European Works Council
On 22 September 1994, the Council of the European Union passed a Directive (94/45/EC) on the establishment of a European Works Council (EWC) or similar procedure for the purposes of informing and consulting employees in companies which operate at European Union level.
The EWC Directive applies to companies with at least 1,000 employees within the EU and at least 150 employees in each of at least two Member States.
European Works Councils were created partly as a response to increased transnational restructuring brought about by the Single European Act. They give representatives of workers from all European countries in big multinational companies a direct line of communication to top management. They also make sure that workers in different countries are all told the same thing at the same time about transnational policies and plans. Lastly, they give workers’ representatives in unions and national works councils the opportunity to consult with each other and to develop a common European response to employers’ transnational plans, which management must then consider before those plans are implemented.
The EWC Directive was revised by the Council and the European Parliament in May 2009. The changes contained in the new ("Recast") Directive must be transposed into national law by 5 June 2011, and have important implications for all companies in scope of the legislation, both those with an existing European Works Council and those yet to have set one up.
A comité d’entreprise (works council) is mandatory in any company with 50 employees or more. Members of the C.E. are elected by all the employees, and have 20 hours of delegation. The main role of the C.E. is being the interface between the employees and the members of the board which is constituted of the Chairman and the HR. The number of members depends of the number of people in the company. All members of the C.E. have a monthly meeting with the board, in which very specific points are dealt with.
Works councils in Germany have a long history, with their origins in the early 1920s in the post World War I Weimar Republic, established by the Betriebsverfassungsgesetz or Works Council Act. Initially, unions were very skeptical of works councils, seeing them as a way for management to negotiate with employees without employing collective bargaining, but eventually they developed clearly defined responsibilities with works councils not allowed to organize strikes or enforce a wage increase. In recent years with a decline in union membership, works councils have come to be seen as a way for unions to recruit members, specifically by having works councils campaign for people to join them.
In Germany, they serve two functions. The first is called co-determination and is where works councils electing members of the board of directors of German companies. The second is called participation, and means that works councils must be consulted about specific issues and have the right to make proposals to management. One of the most impressive achievements of the councils is producing incredibly harmonious relations between management and workers, leading to a situation with strong unions and an incredibly low strike rate. This also allows for a lot of coordination between the firm and the workers, resulting in, for example, the ability of many German firms to dramatically scale back the hours of each worker without large scale layoffs during the 2008 financial crisis, and then slowly scaling back up as the recovery took effect. This was all assisted by the Kurzarbeit, a fund that helps workers who have had their hours reduced.
Works councils in Germany have been correlated with a number of positive effects. They promote higher wages, even more than collective bargaining (although situations with both will promote wages the highest), they make firms more productive (although the degree to which they increase productivity can be hard to measure). and they don’t inhibit investment or innovation. Works councils have also been shown to help women, East German, and foreign workers at a higher rate compared to West German men. However, they are correlated lower profitability, likely since they tend to bring higher wages, and there may not be as much benefit in smaller companies as there is in larger ones.