Léna Guyon, Policy Officer Social Affairs at FIEC (the European Construction Industry Federation)

Lead story

“Social optimisation” to eliminate employee involvement

Since its introduction in 2001, the European company (SE) statute (see European company), which simplifies company structures, has been used by German companies as a way of avoiding legislation that imposes employee involvement on the company’s supervisory board. The authorities are aware of such avoidance mechanisms, and the German government has promised to introduce legislation to prevent this form of “social avoidance”. It is now under pressure, following the publication of a new Court of Justice judgement, which applies the text of Directive 2001/86/EU on involvement of employees quite literally, without showing much concern about possible abusive practice (CJEU, 16 May 2024, Case  C- 706/22, Konzernbetriebsrat der O SE & Co. KG).
The case concerns two companies belonging to the Japanese group Olympus – one of them British (O Ltd), the other German (O GmbH) – which decided to merge and create a European company (SE), on 28 March 2013. As neither of these companies had any employees or any subsidiaries with employees, no special negotiating body was set up to negotiate an agreement on employee involvement, as provided for in Articles 3 to 7 of Directive 2001/86/EU. The following day, the new company derived from the merger, known as O Holding SE, became the sole shareholder in O Holding GmbH, registered in Germany. The latter employed workers and had a supervisory board, one third of whose seats were held by workers’ representatives. A few months later, O Holding GmbH was converted into a limited partnership, called O KG. Following this conversion, the requirement for employee involvement on the supervisory board ceased to apply to the company. In October 2017, O Holding SE, which until then had been registered in the United Kingdom, moved its registered office to Hamburg. The group, which has more than 2,200 employees in the EU, neither took over the employee involvement arrangement that previously existed at the main company, nor established a SE works council to represent its European employees. Moreover, as the employees work for a SE, they are not entitled to call for the creation of a European Works Council. In point of fact, they are subject only to the directive on employee involvement in the SE, which provides for the creation of a SE works council, by means of an agreement. The only remaining representation body was O KG’s German group works council, which took the dispute over these arrangements to the Federal Labour Court. This court in turn referred the case to the EU Court of Justice. The council argued that once it had acquired control of companies with employees, the management of O Holding SE should, with retrospective effect, have set up a special negotiating body for the purposes of concluding an agreement on employee involvement.
So, what does the Court of Justice have to say? 1/ Directive 2001/86/EU does not create any obligation to enter into negotiations on employee involvement when “structural changes are made to a holding SE already established by participating companies which do not employ employees, and do not have subsidiaries employing employees”.  Moreover, in such a situation, it does not extend the guarantee on maintaining workers’ involvement rights in cases where a company is converted into a SE (the “before-after” principle), 2/ When the directive was drafted, the Council of the EU did not adopt an amendment proposed by the European Parliament, which explicitly provided for further negotiations on workers’ involvement in the event of a significant restructuring following the creation of a SE. 3/ It does not rule on any “abusive practice”, but leaves the burden of demonstrating this to the Federal Labour Court’s discretion, explaining how it can do so.
Werner Altmeyer, Managing Director of the EWC Academy, is concerned: “So, for the first time, this judgment allows a company to completely withdraw from all crossborder forms of worker involvement”. Dr. Sebastian Sick, an expert in company law at the IMU Institute, confirms that there are grounds for concern: the Court of Justice “is giving its blessing to a major new escape route for companies wanting to prevent co-determination for employees sitting on supervisory boards, and thereby contributing to the erosion of this right. Co-determination is designed to achieve the objective of shared decision-making for key decisions made by the company. By opening up a way to bypass co‑determination, the CJEU is renouncing this objective, and therefore part of the European social model.”

1. European Union Legislation

Due diligence : On 24 May, the Council definitively adopted the due diligence directive, which will shortly be published in the OJEU. Member States will have to adopt it into their domestic law within two years (see press release). IndustriAll Europe is delighted, commenting that thanks to this directive, “running a business responsibly is no longer an option, it’s an obligation”. IndustriAll Europe General Secretary Judith Kirton-Darling says: “We insist on trade union representatives being fully involved at all stages to ensure that companies do not stop at a mere box-ticking exercise. We are only at the beginning of a process in which trade unions active in multinational companies will play their full role” (see press release). The UNI Europa trade union federation comments that national trade unions in Europe should pressurise their governments “to ensure robust national legislation, including to close some of the gaps in the directive” (see press release).

• Artificial intelligence: On 21 May, the Council definitively adopted the artificial intelligence (AI) act, which is due to be published shortly in the OJEU (see IR Notes 226, IR Notes 162, IR Notes 163 and Artificial intelligence). It will apply two years after it enters into force, with a few exceptions covering specific provisions (see press release).
• Violence against women: Directive (EU) 2024/1385 of 14 May 2024 on combating violence against women and domestic violence has been published in the OJEU. Member States will have to adopt it into their domestic law no later than 14 June 2027 (see IR Notes 229).

Social update

European elections : On 23 May, the lead candidates of the European parties set out the broad lines of their programmes at a debate organised at the European Parliament. Astonishingly, this was given the name “Eurovision 2024”. Social Europe was not at the heart of the discussions, but the candidates mentioned a number of related points: Nicolas Schmit (PES) highlighted the need to combat poverty by creating jobs and investing in skills, in light of the rapid changes taking place in the labour market. Ursula von der Leyen placed the main emphasis on her record, rather than future plans, expressing her satisfaction at the introduction of a minimum wage, which ensures that “it pays to work”, and at the billions of euros invested in housing renovation and providing access to social housing. She believes that the EU needs to finalise the common market of capital and to boost skills. For his part, Walter Baier (European Left) called for a directive on capping rents. Terry Reintke (Greens) argued that it was important not to fall back on an austerity programme, and that the EU should instead boost its investments in the green transformation, which will also create jobs.

Road transport : On 20 May, the Belgian authorities carried out a major inspection on a lorry park close to the Port of Anvers, with the support of the European Labour Authority (ELA) and representatives of the Bulgarian, Lithuanian, Polish and Romanian authorities. The European trade union federation ETF was also present at this inspection, together with some of its affiliates. The inspection revealed systemic non-compliance with social legislation. A total of 202 vehicles were examined, and among these, the inspectors identified 135 violations of the ban on resting in vehicles during longer breaks, 70 violations concerning the return of trucks to the operational centre and 35 violations of the requirement for drivers to return home every four weeks (see ETF press release).

• Industrial policy and the single market: On 24 May, the Council adopted conclusions sketching out the future of industrial policies and the functioning of the single market, while at the same time calling for “reinforced social dialogue” (see press release).

Cross-industry social dialogue

• European elections : On 23 May, in a joint declaration, European social partners – the ETUC, BusinessEurope, SGI Europe and SMEunited – called on “those who are eligible to vote in the upcoming European elections to make their voices heard” in order to support and strengthen European democracy.

Sectoral social dialogue

Banking : On 14 May, European social partners in the banking sector signed a joint declaration on artificial intelligence (see IR Notes 230 and Artificial intelligence). In their text, the social partners adopt the definition of AI used in the recent AI act, and highlight the importance of social dialogue in managing any impact of AI on working conditions, management, decision-making and the confidentiality of workers’ personal data. The signatories call for joint actions to “support job transition and ensure re/up-skilling opportunities”. They take into account the specific characteristics of AI, whose use should be “a subject of continuous monitoring through social dialogue and collective bargaining”. When it comes to health and safety, the signatories recommend joint assessments “that include the effects of algorithmic management due to its embedded unpredictability, as these systems rely on complex data processing and have a tendency to reduce human involvement in decision-making.” They also emphasise that profiling, personnel selection, internal promotion, changes of function and professional grade level, the system of sanctions, and performance evaluations should “always [be] subject to the human-in-control principle”. European social partners in the banking sector strongly encourage sectoral social partners at national level and company-level actors, including European Works Councils, to take this joint statement on board (see press release).

Gas : In a press release, the European trade union federations IndustriAll Europe and EPSU deplore the fact that after nine months of negotiations between EU social partners in the gas sector, the employers’ organisation Eurogas has failed to adopt the Just Transition agreement negotiated by the employers’ and trade union delegations. This text required companies to draw up “Just Transition plans”, in order to anticipate the green transformation’s impact on jobs and skills, provide high-quality training and organise job-to-job transitions.

2. Member States Belgium

Preventing musculoskeletal disorders : A Royal Decree dated 19 March 2024 relating to ergonomics in the workplace and preventing musculoskeletal disorders at work was published in the Moniteur belge on 15 May 2024. For the first time, this text introduces a section into the Well-Being at Work Code, which defines several concepts and general principles relating to ergonomics in the workplace and prevention of musculoskeletal disorders. Employers are required to take ergonomics in the workplace into account, not only at the time new workstations are designed and laid out, but also whenever adaptations are made to existing workstations. They must also implement a prevention policy based on a global approach that takes the various risk factors into account (see press release).

Reclassifying workers as employees : In three recently published decisions (nos. 267, 268 and 270), the Employment Relationship Commission (CRT) of the Social Security Federal Public Service indicated that three Uber Eats delivery workers should be reclassified as employees. This decision is binding only on certain public institutions, such as the National Social Security Office (ONSS) and the Self-Employed Workers’ Fund [caisse en charge des indépendants], though it may guide the courts’ thinking.  Among other things, the Commission notes “a number of restrictions on delivery workers’ freedom in the way they execute their work”. Furthermore, “these restrictions apply even though the service performed by the delivery worker, which is by nature fairly straightforward and broadly standardised, leaves very little scope for freedom of organisation”.

Denmark

Combating social dumping : On 23 May, the parties making up the government coalition and several opposition parties adopted an agreement on boosting efforts to combat social dumping, which will give rise to the preparation of several draft laws by the end of 2025. Noting that one in eight Danish employees is a foreign national, the signatories point out that the foreign employees “should not have to work under unacceptable conditions”. However, the country’s Working Environment Authority is no longer able to cope with the task of tackling repeated breaches of occupational health and safety legislation, especially in the construction industry. The aim is therefore to provide it with more resources, such as powers to suspend the work performed on site by companies and their subcontractors, to inspect companies at more frequent intervals if they have already been found guilty of breaking the law, and to impose suspensions on contractors found guilty of serious and repeated violations. The agreement also sets minimum requirements governing accommodation provided for workers, and the Working Environment Authority will be tasked with overseeing compliance with these standards. The accommodation inspections performed by the labour inspectorate will use a risk-based approach, which will also include spot checks (see press release).

3. Companies European works councils

New EWC created following a demerger : After merging in 2017, the US company FMC and the French company Technip, which both operate in the oil industry, demerged in 2021, resulting in the creation of two new companies: TechnipEnergies, which took over the engineering and technology businesses, and TechnipFMC, which retained the subsea business and renegotiated an EWC agreement (see IR Notes 227). TechnipEnergies (6,316 employees) signed its EWC agreement on 14 December 2023. This is governed by French law, even though the company’s registered office is in the Netherlands. The signatories agree that the EWC shall be “properly informed and consulted, appropriately and in a timely manner, to useful effect”. The group provides the EWC with an annual budget of 25,000 euros to cover its operating costs. This funding cannot be carried forward from one year to the next. The EWC is consulted in exceptional circumstances, involving either a proposal to cut at least 80 jobs from the workforce, or in connection with other operations, when at least 500 employees are impacted by the proposal, in at least two countries, with at least 50 employees in each country.

EWC agreement renewed : The parcel delivery subsidiary of the La Poste group, Geopost (122,000 employees worldwide, including 46,335 in Europe), renewed its European Works Council agreement on 5 March. Following a vote in 2021, the EWC now covers the United Kingdom (which has 10,500 employees and constitutes its main delegation) and Switzerland. There are few changes to the original agreement, which was signed in May 2008. Alongside the annual meeting, the EWC has a budget of 20,000 euros (excluding interpreting and technical costs) to cover the cost of organising an annual two-day training meeting.

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