29 April 2019

The establishment and rights of the European Works Council

By Koen Vermeulen

At the end of last year, the Court of Rotterdam made a rare ruling on the European Works Council (EWC).

Based on that ruling, in this article we give a description of the establishment and operation of the EWC, and how it relates to the normal works council.

This post was reviewed and updated on 23 September 2020

Creation of a European Works Council

Multinational companies with more than 1000 employees operating in or from the Netherlands within multiple EU countries may choose to set up an EWC. These companies are further obliged to do so if their works councils or a large group of employees from several European branches of their company request this be done. About two thirds of Dutch multinationals currently have an EWC. When one of the remaining multinationals receives a request for the establishment of an EWC, it initiates a process which lasts a maximum of three years. During this time, the company and a so-called Special Negotiating Body (SNB) holds discussions about the formation of an agreement. That discussion forms the basis of the powers of the EWC with regard to the multinational company. Incidentally, this is mostly based on the minimum requirements that the European Works Councils Act (WEOR) imposes regarding the rights and obligations of an EWC.

Information and consultation law for cross-border issues

And here comes the big difference with the regular works council. . The regular works council has, among other things, the well-known right of consent and advice. This in turn creates the possibility for a company’s decision-making to be revoked through the courts. The WEOR grants the EWC an information and consultation right, without having comparably far-reaching options for the EWC. The multinational and EWC are free to grant more far-reaching rights to the EWC in their agreement, but that is not common practice. The multinational must inform and consult the EWC on cross-border issues. Think of (intended decisions about) the economic and financial situation of the group, developments regarding employment or major organisational changes – only as far as cross-border issues within the EU are concerned.

Judgment regarding EWC by Alcoa Holding

Although there are not many lawsuits about the WEOR, the question of what falls into the scope of “cross-border issues” is one of the most important issues to be decided during negotiations on the establishment and practical implementation of an EWC. After all, the EWC only applies to cross-border matters relating to the multinational; all other matters are settled according to the works council of the company in that EU member state.

In the ruling of the end of 2018, precisely that discussion played a role. Did the (intended) decision of a Spanish subsidiary of Alcoa for the collective dismissal of 700 employees in Spain qualify as a cross-border decision about which the EWC must be informed? Yes, said the Dutch judge during summary proceedings in the case. Incidentally, the judge in question was competent on the basis of the EWC agreement concluded with the Dutch Alcoa Holding. This case regarded the dismissal of 20% of the total European staff of Alcoa, with likely consequences for Alcoa staff located in EU countries other than Spain. As such, it can be broadly interpreted as a “cross-border issue”.

Relationship between EWC and regular works council

Just as with the regular works council, the EWC must be informed or consulted at a certain point in the decision-making process. If the agreement between multinational and EWC makes no other stipulations, then the EWC must be informed before or simultaneously as the national works council. In the Alcoa case, the judge ruled that the EWC did not have the right to be consulted prior to consultation with the local works council.

Coordination is therefore required between the national and European works councils and the company in order to ensure that the required consultation can still have some effect on decision-making. However, as said, if the suggestions made by the EWC for (alternative) decision-making are not adopted by the company, then the EWC will not be open to the Enterprise Court of the Amsterdam Court of Appeal.

EWC not a toothless tiger

However, the EWC is certainly not a toothless tiger, as this recent statement confirms. In addition, the WEOR also offers the EWC the possibility, for example, to request the Enterprise Court  to order a company to comply with the law and / or the EWC agreement – although EWC’s have rarely used this procedural route.

Would you like to know more about this topic?

We advise both multinationals and works councils on the establishment of an EWC, negotiations on the content of the EWC agreement and discussions on the scope of the rights of the EWC.

Please contact us for further details.

Koen Vermeulen

Koen Vermeulen

Lawyer / associate partner

Koen Vermeulen is your sparring partner for all questions on employment law, employee participation and pensions.

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