In June 2024, the Council agreed to strengthen the existing rules concerning the European Works Councils (EWCs). The call to review the existing directive on the works councils has been present for a substantial time but started being discussed actively only in 2023. In 2023, after the Radtke Report stressing fundamental amendments in February, consultations began. The general voices concerning the renewal of the regulations are optimistic, however, it is yet to be seen how the private sector is going to react to these changes and how it affects company competitiveness (as a main issue in the Union currently) as it places additional burden on their operations.

The European Trade Union Confederation and other trade unions urged the European Commission to propose a revision of the 2009 directive to provide more power and competence to the EWCs within multinational corporations (MNCs) operating on EU (and EEA) territory. This proposition was made by the Commission on 24 January 2024. However, the proposition made by the Council is not as revolutionizing as the Radtke Report suggested it to be, but still is expected to have a significant impact on EWCs and multinational businesses with its revised changes. Some even demanded a vote on the revision before the European Parliamentary (EP) elections in the beginning of June 2024.

The main goal of the legislator is to broaden and clarify the authority of EWCs and secure workers’ rights to improve their legal remedies within the organisation. The lack of sanctions in some Member States caused severe issues with the enforcement of the Directive as – under the rules as transposed into national law – Member States must oblige the companies falling under the scope of the directive to impose proportionate but effective sanctions in case of non-compliance.

This article aims to introduce how the directive is at the current moment and what role EWCs play in that. Furthermore, the problems and weaknesses the current directive has will also be presented, along with why revisional changes are necessary and what propositions were made to correct these weaker elements. The current proposal – as the 2009 directive as well- focuses on multinational corporations (MNCs) and their obligations to maintain a representative body for employees. With that, the EWCs are the only transnational bodies with such a responsibility. The focus on MNCs is not unusual in the EU law and the tendency that larger corporations receive special attention can be experienced in other areas as well, such as in case of Digital Services Act (DSA) where VLOPs (Very Large Online Platforms) are distinctively regulated. This is due to their community-wide operations where it is more crucial to protect the non-discriminatory rules of the Treaties and expand EU competences further.

After the report of the European Parliament’s Employment and Social Affairs Committee in April 2024, the EP voted in favour of the revision and accepted the need for a new approach on the matter. The report highlighted the weak points of the regulation that strengthens dialogue and the position of EU workers outside of their home country. It was further highlighted by the Committee that the new rules shall strengthen corporate democracy and emphasize ESG (environmental, social and governance) principles in the workplace. With the agreement given by both the Council and the Parliament, the Parliament shall confirm its mandate then negotiations can begin between the co-legislative bodies of the European Union. The potential acceptance of a revised directive results in translation to national laws within the given time period.

The Directive of the European Parliament and of the Council on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (2009/38/EC) was published on 6 May 2006 and regulated the operation of EWCs ever since. The Directive obliges multinational companies’ (MNCs) management to establish such councils or procedures that ensure information and consultation for the undertakings.

To discuss what EWCs are for, it is crucial to understand the meaning of a community-scale undertaking (different than the expression used in EU competition law). A community-scale undertaking according to Article 2 (1) (a) of the Directive means “any undertaking with at least 1 000 employees within the Member States and at least 150 employees in each of at least two Member States” including also part-time employees counting from the average number of employees employed in the preceding two years. EWCs work as bodies within a company to achieve the objective mentioned in Article 1 (1) which states the purpose of the Directive which is to transnationally inform and consult with the employees in the mentioned undertakings. The Directive lays out the minimum requirements of establishing an EWC and the details are set by the Member States (in Hungary, Act XXI of 2003 deals with the implementation of the EU Directive).

Despite the fact that the Directive prescribes the establishment of EWCs, in practice, even the European Parliament admitted that European Works Councils tend to have little de facto influence over the decision-making process, especially when it comes to the question of restructuring a company. This was the main motivation for trade unions and European Union bodies as well to demand revision to the original directive to enforce the rights of workers to accession of information and reinstatement of their consultation rights as well. EWCs shall allow workers’ and the councils’ participation in the decision-making processes. Due to the Directive’s inability to achieve the objectives of Article 1(1) in reality, the proposition was demanded and created to focus on this issue and restructure the operation of European Works Councils to the core.

Strengthening the role and capacity of EWCs facilitates better consultation and ensures that these bodies have the necessary competence and authority to strengthen the EWCs’ work ability. Gender balance within the EWCs is also highlighted in the proposition to ensure that EWCs are representative. The proposed changes (called the “general approach”) include also the right of workers to request the establishment of a new EWCs, removing the exemptions mentioned in the current directive (Article 5). The new approach also aims to formulate clearer definitions of the scope of the regulation such as the definition of transnational matters. With these changes, in case of such transnational matters, workers must be ensured to be consulted in a timely manner regarding decision making. This time scale was shortened from three years to eighteen months. The rules of confidentiality must be well justified when it is requested from employees on transnational matters.

All in all, the existing regulatory framework is expected to change the operation of EWCs significantly in the future. As the Council formulated its mandate, now the European Parliament needs to address its position. When there is a common understanding, the co-legislators will enter into the negotiation process. Due to the European Parliamentary elections in early June, the process is expected to be prolonged until more urgent matters are discussed within the new Parliament. However, it is expected that the new directive will be – maybe with slight changes – accepted as the matter has been present for some time now and needs resolution.

Dorina BOSITS is a law student at the Széchenyi István University of Győr, Hungary, and an international finance and accounting graduate of the University of Applied Sciences of Wiener Neustadt, Austria. The main area of her research includes freedom of speech, digitalization, data protection, and financial law. She is a student at the Law School of MCC and a member of ELSA Győr.