatibility with the European Treaty in the courts as soon as they can. 

Third, Brexit, the decision of the UK to leave the European Union, will forever be with us. The Trade and Cooperation Agreement (TCA) between the EU and the UK provides for a “level playing field” when it comes to labour and employment laws. What happens when the EU adopts and implements the laws outlined in this paper? Will the UK seek to keep step? How would a future Labour government approach these issues?