Europe’s managers warm to the idea of works councils

Date: 07/12/1995

By Michael Mann

ALMOST 70 European multinationals have now grasped the nettle and set up works councils voluntarily. But this is a drop in the ocean compared to the roughly 1,200 companies believed to fall under the scope of the European Works Council Directive.

Despite this, officials at the European Trade Union Confederation (ETUC) are "positively surprised" by the attitude the business community is adopting towards an idea about which it had previously been more than a little cool.

Social Affairs Commissioner Pádraig Flynn makes no secret of his delight that many companies are choosing to go down the voluntary road, rather than waiting until the terms of the directive are applied in 14 of the EU's 15 member states on 22 September 1996.

Of particular satisfaction to Flynn is the fact that so many UK companies have elected to negotiate works councils, even though the UK's much-vaunted 'opt-out' from the Maastricht Treaty's Social Protocol means there is no compulsion for them to do so on British soil.

UK multinationals, of whom 108 are eventually expected to be covered by the terms of the directive at their plants and offices in continental Europe, appear to be sensitive about the potential public relations problems of not according similar rights to their British workers as those enjoyed by their counterparts on the continent.

This has prompted fears among Eurosceptics that the UK is effectively being forced to accept the social chapter 'by the back door', undermining the value of its opt-out.

It gives credence to Flynn's often expressed view that as far as the Social Protocol is concerned, "de jure the UK is out; de facto it is in" and boosts the case of those who say the only effect of the UK's 'opt-out' is to deny it a place at the negotiating table when such directives are debated and approved by EU ministers.

Bill Shardlow, group personnel director of Coats Viyella, one of the first UK companies to apply the directive to its workers throughout the Union, says "there was never any thought of excluding UK workers".

He added: "I think politicians who tried to make political capital out of this issue were really out of touch with reality."

The ETUC is keen to point out that European companies with operations in the UK have also not hesitated to apply the same standards of consultation to their British employees as those enjoyed by workers in continental Europe.

Since March, when Ingersoll-Rand took the plunge, a growing number of US firms have been considering establishing works councils for their European-based employees. Some western European companies are also including representatives from East European subsidiaries in the consultation process.

But despite this progress, most of those who have already reached voluntary deals on works councils are German and French-owned companies who have usually built on existing consultative bodies.

ETUC pronounces itself generally happy with the works councils negotiated so far, although an official claimed that "there have been two or three companies who have attempted to by-pass the unions, simply presenting agreements which they wanted to push through without proper consultation".

But the unions are sure if their members feel voluntary agreements are not in keeping with the terms of the directive, they "will demand new negotiations in September 1996 and let the courts decide, if necessary".

The Commission clearly regards the gradual acceptance by a number of businesses that it is better to enter into consultation arrangements voluntarily than by decree as a vindication of its approach. It estimates that over 50,000 workers in 1,500 multinationals will eventually have the opportunity to play a direct role in worker consultation throughout the EU.

Earlier this year, Flynn stated optimistically that "the paradox of this directive is that it had to be invented to encourage multinationals to inform and consult with their employees, but once in place its success will be judged by the fact that it should not be necessary to apply its provisions".

Others are not so sure. Sue Gibas, secretary-general of the European Human Resource Network - an information forum for 40 major multinationals in Europe - stresses that while companies do have to deal with the directive, "they have no desire to see lots of regulation of this sort". None of the companies she represents have set up works councils yet.

Zygmunt Tyszkiewicz, secretary-general of EU employers' federation UNICE, takes a pragmatic approach.

"To its credit, the Commission took into account a fair amount of the flexibility we had asked for in its proposal. Now we have the directive - with its good and bad points - we have to see how to apply it using the maximum flexibility it gives us," he says.

A general theme of the criticism levelled at the directive is that EU industry is so diverse that it makes no sense to impose a single set of rules on the whole spectrum of business. But the mood has changed in the 14 months since the proposal was agreed by ministers last year.

"Industry's attitude has changed from complete denial to a pragmatic stance, although our suspicions have not been entirely allayed," said one business lobbyist.

ETUC is advising its members not to wait until September 1996, but to call on employers to bring in works councils under the voluntary 'Article 13' procedure, offering each individual company sufficient time to work out the system which suits it best.

The union's research suggests that several agreements are pending in the chemical industry and the food sector, although things are generally not so rosy in the graphical and service industries.

Although employers were very nervous about the potential rigidity of the works council model set out in the annex to the directive, most appear to be tying up voluntary arrangements which largely reflect the Commission's approach.

But this has not been without its difficulties. "The main problem is that some employers are still very badly informed about what works councils are all about," said an ETUC official.

Tyszkiewicz insists that UNICE is doing its utmost to provide support to businesses considering the establishment of works councils through its Technical Advice Bureau, which goes under the French acronym BATE. This now receives funding from the EU under a budget line previously reserved for the unions only.

Shardlow brushes aside arguments that the cost of works councils could severely damage the competitiveness of UK firms.

"This really isn't a problem, when you balance it against the money already spent on various managers' meetings," he says

Tyszkiewicz stresses, however, that less immediate costs involved in the consultation process could, in the long-term, make themselves felt, pointing to the time lost in spreading information and translating documents into the various languages used within a firm.

As to whether the process has actually been useful, opinion is divided.

ETUC officials believe that "positive work is going on and solid progress being made".

For Shardlow, "it is too early to say if works councils are useful, but it's pretty obvious that the positive effects of better worker consultation would not show up immediately anyway".

But concerns extend beyond the simple functioning of works councils. UK unions have expressed the fear that companies may use them to by-pass recognised trade union structures, by favouring non-union affiliated worker representatives.

Commenting on the Commission's recent suggestion of a general EU framework for extending works council-type consultation to national companies, an ETUC official said: "We're a little afraid that the Commission may have forgotten about the notion of participation, that somehow it thinks that this directive fulfils all our wishes. Proper participation is very different from information and consultation."

With draft legislation already being discussed in Belgium, Denmark and Spain to transpose the directive into national law, business lobbies are already expressing doubts about the way Belgian lawmakers are interpreting the role of unions.

"There are so many potential complications and threats of legal challenges to voluntary agreements already negotiated that we will need a whole new Commission department to deal with works councils," claimed one industry source.