2024: The Year Ahead in Europe

Challenging times ahead for employee relations executives in the European Union.

Economic prospects continue to be troubled by the fallout from the Russian invasion of Ukraine. Additional pressures come from the Green and Digital transitions, the latter now beginning to happen at warp speed due to the rapid rollout of AI-based applications.

Why it matters: Demographics spell danger. Europe is aging, with an increasing number of older, retired people to active workers. Young families are having fewer children. Immigration is driving a political backlash, particularly as many immigrants come from a different ethnic and religious background.

The bottom line: Debates about immigration will undoubtedly affect the European Parliament election in June, with current predictions suggesting a bigger “populist/far-right” presence in the Parliament than before.

The Legislative Agenda: More immediately businesses will be confronted over the next few years with a wave of new European Union laws, a wave which has already begun to crash against the rocks (See specific items below).

Additional Material:

The next wave of European Laws

Corporate Sustainability Report Directive

From January 1, 2024, businesses in scope have to start tracking data which will allow them to report in 2025 on compliance with the Corporate Sustainability Reporting Directive (CSRD). Under the headings Own Workforce and Workers in the Value Chain businesses will have to track 266 data points covering issues such as equality, collective bargaining, and employee information and consultation. 

How many companies have systems in place to enable them to do this? This information will have to be shared with employees’ representatives, though it will be up to national laws to specify how this should be done. 

Adequate Minimum Wage Directive

By next November, Member States need to transpose into national law the Adequate Minimum Wage Directive. Apart from some aspirational language on the value of minimum wages, the Directive also says that Member States should aim for 80% collective bargaining coverage. How Member States are expected to progress towards the 80% rate is left for them to decide. As average union density across the EU is around 25 %, probably about 15% in the private sector, this will be quite a challenge.

Unions believe the answer lies in a return to sectoral collective bargaining, but this would have to be imposed by governments on reluctant employers. Outside of those countries which already has sectoral bargaining in place, there is little indication that governments want to go down this road. Business should engage actively with governments as they work on the transposition of this Directive. The unions will certainly be knocking on government doors.

Pay Transparency Directive

The Pay Transparency Directive becomes national law in 2026, meaning companies need to be preparing for it now. The Directive is designed to close the European gender pay gap, estimated by the European Commission, to be around 13%. Where analysis show gender pay-gaps of more than 5%, by grade or category, that cannot be objectively justified, then employers must engage with employees’ representatives to identify why the gap exists, and to devise ways of closing it. Given that the reasons for gender pay gaps can be complex and deep-rooted the joint analysis and action plan will take time and may stretch over a number of years.

Status of Platform Workers Directive

On December 22, the European Council (which represents Member States), led by France, declined to endorse the agreement on Platform Workers that came out of trilogue negotiations between the Council, the Parliament, and the Commission. For a more detailed comment on this see here. 

This means that it will now be up to the incoming Belgium presidency of the Council of Ministers to see if an agreement on fresh terms can be negotiated. It is possible that agreement on this contentious issue could have to wait until after the European Parliament elections. There is a considerable gap between the position of the Council and the Parliament on the “presumption of employment” issue which will be difficult to bridge. 

Artificial Intelligence Act

Just before the Christmas break, EU legislators reached political agreement on The Artificial Intelligence Act which will set the governance framework for the use of AI in the EU. For a useful overview of what has been agreed, see here from Hogan Lovell. As this note says, it will be some weeks before we get the final text. 

As we understand it, employers will be obliged to inform workers and their representatives about the use of AI in the workplace, but the Act falls short of requiring them to consult about the issue, much less seek agreement. However, employers need to keep in mind that information and consultation obligations about the use of AI already exist under the GDPR and health and safety legislation so simply announcing the use of AI may not be an option.

However, as with the Platform Workers Directive, the French are not happy with the outcome, with President Macron believing that it could be over-prescriptive and could inhibit the growth of European AI companies. He commented on the Act: “We can decide to regulate much faster and much stronger than our major competitors… But we will regulate things that we will no longer produce or invent. This is never a good idea.” The Financial Times reports that France is in discussions with Germany and Italy about seeking changes to the ACT, or blocking it for now. 

Corporate Sustainability Due Diligence Directive

Again, just before the Christmas break, political agreement was reached on The Corporate Sustainability Due Diligence (which comes on top of CSRD - see above). The text of this Directive still has to be finalised and agreed. Once adopted, it will be two years before it comes into force. We will publish a detail analysis when the text is made public. However, it can be said at this stage that the provisions regarding employees’ representatives information, consultation, and involvement, will mirror those of the CSRD.

European Works Council Directive

On January16, the European Commission will publish its proposals on possible changes to the European Works Council Directive. We will comment on these in detail as soon as they are available.

It is also worth noting that on 14 December, the Council of the European Union (Prime Ministers and Presidents from EU Member States) decided to open accession negotiations with Ukraine and with Moldova, and to grant the status of candidate country to Georgia. The Council also said it will open accession negotiations with Bosnia and Herzegovina once the necessary degree of compliance with the membership criteria is achieved. As has happened in the past, expect requests to include representatives from these countries in your EWC if you have operations in any of them. 

Other URL links of interest:

• See here for a poll of economists by the Financial Times on the prospects for Europe in the year ahead
• See here for a Lewis Silkin LLP analysis of what a Labour U.K. government might mean for industrial relations law.