The European Parliament and European Council are proposing to amend the European Works Council (EWC) Directive (2009) to provide clarity and additional powers for EWCs as well as enhanced enforcement. This could have interesting implications for employers across Europe, particularly in relation to new areas such as the EU Pay Transparency Directive.

The next step for reform involves the formal adoption of a political agreement by both the European Parliament and the Council. After publication, Member States will have a period of two years to implement the legislation, with the new rules coming into effect one year thereafter. 

Proposed changes

The revised EWC Directive aims to address what the European Parliament and the European Council perceive to be shortcomings in the existing legislation concerning EWCs, making the framework for information provision and consultation of employees at a transnational level more effective.  

EWCs are seen as crucial for strengthening workplace democracy and ensuring employee involvement in significant corporate decisions. Under the current legislation, the EWC has the right to information and consultation, enabling it to ensure that transnational decisions - such as restructuring, factory closures, or changes in working conditions - are transparently discussed and assessed in the interest of employees. 

The European Parliament and European Council consider that the current Directive lacks sufficient sanctions for employers, and that enforcement of the rights of works councils has proved challenging. As a result, there is a perception that it was relatively easy for employers to circumvent their obligations regarding information and consultation. 

The revised Directive introduces several key improvements aimed at making EWCs more effective and resilient. It includes:

• A clearer definition of transnational issues (to prevent companies from avoiding the involvement of the EWC due to ambiguity);
• Aims to promote gender representation within EWCs;
• Enhanced access to judicial and administrative procedures for employees and their representatives;
• The EWC must be consulted prior to decisions made by central management. Consultation is therefore no longer a mere formality afterwards, but a crucial moment in the decision-making process; and
• Additionally, the revised Directive seeks to establish clearer and stricter requirements for situations in which a company refuses to grant access or insists on treating information confidentially. 

Implications in relation to the EU Pay Transparency Directive

Both the revised EWC Directive and the EU Pay Transparency Directive (2023) aim to safeguard and enhance the social rights of employees within the EU. They strive for improved working conditions, increased transparency, and equal treatment of workers across the EU.  

Further, the EU Pay Transparency Directive empowers the (local) Works Council with enhanced mechanisms to mandate equal compensation and equal treatment within the organisation. 

It is conceivable that, with the introduction of the revised EWC Directive, the European Works Council may also assume a role within this context, particularly in relation to companies that have establishments in multiple European countries. 

This will primarily depend on whether changes to a centrally managed equal pay/equal treatment policy is regarded as a transnational issue. This is likely to be the case now that it concerns measures applicable to various European countries, where (c-level) management is involved or must be involved, with implications for all European employees and potential negative consequences if matters are not adequately addressed (such as fines, negative publicity, etc.).

In summary, should this revised EWC Directive come into effect, (central) project management will become increasingly important, necessitating careful consideration of which Works Council should be involved, when and to what extent, especially given the stringent deadlines for the submission of gender pay gap reports, making timely engagement of (local/European) works councils even more significant in this context. 

For further information about your obligations in relation to European Works Councils or under the EU Pay Transparency Directive, please contact:

Kathryn Dooks, Deloitte Legal UK

Fraukje Panis, Deloitte Legal Netherlands

Klaus Heeke, Deloitte Legal Germany

Ivana Azzolini, Deloitte Legal Italy