The EU Commission's new proposal on European Works Councils (EWCs) is set to bring about substantial changes for multinational employers operating within the EU, affecting around 200 major U.S. companies. It is crucial for employers to start preparing for these changes immediately by reviewing the following key takeaways.
1. Multinational employers in the EU who had an EWC in place prior to the Directive in September 1996 will have to renegotiate their agreement under more restrictive terms and may end up with two EWCs. There are 350 of these agreements in place, many with U.S. corporations.
2. Employers should expect increased expenses and burdens due to these new requirements.
- Companies who reached agreements for an EWC after September 1996 will find the terms they agreed to are superseded by the new Directive. They will have two years to implement the required changes. There are more than 600 of these agreements in place, again many with U.S. corporations.
- Companies must host two annual meetings with the EWC, up from one.
- Companies must allow experts to participate in meetings and allocate funding for their attendance. The EWC itself will be allocated a budget.
- Directive includes new and more onerous definitions of subjects requiring mandatory consultation, including “transnational issues” and “exceptional circumstances.”
- EU Member states are encouraged to increase penalties for non-compliance.
3. Expect increased representation from Central and Eastern Europe. Employee representatives from the UK will no longer serve in the EWC. Instead, representatives from new EU member states in Central and Eastern Europe will claim seats on the council.
4. The risk for companies operating in the EU without an EWC is rising. This topic is trending in workplaces, and employees will easily be able to request an EWC if their company is eligible.
Background: EWCs are bodies that ensure employee involvement in transnational decision-making processes. They are relevant to companies with over 1,000 employees operating in at least two EU or European Economic Area (EEA) countries.
As of 2021, there were about 1,000 active EWCs, representing less than a third of the nearly 4,000 eligible companies, including close to 200 U.S. companies.
Next Steps: The proposal will be submitted to the Council of Ministers and the European Parliament. A new Directive is expected by 2025, and will likely take effect in 2026.
Actions Members can take now:
- Liaise with your EU government relations team to provide feedback to the member state’s government.
- Examine your current EWC arrangements and structure and carry out compliance assessments.
- Join forces with HR Policy Global on this issue by participating in our upcoming event in Brussels February 28-29.