IR Notes

On 18 March, the European Commission put forward a proposal for a regulation to establish a new company status, known as “EU Inc.”, with the aim of encouraging the creation and development of start-ups and innovative companies within the EU. These companies would “benefit from a single, harmonised set of rules” in the form of a “28^th regime”, i.e. a kind of fictitious 28^th Member State, in which the rules of company law are simplified to an extreme degree. The key text is a proposal for a regulation that seeks to achieve full harmonisation, with “a single set” of rules that “companies can choose instead of navigating multiple national regimes, unlocking the true potential of the Single Market”. Using this new status, it will be possible to found a company within 48 hours, for less than 100 euros and with no minimum share capital requirements, by submitting information once only, via an EU-level interface. If the company subsequently has to be wound up, EU Inc. companies will benefit from simplified and fully digital liquidation procedures (see Commission press release). The Commission wants to move quickly to implement this recommendation made by the Draghi report (which already dates back to September 2024, see IR Notes 236), and is calling on Member States and Parliament to adopt the text by the year-end.
At first sight, the regulation does not appear to offer lighter social legislation. It emphasises the need to ensure that “this legal form cannot be used to circumvent rights, including notably employees’ rights to participation in company boards.” The text states that where employee participation rules exist within the Member State in which an EU Inc. has its registered office, they shall apply to this company. However, the text mentions a very vague application of the “before-after principle” to preserve the existing participation rights of employees involved in a cross-border creation of an EU Inc. company. Management should enter into negotiations with employees or their representatives “with a view to finding an amicable solution” that reconciles the company’s right to carry out a cross-border operation with the employees’ rights of participation. The fears expressed by the European Trade Union Institute (ETUI) are thus proving well-founded (see Policy brief).
As far as collective rights are concerned, Recital 18 states that, as for other limited liability companies, the EU legal framework regarding the information and consultation of employees should apply to EU Inc. companies, which is not what the start-up lobby wanted (see EU-Inc.org.proposal). When it comes to individual employment relationships, the text indicates that Regulation (EC) 593/2008 on the law applicable to contractual obligations shall apply. In other words, the employee is subject “to the legislation chosen by the parties”, while at the same time benefitting from protective rules such as mandatory laws enshrined in the labour law of the country where they normally carry out their duties (Article 8 of the regulation), e.g. the maximum length of the working week or application of the statutory minimum wage.
Apart from that, the regulation takes an interest in employees, especially from the viewpoint of attracting talent: it establishes a harmonised structure of stock-option plans, which will be identical in all Member States, with the option for the company to issue warrants that employees will be entitled to purchase after a mandatory waiting period of at least 24 months. Any income generated from these shares will be taxed at the time they are sold. The goal of preventing the siren voice of US tech attracting European talent is laudable, but it is not without risk for the workers concerned, who may be tempted to accept low wages in return for potential large future gains. EU Inc. is a company law instrument focused on boosting competitiveness: it does everything possible to reassure entrepreneurs, but it also opens up yawning gaps that may allow them to bypass the European social model (see Editorial, opposite).

Reactions to the 28th regime plan : ETUC General Secretary Esther Lynch warns: “Simplification cannot be an excuse to unpick the European social model. Without proper safeguards, this proposal risks ending up as a reheated version of the doomed Bolkestein directive.” (see ETUC press release). Speaking for the employers, Markus J. Beyrer, BusinessEurope Director General, explains: “we are pleased that the 28th regime is being proposed as a regulation and is open to all types of companies”. He adds: “Moreover, we welcome the focus primarily on company law as including other areas such as labour law would generate long debates (including on EU competences) and seriously delay or jeopardise the chances of adoption” (see BusinessEurope press release). MEP Estelle Ceulemans (S&D), a former General Secretary of the Belgian trade union confederation FGTB, commented as follows in a LinkedIn post written in French: “We can’t accept new deregulation that would allow companies to shop around and choose to be registered in countries with more flexible regulations, while doing their business elsewhere”.

AI and the labour market : At the Council meeting on 9 March, the Spanish Minister of Employment, Yolanda Diaz, unveiled six measures to meet challenges linked to AI and the labour market, including: a training entitlement; algorithmic transparency and human oversight of decision-making; a guaranteed right to disconnect; creating an automation risk indicator; and establishing an EU public data protection agency. The Minister is also proposing a levy on AI companies with a view to creating a digitalisation adaptation fund to finance some of these measures (see press release ).

Social criteria in public procurement contracts : On 5 March, the Court of Justice issued a judgment on a Spanish case concerning the awarding of a municipal public procurement contract for home help services. One candidate disputed two social clauses in the invitation to tender – one linked to the rates of pay for employees performing this service and the other to the tenderer’s undertaking to negotiate a collective agreement. The judgment is being closely scrutinised as it comes at a time when the European Commission is due to draw up reforms of the rules governing public procurement contracts: the trade unions are demanding that invitations to tender should be allowed to include a clause requiring tenderers to apply a collective agreement. In the case in point, the municipality of Ortuella had firstly required candidates to apply rates of pay higher than the sectoral collective agreement in force, and secondly, to commit to opening a collective bargaining negotiation within one month after securing the contract, covering the pay and working conditions of employees assigned to the home help service. The municipality’s intention in inserting this clause is to ensure that the services will be performed by “qualified, trained and supervised staff”. It therefore believes that these staff should receive higher rates of pay than those provided for in the collective agreement. The Court of Justice upholds such a clause, arguing that “in a contract of such a nature, it is not unreasonable to consider that an award criterion which takes into consideration a more favourable remuneration […] than that provided for by the sectoral collective agreement in force may contribute to that objective by improving the quality […] since more favourable remuneration would have the effect of retaining the staff performing the contract and allowing the recruitment of more qualified staff.” Article 67, paragraph 1 of directive 2014/24, stipulates that contracting authorities shall base the award of public contracts primarily on the most economically advantageous tender. Is this article compatible with a clause that automatically increases the cost for the municipality? Yes, says the Court of Justice: the “increase […] in the total payroll that the tenderer proposes to apply to persons performing the contract, allows the contracting authority to identify the most economically advantageous tender, within the meaning of that provision”. The Court also accepts the obligation to open a negotiation with the employees assigned to this contract. Such a requirement seeks to “facilitate dialogue between the social partners and, therefore, encourages the exercise of that right by requiring merely that the successful tenderer endeavour to conclude a collective agreement with the representatives of the staff assigned to perform the contract, without encroaching on the latter’s right to participate in the determination of the elements of the salary increase and working conditions.” This judgment has been welcomed by the European Trade Union Confederation, which calls on the Commission “to use its revision of the public procurement directives to consolidate this ruling, making sure that companies whose workers are covered by collective agreement are given an advantage in the awarding of public contracts.” (see press release).

• Insurance : On 12 March, European social partners in the insurance sector adopted a Joint Declaration aimed at boosting business in the sector. The document supplements their previous initiatives in the area of digitalisation, and emphasises that “social dialogue and, where applicable, collective bargaining, information and consultation during the introduction and implementation of AI and digital tools and continuous monitoring are central.”

• Retail : On 12 March, European social partners in the retail sector published a joint statement calling on EU institutions to tackle various issues, including “unfair competition from third country marketplaces and traders selling directly to consumers in the EU often with no regard to EU standards and regulation” (see joint press release). They also adopted their Work Programme 2026-2027.

Prevention : On 1 March, the National Labour Council (CNT) launched the 3rd selection cycle for pilot projects aimed at preventing burn-out at work. This long-term initiative, which was provided for by the 2017-2018 cross-industry agreement, has given rise to the preparation of a brochure of recommendations for employers. Applications for subsidies must be submitted by 31 May 2026 (see press release).

Employers’ reaction to “democratisation at work” : On 10 March, the two employers’ confederations CEOE and CEPYME published a joint press release announcing their refusal to take part in round table discussions on social dialogue concerning democracy in the workplace (see IR Notes 267). In their view, this is a further example of interventionism on the part of the State and a breach of private property rights. Despite their refusal, CEOE and CEPYME say that they continue to believe in collective bargaining as a vehicle for consultation (see press release).

Health and safety in the workplace : Since 16 March, the prevention passport has been available to employers who wish to declare the internal training courses undertaken by their workers or to check the declarations made by training bodies. The purpose of this tool, which was created by the Law of 2 August 2021 to boost prevention in occupational health, is to make it easier to monitor and update training courses in the field of occupational health and safety (see presentation of the tool). To qualify for declaration, a training course must: 1/ concern occupational health and safety; 2/ be executed within the framework of the company; 3/ give rise to a document certifying the employee’s participation; 4/ present skills that can be transferred to an identical position. A simulator is available to help employers determine what is to be declared.

Due diligence : In a ruling by the Paris Ordinary Court [Tribunal Judiciaire] on 12 March, the cosmetics group Yves Rocher (LBYR) was ordered to pay 48,000 euros to six former employees of a former LBYR Turkish subsidiary, on account of the weakness of its risk mapping, which failed to prevent breaches of trade-union rights and instances of trade-union discrimination. The complainants are among the 132 employees of the subsidiary who were dismissed after joining the Turkish trade union Petrol-IS. This is the second time that a French company has been found guilty of breaching the 2017 law on due diligence (in the wake of a case concerning bogus “self-employed” workers employed by La Poste group, see IR Notes 220), but it is the first time that workers employed outside France, by a subsidiary of a French company, have sought damages from the parent company.  The substance of the judgment relates to risk mapping, which the 2017 law placed “at the forefront of the measures to be included in a company’s due diligence plan, since it is upon this that the determination of actions to be taken to reduce risks, prevent serious violations and implement their monitoring depends”. The ruling states that the mapping performed “does not include a risk analysis of the subsidiaries”, which were excluded from the risk management relating to the group’s business, and that while it is indeed the company’s responsibility to identify and prioritise risks, “nothing in this case provides any insight into the procedure or method used” by Yves Rocher, […] “to determine the information to be included in its 2017 and 2018 vigilance plans.” In the court’s view, this “shortcoming” in itself constitutes “a breach” of its obligations.  The court adds that “neither the issuance of a code of conduct nor the purportedly corrective measures taken subsequently—once the risks had materialised—can compensate for” the inadequacy of its mapping. This shortcoming “is likely to give rise to the civil liability of the company LBYR and oblige it to compensate for the loss that the fulfilment of its obligations would have prevented.” Judith Kirton-Darling, industriAll Europe’s general secretary, comments with satisfaction: “The ruling represents an important milestone for corporate accountability” (see press release).