IR Notes

IR Notes is celebrating its 10th birthday today, thanks to its loyal readers!! The newsletter has come a long way since its first edition: the coverage it provides is now more exhaustive and it appears in two extra languages (Italian and a test version in Polish). Each article of IR Notes is carefully drafted by the editorial team, with the support of our network of correspondents and our valued team of professional translators. IR Notes is an independent publication, financed entirely by your subscriptions. Its mission is to inform and educate its readers, of whom there are more than 1500, across the EU and beyond, in Ukraine, and as far away as South Korea! We hope to convince more readers to join us, and we plan to modernise the format of IR Notes. Our aim is to make news stories about European social affairs easily accessible, and to provide a tool that will stimulate thinking, and generate interactions and innovative solutions that will help turn social Europe into a concrete reality. And we need to keep working on the task of building Europe! This goal will be achieved through the efforts of everyone involved, at all levels, and is exactly what IR Notes is seeking to do, in its own modest way. So… we’d like to thank you, our readers! Please feel free to say what you find useful in IR Notes, on our LinkedIn page.

Pascale & Frédéric Turlan

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On 14 December, negotiators for the Council, the Commission and Parliament reached agreement on the proposal for a directive on corporate sustainability due diligence, amending Directive 2019/1937. MEP Lara Wolters (S&D) is delighted: “This law is a historic breakthrough. Companies are now responsible for potential abuses in their value chain, ten years after the Rana Plaza tragedy”, she says (see European Parliament press release ). Its adoption has been welcomed by the European trade union movement (see ETUC, IndustriAll Europe and EFFAT press releases), but the employers have expressed concern regarding a text that is neither clear nor realistic, and poses a threat to business competitiveness (see BusinessEurope press release). The technical wording of the law is due to be finalised in the coming weeks. This process also involves lawyer-linguists, who will perform checks and produce translations. Once finalised, the proposal for a directive will have to be formally approved by the Council and Parliament before it is published. It is due to enter into force during the first quarter of the year.
The text will apply to companies and parent companies with more than 500 employees and a worldwide turnover in excess of 150 million euros. These obligations will also apply to companies with more than 250 employees and a turnover exceeding 40 million euros, if at least 20 million of this amount is generated in specific sectors that are at greater risk of human rights violations or environmental pollution, such as textile manufacture and trading, foodstuffs production and mineral extraction and trading. However, the financial services sector has been temporarily excluded from the directive’s scope of application (see Council press release). It will also apply to companies from third countries, which realise an equivalent turnover in the EU.
The companies concerned will have to draw up and implement a transition plan that meets the reporting requirements set out in Article 19a of Directive (EU) 2021/0104 (CSRD), to ensure that their business model and strategy are aligned with the objectives of the transition to a sustainable economy and with limiting global warming to 1.5°C, in accordance with the Paris Agreement. IndustriAll Europe is still not satisfied though, pointing out that “There will however be no civil liability for non-compliance with decarbonisation plans” – instead, national authorities will monitor their publication and compliance. MEPs have also ensured that companies will be held liable for any failure to meet their due diligence-related obligations and that victims will be entitled to receive damages.
Parliament’s position suggests that the directive should include an obligation for companies to establish a framework for consulting stakeholders, including workers’ representatives. There is also a provision requiring companies to keep their workers and workers’ representatives informed about their due diligence policy and its implementation. The text does not specify at what level this information is to be communicated and such consultations are to take place. It will therefore be up to each company to identify the most appropriate levels, for instance that of the European Works Council within large corporations. “We are only at the beginning of a process in which trade unions active in multinational companies will undoubtedly play their full role”, warns Judith Kirton-Darling, IndustriAll Europe Acting Joint General Secretary (see press release).

> Find out more: European Parliament fact file on due diligence.

Sustainability report : Commission delegated regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU as regards sustainability reporting standards has now been published (other languages). This text is extremely important for companies, as it specifies the content of the sustainable development reports they will be required to publish from 2025 onwards (see Sustainability reporting and Due diligence). This regulation, which the Commission put forward in late July (see IR Notes 214), was approved by Parliament on 18 October, after it had previously rejected an attempt by Conservative MEPs to reduce its scope (see IR Notes 217). So, from 2025 onwards, companies with more than 500 employees, and to which the current Non‑Financial Reporting Directive (NFRD) 2013/34 already applies, will be required to produce a sustainability report based on their 2024 data, either if their total balance sheet value is at least 25 million euros or their turnover is at least 50 million euros in the EU. From 2026 onwards (for the 2025 data set), the obligation will be extended to include companies that have more than 250 employees on average and exceed one of the two thresholds mentioned above. Annex I of the regulation specifies the items covered by, among others, European Environmental and Social Reporting Standards – ESRS) on “Own workforce” (ESRS S1) and on “Workers in the value chain” (ESRS S2), which go further than the information currently being given to workforce representatives, and EWC representatives in particular.

• Definition of a company’s size : Commission delegated directive (EU) 2023/2775 of 17 October 2023 amending Directive 2013/34/EU as regards the adjustments of the size criteria for micro, small, medium-sized and large undertakings or groups has now been published. Among other things, this text raises the turnover thresholds for the scope of application of Non-Financial Reporting Directive (NFRD) 2013/34 (see above).

Belgian presidency of the EU : Belgium has now succeeded Spain’s presidency of the EU and will continue to tackle social issues and give priority to a number of topics such as workplace mental health. Its work programme refers to “an ambitious and forward-looking social agenda” and takes in “the economic governance review, the treatment of social public investment in a revisited fiscal framework, and increased visibility for the social convergence framework” (see Presidency website).

Accession negotiations: : On 14 December, EU leaders decided to commence EU accession negotiations with Ukraine and the Republic of Moldova, which were granted candidate country status in June 2023, and to grant candidate country status to Georgia. Bosnia-Herzegovina, for its part, will have to wait until the European Commission reports, by March 2024, on progress made (see Council conclusions). The other candidate countries (Albania, North Macedonia, Montenegro, Serbia, Turkey) will have to keep waiting (see Enlargement). It should be borne in mind that some European Works Council agreements, which anticipated the EU’s enlargement to include Cyprus, Malta and the Central and Eastern Europe countries, almost 20 years ago, contain provisions that include representatives of candidate countries or of countries with which accession negotiations had already commenced, sometimes directly as a full member, or alternatively as an observer. These clauses could therefore be reactivated to include employees from these countries on EWCs. There is nothing to prevent EWCs opening their doors to non-EU member countries, based on the principle of autonomy of the parties. This prospect of enlargement has been welcomed by the European trade union movement, which does not seem to fear the possible risk of social dumping (see ETUC press release).

Quarantine measures and paid leave : In a judgment concerning the rejection of an application to carry over the annual leave of an employee who had to isolate for a period of time after being in contact with a Covid-19 patient (see Annual leave), the Court of Justice holds that a period of quarantine cannot, in itself, present an obstacle to the attainment of the purpose of paid annual leave, which is intended to enable workers to rest from carrying out the work they are required to do under their contract of employment and to enjoy a period of relaxation and leisure. The solution therefore differs from the arrangements surrounding the right to sick leave which, according to the CJEU, allows paid leave to be carried over (CJEU, 14 December 2023, Case C-206/22, TF).

Minimum wage : On 1 January, the gross minimum wage was raised to 840 euros, representing an increase of 140 euros or 20% on the 2023 figure, under a regulation of 25 October 2023, in accordance with the recommendation of the consultative committee tasked with determining the level of the minimum wage. As in previous years, the Croatian employers’ association warned that this increase, which is not based on improvements in productivity, may jeopardise the long-term viability of companies operating in labour-intensive industries, and may also compromise the Croatian economy’s competitiveness in global markets.

Parental leave : New rights have come into force for the parents of children born or adopted since 1 January, to make life easier for single parents and LGBT+ families. Every employee is entitled to take 24 weeks’ (paid) parental leave, 13 of which can be transferred to the other parent. From now on, lone parents will be able to assign these transferable weeks to a family member (a brother, grandmother, etc.) or to either one or two social parents: the legal parent’s spouse, the legal parent’s cohabitee (with whom they have been living for at least two years), a known donor who has a parental-type relationship with the child or this same donor’s spouse or known cohabitee (see press release).

Breastfeeding leave : On 19 December, the Council of Ministers passed an amendment to the Workers’ Statute (Article 37.4), extending the entitlement to breastfeeding leave, which was previously granted only within the framework of a collective bargaining agreement or company agreement, to all employees. As a result, in cases of birth, adoption and childcare for adoption or foster care purposes, workers will be entitled to one hour’s leave of absence from work per day, paid for by the employer, which they can split into two parts, in order to care for their infant until it reaches the age of nine months. They can also save up these hours and either take a full day off work or reduce the length of their working day by half an hour (see press release).

Spin-off successfully completed : On 9 December, the Belgian chemicals group Solvay split itself into two separate entities: on one hand Syensqo, which takes over the company’s rapidly growing specialty chemicals business (accounting for 60% of the former Solvay company’s turnover), and on the other, Solvay, which retains its historical business activities. So what will happen to the Solvay EWC now? How can we be sure that Syensqo employees will be properly represented at European level? With these questions in mind, Solvay’s management and EWC anticipated the impact of this reorganisation, as soon as the plan was announced, in March 2022. First of all, in May 2022, they signed a Memorandum of Understanding supporting the information and/or consultation process related to the organizational transformation of the Solvay group. This document: governs how the information and consultation procedure relating to the plan will unfold, following a precise timetable; establishes an Ad Hoc Committee to represent the countries most concerned by the transformation, including those outside the EU; sets out the details of recourse to expert advice, the content and timetable of the information to be provided to the Ad Hoc Committee, the undertakings given by the company to its employees, the framework of the Voluntary Separation Plan, etc. and the fate of its workforce representation bodies. The Solvay Global Forum is being retained by both groups created by the spin‑off and an undertaking has been given to set up a EWC within both entities as soon as possible, once they have been created. The text also creates a Liaison Office, made up of Select Committee members from both EWCs, which will meet to discuss topics related to the separation for a limited period of time (two years). Subsequently, in a Transition Agreement signed in December 2022, Solvay’s management and EWC stated that the Solvay EWC was designated as the appropriate body to set up future EWCs and to prepare both agreements, so that these works councils could start work as soon as the spin-off process was completed. “As we had only recently revised the Solvay agreement, other than a few slight differences, we adopted the existing agreement for both new entities”, explains Marcus Roumen, Secretary of the Solvay EWC. Lastly, the EWC agreements, which are virtually identical, were signed on 23 November 2023, for both Solvay and Syensqo.