EMF GUIDELINES ON LEGAL ACTIONS CONCERNING EWCs

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1 EMF GUIDELINES ON LEGAL ACTIONS CONCERNING EWCs Introduction: The legal field of EWCs is undeveloped Court cases concerning European Works Councils are difficult matters. It is a relatively undeveloped legal field, so there are few precedents. At the same time, many EWCs are taking legal action to enforce the terms of their agreements. The precise provisions of EWC agreements are quite variable, thereby making it difficult to lay down any fixed rule except to say that in most cases, the rights accorded to the EWC are only those laid down in the Agreement rather than what it says in the legislation. Due to their potential to set precedents, court rulings concerning EWCs may, even if they are only formally valid in one member state, have an influence within the legal systems in the entire EU. This also means that a legal decision against employees and their representatives may also have negative repercussions across Europe. In many cases, the mandate to go to court on behalf of the EWC must first be formally defined, and EWCs will probably find themselves up against a very resourceful counterpart. For all of these reasons, court cases about EWCs need to be carefully prepared. The EMF Company Policy Committee has therefore developed these guidelines and recommendations which should be taken into consideration before deciding if a matter should be taken to court. More resources on the EMF website: This paper is meant as a general strategic guide. The wide variety of legal systems within the EU means that any legal strategy concerning EWCs will have to take into account the specific requirements of each legal system. On the EMF website ( you can find the following more detailed information: An overview and a brief description of the legal systems in the EU Member States. Comparative tables for most EU Member States about: The legal framework for proceedings involving EWCs (Court and Out-of-Court /Extra judicial) Legal personality of EWCs and national and local employee representation bodies Work councils eligibility criteria, Labour Courts in the EU Court cases involving EWCs: A synopsis of past legal cases involving EWCs 41

2 Legal actions concerning EWCs: The experience so far Since the introduction of the Directive on European Works Councils (EWC) and its transposition into national legislations, some 700 EWCs have been established (around 260 within the EMF remit alone). So many EWCs would suggest that legal conflicts are bound to occur, and it seems that about 25 court cases concerning EWCs have taken place so far. Some of these legal decisions clarified the companies obligation to comply with the EWC Directive even if company headquarters are outside the EU (ADS Anchor, Becton Deckinson, Bofrost, and Kühne & Nagel). There have been several contradictory rulings about whether the nomination or election of SNB or EWC members is determined by the agreement, the national law of the country from which the delegates come, or the national law according to which the EWC agreement was set up (Interbrew, Hewlett Packard, and Schneider Electric). A wide range of rulings were made about the right of the EWC to be informed and consulted on transnational issues as well as on the timing and sequence of information and consultation at the national and European levels (Alstom, Altadis, Forbo, Panasonic, Otis, Renault, ST Microelectronics). Several cases have also established the importance of the EWC granting its chairperson a solid legal mandate to go to court (Alstom, Jungheinrich, Panasonic, and P&O Ferries). A summary of these cases can be downloaded from the EMF website. Next to those cases involving EWCs which have gone to court, there have also been many conflicts within EWCs which nearly went to court; it is clear that even the realistic threat of being taken to court is one of the best reasons for a company management to give in and settle things peacefully. As it has been clearly shown in the Renault Vilvoorde case, legal action concerning EWCs can be rather spectacular, often bearing some very negative and long term consequences for the company involved, such as significant bad will, image damage and quite possibly a negative influence on the stock price and shareholder value. EWCs and restructuring: enforcing the right to an extraordinary meeting The EWC Directive and the national implementing legislation provide for the convening of an extraordinary meeting between regularly scheduled meetings if extraordinary circumstances, such as transfers of production, closures, or significant job losses are planned. The purpose of this extraordinary meeting is to begin a process of information and consultation about the cross-border implications of the company s plans. Nearly all EWC agreements have included this right to hold extraordinary meetings. This may be one of the most important rights that EWCs have, since it is when they are faced with cross-border restructuring measures that is most important that EWC members have the opportunity to meet with each other and with management (not least because obliging management to say the same thing to everyone at the same time can have an important disciplining effect on management). The information gained at an extraordinary meeting of the EWC is of course useful at the local and national level. Furthermore and perhaps even more importantly -- the deliberations within the EWC about the restructuring measure should lead to a better appreciation of the bigger picture ; it can provide the basis for a joint assessment of the situation and a coordinated strategy which takes the implications of the measures for all employees in Europe into account. 42

3 The problem arises in determining when such extraordinary circumstances arise. Who decides what is to count as cross-border implications? The EWC Directive specifies that the employee representatives shall have the right to meet with management at the EWC s request. Unfortunately, this right of the employee representatives to meet with management does not seem to be included in many EWC agreements. Instead, the question of who has the right to call for an extraordinary meeting is often left open. By the time the cross-border implications of a measure are identified clearly enough for it be proven in a court of law, however, it may be too late for the meeting to be of much use. However, in cases of restructuring, the chances of getting a rapid court ruling (injunction) against the company might be fairly good. If measures are already being implemented or have been officially announced, but the company has not informed and consulted the EWC or the select committee, then a court will be more likely to award a decision in favour of the EWC, thus forcing the company to respect its obligations under the agreement. The court ruling about Renault Vilvoorde clearly established that the company could not proceed in implementing its restructuring measures until it had adequately consulted the EWC. It is important to note that the right of the EWC to meet to consider and respond to restructuring measures does not compete with the rights to information and consultation at the national or local level: on the contrary, the activities and strategies of employee representatives must complement each other. It is not a question of who is informed first but rather of what each level can gain by combining their access to information and their deliberations on the consequences of restructuring measures. This understanding of the relationship between the EWC and the national and local level is clearly supported by the rulings in the cases of Alstom, Altadis, Forba, and ST Microelectronics, where the judges ruled that the meetings of European, central and local works councils must take place in a sequence that enables each level to have the maximum of information that it requires to fulfil its respective role. In cases of restructuring, it is often necessary that the EWC act as early as possible. This requires close cooperation and the exchange of information among EWC members and unions. The EWC Directive and most EWC agreements specify that the information and consultation at the European level must take place as soon as possible. But it is often unclear to employee representatives at the national level that a measure they are confronted with at the national level may be connected to a measure taking place in another country. It is therefore all the more important that EWC members exchange information about what is happening at the local or national level between meetings, and that they try to contact each other directly and via their EWC coordinator or their national union as soon as they suspect that a cross-border measure may be planned. Despite these difficulties, the experience at the EMF indicates that more and more EWCs are actively making use of their ability to hold extraordinary meetings when necessary. When should a lawsuit be considered? There are basically two different kinds of court cases: in several countries a rapid court decision (injunction) can be obtained very quickly if it can be proven that it is needed in the 43

4 short term, for example in dealing with restructuring measures. However, a lawsuit can drag on for many years, depending on the possibilities of appeal, and it can be very expensive and stressful for all parties involved. To expose yourself, your colleagues and your trade union to the challenges of court action calls for some consideration. First of all it must be sustained by your legal consultant (typically the legal department of either your own union, the EWC coordinator s union or of the national confederation) that an active act or an omission by the central management of a company probably construes a breach of an EWC agreement, national EWC legislation or the EWC Directive. If this probable breach risks serious and irreparable damage to the relations between employees and Central Management and if it does not seem that you can obtain your goals through further negotiations or through mediation, then a lawsuit might be the only effective solution. Know what you want before you sue! Before bringing a matter to court no matter how unjustly Central Management has acted -- it must be clear what is to be obtained in court. By bringing a matter to court you might be able to force a reluctant management back to the negotiating table, thereby making it possible for you to gain time or to pursue some specific goals (such as securing new investment in compensation, reducing the number of lay-offs, or raising the level of economic compensation, etc). If negotiations are then successful, you can always cancel the court case. You might want a ruling that shows that you were right and Central Management was wrong. Besides rectifying the situation itself, your case can sometimes be combined with a demand for economic compensation either to the ill treated employees or according to the legal system to your trade union. You might want to confirm a legal principle or pursue a political goal (when you need a binding legal ruling), for instance when management claims that the legislation or the EWC agreement cannot be interpreted in favour of the employee representatives. But in these cases you must always beware of the risk that the employers win, which might damage the situation for thousands or even millions of employees all over Europe. In other words, sometimes it is better to have no ruling at all. In certain situations for instance during a restructuring process - you simply do not have the time necessary for a normal court case to run its course, but many legal systems grant you the possibility to ask for an injunction, which means that the court s ruling can be made and enforced quite quickly. The overviews of legal systems in the EU which can be found on the EMF website will provide you with some useful pointers. 44

5 No matter which one of these motivations guide your decision to go to court, you will need all the legal advice you can get. Next to the legal departments of your own unions, the national experts within some of the national unions who have ties to the EMF in general or the EMF Company Policy Committee (CPC) in particular could be another very good source of assistance. Some advantages and disadvantages to be considered before going to court As it has already been mentioned above, a lawsuit certainly is no picnic it is conflictual, it is a lot of work, it is time-consuming and if you lose, it certainly is an awful waste of money and effort. However there are generally at least three good reasons to bring a matter to court: You usually have no other option to reach your goals, You usually gain a certain profile and publicity, and You get a proper ruling with a prejudicially binding effect Who can file for a lawsuit and against whom? Certain legal requirements must be fulfilled if a court case is to be admitted to court. A number of EWC cases which either have or nearly have gone to court have highlighted the need for a solid legal mandate to back up the claim. First of all you must find out who is eligible to file for a lawsuit against a certain legal entity. This may not be as straightforward as it sounds: in the British P&O case, for example, the EWC was a mixed body made up of both employee representatives and employer representatives. The court therefore ruled that the EWC could not actually sue the company, since many of its members were actually representatives of the company itself. In other cases (e.g. Kühne & Nagel where the German Central Works Council brought the Central Management to court) no such problem has come up. The typical court case involving EWC matters are filed by the employees or their representatives often represented by their national trade union - towards a somehow neglectful Central Management. However in some countries individual EWC members themselves might be able to take legal action towards Central Management, while in other countries collective agreements or labour laws seem to prevent individuals (even EWC-members) to surpass or overtake a collective entity like an EWC. If a situation occurs in which an EWC member finds that the EWC is entitled to take legal action towards Central Management but does not do so, then according to some legal systems, that person might be able to take legal actions towards the EWC or the select committee for a failure to perform their duties. Finally, a similar situation could arise in which a national trade union finds that an EWC does not take action towards Central Management. In this case, some legal systems would allow a trade union to take an EWC or a select committee to court. 45

6 Diagram: Who can take whom to court? Central management EMC members National trade unions and the EMF EWC Action may also be taken against a select committee The importance of a mandate Once it has been clarified who will actually take whom to court, the next step is to ensure that that body or person has a mandate to do so. While this question is more easily answered within the context of the national legal system if the plaintiff is an individual person or a national-level representative body or union, it has proven to be a thorny question at the European level. It is absolutely essential that EWCs ensure that they have given a solid mandate to go to court, otherwise the case will easily been dismissed on formal grounds alone. The court rulings at Alstom, Jungheinrich, Panasonic, and P&O Ferries clearly established that it is simply not enough for an EWC member or even Chairperson to file a case on behalf of the EWC. On the contrary, the EWC needs to give its member or chairperson an explicit and specific mandate to do so. The question is how? According to what rules? Usually, such rules about how the EWC takes decisions as a group are laid down in the EWC s own Rules of Order. Such rules of order may specify, for example, that the EWC takes decisions by simple majority voting, or by a system of weighted majority voting according the size of the national workforces. Even though the EWC Directive, the national implementing legislation and most EWC Agreements explicitly provide for EWCs to lay down their own Rules of Procedure which define, for example, how decisions will be taken collectively and the representative capacity of the EWC Chairperson or Secretary, the vast majority of EWC 46

7 have apparently failed to do so. This means that nearly all EWCs have some homework to do which they should do regardless of whether or not they plan to go to court. If no Rules of Order have been established, then the first step is to agree a set of rules about how the EWC makes decisions as a collective body. Normally, the Rules of Order must be agreed by a majority of the EWC members to be considered a valid legal base. These agreed rules then provide the basis for the EWC Members to pass formal, legally recognised resolutions, for example mandating its Chairperson or Secretary to file a court case on behalf of the EWC. Since it might be necessary to take such collective decisions at short notice, it might also be a good idea to provide for decision-making in absentia; i.e., that if the EWC Members cannot come together to pass a resolution within a meeting, then resolutions can be put forward and agreed by post or . Whatever the EWC as a group decides, it is essential that its decision has been taken according to legally recognised and legitimate means. If your EWC already has agreed Rules of Order and the EWC has decided to go to court, then you should be sure that the EWC has made a decision precisely according to these rules in mandating its Chairman or Secretary to file a court case. The EMF, the EMF coordinator and your national unions will be able to support you in drafting such Rules of Order or in making sure that the EWCs mandate to go to court is legally recognised. Political prerequisites However, next to these legal formalities, there are also political factors which must also be considered; there are quite possibly wider consequences of court action. An EWC court case is a legal matter dependent on national law in one single EU Member State, but because every national EWC legislation is based on the same Directive and due to the transnational nature of these cases, a positive court ruling in one country can be very helpful in another. There is a risk, however, that a court ruling could backfire on the situation in one or more other countries, for example by calling into question an established practice in another country, or exposing employee representatives or trade unions to legal action as a consequence. This risk highlights the need for cooperation among trade unions in an effort to involve everyone in the decision to go to court. Furthermore, you must also be absolutely certain that you are able to stand united and strong and this might not be as simple as it sounds. The EWC must be on guard for workers rights in all of Europe, but there is always the risk that national interests will be defended at the expense of European interests, for example when a union bends to either pressure or promises from Central Management or even that a weak or conflict-averse select committee might try to impede the prospects of taking a matter to court. If Central Management threatens that the next division to be transferred might otherwise be yours, then it requires a firm European commitment to stand up for (other) workers rights. But our trade union experience has shown that it is only by holding together that we can achieve a solution which is acceptable and fair for all. 47

8 The supporting role of the EMF Due to culture, legislation and social dialogue traditions, trade unions in different countries might have a different view about when negotiations to solve the situation might have to be abandoned. But before bringing a matter to court it will be wise to see if you can get some help from above. It is important to bear in mind that the national union which coordinates the EWC on behalf of the EMF bears a responsibility to the employees of other countries as well. It is therefore imperative that both legal assistance is acquired and that the EMF is notified if a serious situation occurs. EMF will in general be in favour of a lawsuit when a serious breach of either an EWC agreement or the EWC legislation (national law or the Directive) has taken place according to either your union or the EWC coordinator or both - (their legal departments). The first way of demonstrating EMF s support would be for the General Secretary to send a letter to Central Management stating that if they do not comply, EMF may initiate cross-border actions and recommend a court case in whichever country seems the most promising. After that it must be individually evaluated whether and how EMF can and should supply support. This might include a coordinating role for the EMF or the EMF filing the case together with or on behalf of the EWC and/or the national unions. The role of the EMF EWC coordinator Monitoring and guiding existing EWCs is one of the main EMF challenges to ensure that all workers enjoy their rights to information and consultation. The EMF trade union coordinators have been entrusted with this task by the EMF: the coordinators work to draw the EWC together into a cohesive group and to anchor a European trade union perspective and strategy. As a point of contact between the EWC and the EMF, the EMF coordinator shall be informed and involved actively when an EWC (endorsed also by the trade unions represented) considers opening a legal action, by supporting and working together with the legal union national experts. Before a matter is brought to court, the EMF coordinator might be called upon to act as a mediator between the EWC and the central management. Once it is decided that the lawsuit is the only solution to the conflict, then the union in the country where the lawsuit is filed will most likely take the lead in coordinating the procedure. If this person is not the EMF Coordinator anyway, then he/she will be expected to keep the EMF Coordinator and the EMF informed about the case. 48