Employee Representatives in an Enlarged Europe

Employee representatives in an enlarged Europe

Volume 1

European Commission

Directorate-General for Employment, Social Affairs and Equal Opportunities Unit F.2

Manuscript completed in April 2008

1 This report was financed by and prepared for the use of the European Commission, Directorate- General for Employment, Social Affairs and Equal Opportunities. It does not necessarily represent the Commission's official position.

Authors of this report: Javier Calvo, Lionel Fulton, Christophe Vigneau, Nataša Belopavlovič, Ricardo Rodríguez Contreras Coordination and project leader: Ricardo Rodríguez Contreras

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ISBN 978-92-79-08928-2

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2 ACKNOWLEDGEMENTS

This study has been carried out with the information collected by national experts, following the common guidelines issued by the coordination team, expanding on and correcting information as required. We would like to thank the following experts for the work they have carried out and for the several consultations they have answered:

AUSTRIA Ulrich Runggaldier, Vienna University of Economics and Business Administration Linda Kreil, Vienna University

BELGIUM Patrick Humblet, Vakgroep Sociaal Recht, Department of Social Law, Ghent University.

BULGARIA Irina Terzyiska, European Labour Institute.

CROATIA Miljenko Cimesa, SAPIENTIA.

CZECH REPUBLIC Marketa Nekolova, Research Institute for Labour and Social Affairs.

DENMARK Carsten Jørgensen, Forskningscenter for Arbejdsmarkeds- og Organisationsstudier, Sociologisk Institut, Københavns Universitet- FAOS, Department of Sociology, University of Copenhaguen.

ESTONIA Epp Kallaste, PRAXIS Center for Policy Studies

FINLAND Markku Kiikeri, Helsinki University

FRANCE Christophe Vigneau, Institut des Sciences Sociales du Travail, Université de Paris 1 Panthéon Sorbonne

GERMANY Eva Kocher, Hamburg University, Universität für Wirtschaft und Politik, Fachgebiet Rechtswissenschaft

GREECE Athanassios Papaioannou, Police Academy of Athens

HUNGARY Makó Csaba, Institute of Sociology, Hungarian Academy of Sciences

Béla Benyó, Semmeweis University

ICELAND Elín Blönda, Research Centre for Labour Law and Equality at the University of Bifrost

Maj Britt Hjördís Briem, University of Bifröst

IRELAND Josephine Browne, Trinity College Dublin

ITALY Edoardo Ales, University of Cassino

Giorgio Verrecchia, University of Cassino

LATVIA Daiga Ermsone, Advisor International Relations

LIECHTENSTEIN Bettina Drawitsch, Legal and Economic Affairs Unit, Arbeitsrecht, Vaduz

LITHUANIA Tomas Davulis, Faculty of Law, Vilnius University

LUXEMBOURG Marc Feyereisen, Court administrative

MALTA Saviour Rizzo, Centre for Labour Studies, University of Malta

NORWAY Inger Marie Hagen and Kristine Nergård, FAFO- Institute for Applied Social Science, Oslo

POLAND Piotr Korzuch, University of Warsaw

Agata Drabek, University of Lodz

PORTUGAL Catarina de Oliveira Carvalho, Portuguese Catholic University

ROMANIA Luminia Dima, University of Bucharest

SLOVAKIA Monika Čambáliková, Institute of Sociology of the Slovak Academy of Sciences

SLOVENIA Nataša Belopavlovič, Institute of Industrial Relations Research.

SPAIN Javier Calvo, University of Sevilla

José María Miranda, University of Santiago de Compostela

SWEDEN Annika Berg, Arbetslivsinstitutet (National Institute of Working Life)

THE Robbert van het Kaar, University of Amsterdam NETHERLANDS

TURKEY Nurhan Süral, Middle East Technical University of Ankara

UNITED KINGDOM Lionel Fulton, Labour Research Department, London

Additionally, representatives from employers’ and trade union organisations, as well as other international institutions have also collaborated actively, providing direction, guidelines and specific texts. In particular, we would like to thank the following persons and institutions for their generous cooperation:

BUSINESSEUROPE (The Confederation of Peter Kettlewell. Communications Department European Business)

ETUC (European Trade Union Confederation) Patrizia Grillo. Press and Communications.

EUROCOMMERCE Christel Delberghe and Ann Vervondel

ILO (International Labour Organization) Eddy Laurijssen. ILO Office in Brussels

Special acknowledgements are due to Malena Donato for her work in document management and to José María Miranda Boto and Andrea Oates for their work in revising and homogenising the information.

Volume 1 of the publication Employee Representatives in an Enlarged Europe provides a general overview of the basic characteristics of national systems of employee representation and participation in European undertakings within the framework of prevailing industrial relations in each country. It covers the following countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland and Italy.

Please consult Volume 2 (ISBN: 972-92-79-08929-9) for the remaining countries as well as the European Social Partners, and the European and International Institutions.

EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

TABLE OF CONTENTS

INTRODUCTION...... 11 PART ONE. NATIONAL CHARACTERISTICS AND SIMILARITIES BETWEEN EUROPEAN COUNTRIES: AN OVERVIEW……………………………………………………………..…………15

I - ECONOMIC AND SOCIAL CONTEXT...... 19

II - INDUSTRIAL RELATIONS ...... 26

III - EMPLOYEE REPRESENTATION IN THE COMPANY...... 45

IV- EMPLOYEE PARTICIPATION ON THE BOARD OF DIRECTORS, SUPERVISORY BOARD OR OTHER CORPORATE BODIES...... 63

V- EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING...... 63 V.1 RECOVERY AND BANKRUPTCY PROCEDURES...... 68 V.2 OPERATIONS AFFECTING SHAREHOLDERS ...... 71 V.3 STATE AID...... 72

PART TWO. NATIONAL SITUATIONS…………………………………………………..…………75

AUSTRIA...... 77 I. ECONOMIC AND SOCIAL CONTEXT ...... 77 II. INDUSTRIAL RELATIONS...... 78 III. EMPLOYEES' REPRESENTATION SYSTEM IN THE UNDERTAKING ...... 82 IV. EMPLOYEES' PARTICIPATION IN CORPORATE BODIES...... 86 V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING...... 87 BELGIUM...... 89 I. ECONOMIC AND SOCIAL CONTEXT...... 89 II. INDUSTRIAL RELATIONS...... 90 III. EMPLOYEES' REPRESENTATION SYSTEM IN THE UNDERTAKING ...... 94 IV. EMPLOYEES' REPRESENTATION IN THE BOARD OF DIRECTORS, SUPERVISORY BOARDS OR OTHER CORPORATE BODIES...... 99 V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING ...... 100 BULGARIA ...... 102 I. ECONOMIC AND SOCIAL CONTEXT ...... 102 II. INDUSTRIAL RELATIONS...... 104 III. EMPLOYEES' REPRESENTATION SYSTEM IN THE UNDERTAKING ...... 109 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 115 V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING ...... 116 CROATIA...... 117 I. ECONOMIC AND SOCIAL CONTEXT ...... 117 II. INDUSTRIAL RELATIONS...... 118 III. EMPLOYEES' REPRESENTATION SYSTEM IN THE UNDERTAKING ...... 122 III. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 125 CYPRUS...... 126 I. ECONOMIC AND SOCIAL CONTEXT ...... 126

7 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

II. INDUSTRIAL RELATIONS...... 128 III. EMPLOYEES' REPRESENTATION SYSTEM IN THE UNDERTAKING ...... 132 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 135 CZECH REPUBLIC ...... 136 I. ECONOMIC AND SOCIAL CONTEXT ...... 136 II. INDUSTRIAL RELATIONS ...... 137 III. EMPLOYEES' REPRESENTATION SYSTEM IN THE UNDERTAKING ...... 143 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 147 V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING...... 149 DENMARK...... 150 I. ECONOMIC AND SOCIAL CONTEXT ...... 150 II. INDUSTRIAL RELATIONS...... 152 III. EMPLOYEES' REPRESENTATION SYSTEM IN THE UNDERTAKING...... 157 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES...... 163 V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING...... 164 ESTONIA...... 166 I. ECONOMIC AND SOCIAL CONTEXT ...... 166 II. INDUSTRIAL RELATIONS...... 168 III. EMPLOYEES' REPRESENTATION SYSTEM IN THE COMPANY...... 176 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 182 V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING ...... 182 FINLAND...... 184 I. ECONOMIC AND SOCIAL CONTEXT ...... 184 II. INDUSTRIAL RELATIONS...... 185 III. EMPLOYEES' REPRESENTATION IN UNDERTAKING...... 189 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 194 V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING ...... 195 FRANCE ...... 197 I. ECONOMIC AND SOCIAL CONTEXT ...... 197 II. INDUSTRIAL RELATIONS...... 198 III. EMPLOYEES' REPRESENTATION IN UNDERTAKING ...... 204 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES...... 215 V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING ...... 217 GERMANY...... 219 I. ECONOMIC AND SOCIAL CONTEXT ...... 219 II. INDUSTRIAL RELATIONS ...... 222 III. EMPLOYEES' REPRESENTATION IN UNDERTAKING ...... 228 III. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 240 V. EMPLOYEE INVOLVEMENT IN DECISIONS THAT AFFECT THE UNDERTAKING...... 244 GREECE...... 247 I. ECONOMIC AND SOCIAL CONTEXT ...... 247 II. INDUSTRIAL RELATIONS...... 249 III. EMPLOYEES' REPRESENTATION IN UNDERTAKING ...... 255 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES...... 260 V. EMPLOYEE INVOLVEMENT IN DECISIONS THAT AFFECT THE UNDERTAKING...... 261 HUNGARY ...... 262 I. ECONOMIC AND SOCIAL CONTEXT ...... 262 II. INDUSTRIAL RELATIONS ...... 263 III. EMPLOYEES' REPRESENTATION IN UNDERTAKING ...... 270 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 274

8 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

V. EMPLOYEE INVOLVEMENT IN DECISIONS THAT AFFECT THE UNDERTAKING...... 274 ICELAND ...... 275 I. ECONOMIC AND SOCIAL CONTEXT ...... 275 II. INDUSTRIAL RELATIONS...... 276 III. EMPLOYEES' REPRESENTATION IN UNDERTAKING ...... 281 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 286 V. EMPLOYEE INVOLVEMENT IN DECISIONS THAT AFFECT THE UNDERTAKING...... 286 IRELAND ...... 288 I. ECONOMIC AND SOCIAL CONTEXT ...... 288 II. INDUSTRIAL RELATIONS...... 289 III. EMPLOYEES' REPRESENTATION IN UNDERTAKING ...... 294 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 298 V. EMPLOYEE INVOLVEMENT IN DECISIONS THAT AFFECT THE UNDERTAKING...... 299 ITALY ...... 301 I. ECONOMIC AND SOCIAL CONTEXT ...... 301 II. INDUSTRIAL RELATIONS...... 302 III. EMPLOYEES' REPRESENTATION IN UNDERTAKING ...... 307 IV. EMPLOYEES' REPRESENTATION IN CORPORATE BODIES ...... 311

10 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

INTRODUCTION

The objective of this study is to provide a general overview of the basic characteristics of national systems of employee representation and participation in European undertakings within the framework of the prevailing industrial relations in each country. A comparative analysis has also been carried out on the unique and significant elements that make up these complex systems of labour relations and employee representation with the aim of providing a cross-cutting perspective which highlights common features. As a complement to this national and transnational analysis, the study also provides a brief presentation of the main European and international actors, both institutions and private, which operate in this wide field.

The study covers a vast geographical, economic, social and labour area, which includes the 27 European Union Member States, EEA and candidate countries. In total, this report covers 32 countries and more than 50 million workers/labour force, analysed through their national systems of representation and participation in the undertaking.

The existence and recent evolution of the complex fabric of rights and prerogatives in these national systems makes direct reference to the core of the so-called European social model, although this may adopt several forms and expressions in keeping with diversity of history, culture, institutions and tax systems.

The subject addressed here has been previously published by the European Commission, and its results were published in 2001. The need to prepare an update of this previous work is generated by the concurrence of several factors:

1. The pressure of economic and market globalisation is constantly modifying the European entrepreneurial scene. Undertakings are in a constant state of adaptation to changes, generating a continuous and generalised process of mergers and acquisitions, the creation of groups of undertakings, production outsourcing and changes in the internal structure of undertakings. This process is also mirrored in how undertakings organise work, in the composition of staff and in labour conditions, including the recourse to subcontracting and temporary work agencies, among other means of internal and external flexibilisation that affect the real exercise of collective rights of employee representation.

2. EU enlargement has generated a significant change in the general picture of labour relations and systems of employee representation and participation. New productive and social realities belonging to former models that diverged from the European model have been openly included in the sphere of Community action. Moreover, there are national legislations and practices that are still deeply involved in an intense motion to assimilate the European heritage of social and labour issues. The existence of new candidate countries, some of them from very different historical and cultural backgrounds, deserves a preliminary investigation of the features of their labour relations in order to understand how they approach and converge with the European parameters on this subject.

3. The evolution and new approaches that have appeared in the nature and meaning of employee participation in the undertaking call for an update of the contents of the right of representation. We are witnessing deep changes in waged employment regulations, with the emergence of new atypical and flexible forms of employment and an increasing trend towards employment instability that affects labour conditions and the collective rights of employee representation. Advances made to effectively include certain democratic values in different spheres of the undertaking, such as specific equality and non-discrimination demands, fall within this context.

4. The establishment of a real body of supranational representation such as the European Works Councils. Although far from meeting expectations with regard to the number of EWC that potentially could have been established, in view of the number of groups and undertakings affected by this legislation, EWC have become a highly important instrument in the European arena.

11 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Approach and methodological characteristics of the study This study sets out to be a continuation of the 2001 publication ”Employee representatives in Europe and their economic prerogatives”, finalised in early 19991.

Our intention has been to respect both the spirit and logic of the former as much as possible. In terms of EU reality, and especially its “size”, this study has undergone transformations. We have made some minor changes to the structure of the former document with the aim of facilitating its rationality and comprehension. Thus, in the section on the 32 national monographs, we have decided to list the countries one by one, instead of grouping a number of them together.

The criteria to group certain countries together on grounds of a common history or the homogeneity of their labour relations models, although clear in some specific cases (for instance, Scandinavian or Baltic countries) is not as clear-cut in others. In our opinion this would lead to a final presentation that would be unbalanced and asymmetrical. Although within the EU prior to enlargement the reasoning behind “modelling” national industrial relations may have been logical, most of the 32 national systems of employee representation and participation contain enough features of their own to warrant an individual analysis. Hence, we believe that the individual presentation of each country will facilitate finding information quickly and avoid the risk of attributing criteria to countries that could surely be questioned by everyone involved.

Given that the final aim of the study is for it to be published, we have considered space limitations and the section regarding the analysis of potential similarities between countries is very summarised. The objective has been to point out, briefly, what is essential, considering that descriptive and detailed information can also be found in the section dedicated to the national monographs.

Sources of information Most of the work has been carried out in 2007 and includes the most recent amendments to national legislation on the subject concerned. Information contained in the monographs has been gathered by national collaborators and experts in industrial relations and labour law. Most of the sources used are national, both official and non-official, including literature on the doctrine and existing studies. In some cases, information has been completed with other sources from institutions that carry out transnational work and perform transnational studies (European Commission, European Foundation for the Improvement of Working and Living Conditions, European Trade Union Confederation, etc.)

Contents of the study The aim of this study is to serve as a source of information and consultation. To this end, it presents the characteristics of national systems of industrial relations and employee representation and participation in an orderly manner for the 32 countries, following a homogenous structure that facilitates comprehension. In this sense, the approach intends to provide an exhaustive description of the main elements of these systems, with updated legal information on national regulations.

As a complement to the study on each country, and as a result thereof, an analysis has been carried out on the main trends detected in each of the large subject areas that are studied here. The intention has not been to carry out a comparative analysis – a task that exceeds the ambitions of this study – which is always difficult when dealing with such particular national systems, and especially with such a large number of countries. Instead, the intention has been to briefly describe the most relevant and characteristic results for each country, with the aid of summary tables, and to highlight common elements that may provide clues to recent evolutions in each country.

We have taken into account that this study should last at least a few years. Therefore, any information that would soon become obsolete has been reduced to a minimum.

1 The study was undertaken by Evelyne Pichot and, in turn, is a reworking of the text of a study conducted by the same author in conjunction with Alpha Conseil in 1995 and published in Europe Sociale 3/96.

12 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

The approach of this study is focussed on national situations, that is, providing detailed and legally supported information on national situations with regard to the models of representation and participation of employees in the context of the systems of industrial relations. Working with 32 countries entails large volumes of information that are not always easy to summarise in comparative tables, where some detail is necessarily lost. In any case, we have used this tool as a means to visualize the essential and most relevant features of the most significant issues.

Structure The document is structured in three parts. The first part presents the results of an overview of the basic characteristics of systems of industrial relations and employee representation and participation and includes social and economic information within the European context. This global overview includes general comments on the current situation and highlights trends that may be observed in the last few years.

The second part presents the results of the national monographs for the 32 countries under study. The outline followed is the same as that of the first part, starting with basic information on the social and economic context, adding relevant notes for each country of a historic and institutional nature in order to contextualise the scene where industrial relations take place. The structure of the national monographs coincides with the treatment of the right of employee representation and participation, although the differences and complexities between some of them are highlighted. Finally, this part concludes with a section that looks at other forms of employee and employee representatives’ involvement in specific areas that do not affect the day-to-day running of companies but reflect the influence of external decisions (legal, at state level, in other undertakings, etc.)

The third part deals with the main institutional and private actors involved in the subject studied here, i.e., European and international employers’ organisations and trade unions, and provides an update on the movements that have taken place as a result of the impact of globalisation on collective action to defend professional interests. Finally, a bibliography, which is divided into two parts, national and transnational, is included.

Basically, this work is aimed at the actors involved in any of the different components that make up the systems of employee representation and participation in the undertaking: trade union members, undertaking managers and human resources managers in transnational groups, members of European Works Councils, institutional representatives in tripartite bodies or in social dialogue councils, etc. Given the breadth of this study, it may also be of interest to students of social and industrial relations or professionals working in this area. In any case, it intends to contribute to updating and to a better comprehension of the European dimension of employee participation in undertakings, the changes taking place in labour relations and, in general, in the labour world, which at this moment in time continues to shape the societies we live in.

This study has been prepared by a team made up of Nataša Belopavlovič, Javier Calvo, Lionel Fulton, Christophe Vigneau and Ricardo Rodríguez Contreras. The team has distrubuted the work on the national monographs prepared by national experts as well as the comparative analysis part. In addition to these tasks, the general direccion y coordination of the entire study was performed by Ricardo Rodríguez Contreras.

14 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

PART ONE. NATIONAL CHARACTERISTICS AND SIMILARITIES BETWEEN EUROPEAN COUNTRIES: AN OVERVIEW

16 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

PART ONE. NATIONAL CHARACTERISTICS AND SIMILARITIES BETWEEN EUROPEAN COUNTRIES: AN OVERVIEW

The creation of worker representation bodies in companies dates back to the beginning of the last century. There are precedents in Germany going back as far as the end of the 19th century during the Weimar Republic. Internal committees sprang up in Italy in 1906 and, in France, staff delegates appeared in 1936 and works councils in 1945.

In theory, employee representation entails the involvement of employees in the daily running of the undertaking and, hence, their direct or indirect co-operation towards achieving profitability objectives. In exchange for this, employees and their representatives are taken into account, informed and consulted about management and production activities. In certain cases, this consideration can lead to playing a role in decision making. Employee participation thus becomes an expression of power sharing in the undertaking.

There are also other forms of worker participation in other financial/economic aspects of the business by granting workers certain economic rights over the capital (employee share ownership) or by awarding profit-related bonuses (profit-sharing). This study does not refer to these possibilities, nor to other forms of participation belonging to the so-called «Japanese model» of work organisation2, in which the workers’ aim is not to set up a counterbalancing power against the institutional channels, but rather to get involved, i.e. to individually participate in the production process, making team decisions in order to raise productivity and improve flexibility in personnel management in order to adapt business strategies to the prevailing circumstances.

Summarily, we could classify the systems of employee and employee’ representatives participation presented in this study into two types. On the one hand, the model based on the internal participation of employees in the administration and supervisory bodies of the undertaking, founded on collaboration between capital and labour and, on the other, the confrontation-negotiation model based on control through external participation bodies (basically, bodies of representation, works councils or trade unions) which do not have a commitment of co-responsibility with managers in charge of business administration.

Apart from the differences as to when they came about, worker representation and participation bodies have different organizational and functional profiles in the various European systems. The most basic distinction concerns “single channel” representation, in which one or more trade unions are involved and they and their representatives are the only channel through which the workers’ interests are represented; and the “double channel” system – trade union representation and “unitary” representation by the works committees and workers’ delegates-. However, this is a theoretical distinction that is often overshadowed by national complexity. Pure application of these two models is uncommon. In practice other factors combine to condition the operation of these systems (systems for electing representatives, negotiating powers, a collective bargaining structure for an entire sector or among a group of associations, the extent of representatives’ rights, etc.). Therefore, the usual case is for mixed systems of worker representation to coexist, largely due to the complex institutional, legal and social balance in each country.

Moreover, the appearance of new economic situations raises new problems and challenges for the operation of these systems of representation and participation.

Increasing global economic competition forces undertakings to permanently adapt to ever-changing environments. Financial markets, in their different expressions, are taking on significant weight in business activity. Capital concentration runs parallel to production deconcentration. The boundaries between undertakings are increasingly imprecise. Opposed to the easy identification that concepts such as productive unit, employer or capital ownership used to have, we are now witnessing the reconfiguration of undetakings where it is no longer easy to identify the employer, the owners of capital and what the undetaking is dedicated to. The legally-responsible employer in the labour relationship and the

2 Target setting or problem solving and other techniques such as “quality circles”, development groups, quality improvement or progress teams and independent work teams.

17 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

entrepreneur (or owner) making the decisions are increasingly dissociated. All of this has an effect on the exercise of employees’ right of participation, requiring its adaptation to be efficient in reality.

It is widely known that European competition, quite behind China and the United States in some figures, can not be based on certain natural resources it does not own. One of the greatest competitive asset in the EU is its human capital. The participation of employees in the decisions of the undertaking, including economic decisions, has an impact on the undertaking’s competitiveness, inasmuch as it implies the creation of relationships based on trust. In the long run, it is based on the definition of collective interests that usually provide stability to business strategies and the management of the undertaking. This is the case illustrated by some European economies such as the German and the Scandinavian, where the institutionalisation of employee participation in the governing bodies of undetakings has contributed towards solidity in activities and towards economic results. Employee participation in decision-making in the undertaking in this case becomes an essential profile, rooted in the institutional framework and the rationality of economic activity.

We shall briefly expound below some common and some differential elements that make up the national systems of employee representation and participation, including the basic framework of industrial relations on which they are built.

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I- ECONOMIC AND SOCIAL CONTEXT

Throughout their history, the European countries’ industrial relations systems have reflected their economic, political, social and cultural contexts.

These systems are now facing common challenges: rapid technological progress, an increased competitive caused by international economic integration –the so-called globalization--, technological and organisational changes that deeply modify the traditional model of enterprises and even of employees, the necessity of find ways to build a flexible and inclusive labour market that could achieve the objectives of the Lisbon Strategy.

At the start of the 21st Century, some key issues arise in the debate on industrial relations in Europe and the systems of employee representation in the undertaking:

- In practice, the deep transformation of the undertaking becomes one of the main factors that are generating tensions with regard to the systems of employee representation and the future of industrial relations. Changes in work organisation, a greater focus on production processes than on specific individual tasks, outsourcing, restructuring or reorganisation as a permanent tool to manage adaptation, and other everyday events installed in the life of any undertaking require answers that Labour Law is not yet able to prepare. Labour regulations are thought out for a uniform and general implementation and, especially, for a different type of business organisation (post-industrial) that does not always correspond with the current needs of some undertakings (a specific excample would be the running of a networking undertaking).

- The trend towards the individualisation of the employment relationship by means of flexibilisation in contractual forms (atypical and non-standard contracts) influences the real capacity of employee representation. Trade unions find obstacles to represent, and to include among their membership, these new contingents of flexibilised employees who are structurally difficult to organise given the vulnerabilty and exposure to risk of their labour conditions. As a consequence of this, trade union weakening affects an essential part of the system of labour relations.

- Discussion with regard to the Europeanisation process of the national systems of industrial relations is still open. The transposition of Community social law directives has had a certain harmonising influence, an influence that still needs to be analysed in detail. Other changes are no less important, such as the development of the open method of coordination and new forms of soft governance. Despite some optimistic advances in this process, the reality of national diversity with regard to systems of industrial relations still appears insistingly evident. The potential fading out of the homogenising progress of the European social model as a result of the enlargement and integration of more reactive systems absorbed into the schemes of real participation of employees and their representatives, or the exercise of effective social dialogue, are also argued in this discussion.

- The last generation of Directives aimed at the involvement of employees and their representatives (Directive 2001/23/EC on the transfers of undertakings; Directive 2001/86/EC supplementing the statute for a European Company and, particularly, Directive 2002/14/EC establishing a general framework for informing and consulting employees) entails an effort towards a homogenisation of standard information and consultation procedures. We must add to the europeising effect of these directives the phenomenon of an increasing presence of employee representatives as members of European Works Councils. Although not fully developed due to a lack of negotiated agreements in the affected undertakings or groups, these representatives (more than 11,000 in 2007 according to ETUC figures) constitute a real transnational network who may share information and structure their activity with a Community dimension.

- Simultaneous to the perceived evolution towards a decentralisation of collective bargaining and its potential consequences with regard to a decrease in coverage, the appearance of European intersectoral and sectoral agreements stands out. Sectoral social dialogue has also developed in a stable fashion, consolidating a structure of more than thirty committees that already form a reference network to consult certain issues. Also, undetakings and groups reach agreements at European level and worldwide

19 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

with employee representatives, self-regulating elements that concern, in general, principles close to the respect of fundamental rights. The appearance of tools for the governance of industrial relations, although still limited, delves on the foundations on which transnational collective bargaining at European level may be based. In this scenario, the debate on the nature, legal basis and contents of this potential governance does not leave other discussions aside regarding the scope of the negotiating function of European Works Councils, which are claimed by some as the natural complement to their activities linked to information and consultation.

All of the abovementioned factors mix in with an increasingly complex world where work has transformed and, with it, individual and collective labour relations. Tensions reveal that something new is arising that isn’t quite born and that, at present, in the framework of this study on 32 countries, national differences are still perceived more than the similarities.

Although not an exact indicator, Gross Domestic Product per capita (see Table 1) provides a rough idea of living standards. GDP is lowest in Romania and Croatia, where in 2006 it stood at 36% and 48% of the Community (EU-25) average, respectively, and highest in Luxembourg, Norway and Iceland in terms of standardised purchasing power. Ireland has made considerable progress in catching up.

20 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Table 1: GPD per capita PPS and Real GPD growth rate evolution

GDP per capita in PPS* Real GDP growth rate** 1997 2006 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 EU (27 countries) : 96.2 2.7 2.9 3.0 3.9 2.0 1.2 1.3 2.5 1.8 3.0 EU (25 countries) 100.0 100.0 2.7 2.9 3.0 3.9 2.0 1.2 1.3 2.4 1.8 2.9 EU (15 countries) 110.2 107.8 2.6 2.9 3.0 3.8 1.9 1.1 1.1 2.3 1.6 2.8 Euro area 111.0 106.2 2.5 2.8 3.0 3.8 1.9 0.9 0.8 2.0 1.5 2.7 Belgium 117.6 118.1 3.5 1.7 3.4 3.7 0.8 1.5 1.0 3.0 1.1 3.2 Bulgaria 25.6 (e) 35.8 -5.6 4.0 2.3 5.4 4.1 5.6 5.0 6.6 6.2 6.1 Czech Republic 69.2 (e) 76.1 (f) -0.7 -0.8 1.3 3.6 2.5 1.9 3.6 4.2 6.1 6.1 (f) Denmark 124.9 122.0 3.2 2.2 2.6 3.5 0.7 0.5 0.4 2.1 3.1 3.2 Germany 116.5 109.2 1.8 2.0 2.0 3.2 1.2 0.0 -0.2 1.2 0.9 2.8 Estonia 38.4 (e) 64.8 11.1 4.4 0.3 10.8 7.7 8.0 7.1 8.1 10.5 11.4 Ireland 112.4 138.8 (f) 11.7 8.5 10.7 9.4 5.8 6.0 4.3 4.3 5.5 6.0 (f) Greece 70.9 85.4 (f) 3.6 3.4 3.4 4.5 5.1 3.8 4.8 4.7 3.7 4.3 Spain 87.5 98.4 3.9 4.5 4.7 5.0 3.6 2.7 3.0 3.2 3.5 3.9 France 114.1 109.0 2.2 3.5 3.3 3.9 1.9 1.0 1.1 2.5 1.7 2.0 Italy 114.6 100.2 1.9 1.4 1.9 3.6 1.8 0.3 0.0 1.2 0.1 1.9 Cyprus 79.6 (e) 90.0 2.3 5.0 4.8 5.0 4.0 2.0 1.8 4.2 3.9 3.8 Latvia 33.0 (e) 53.9 8.4 4.7 3.3 6.9 8.0 6.5 7.2 8.7 10.6 11.9 Lithuania 37.3 (e) 55.8 8.5 7.5 -1.5 4.1 6.6 6.9 10.3 7.3 7.6 7.5 Luxembourg 192.4 268.8 5.9 6.5 8.4 8.4 2.5 3.8 1.3 3.6 4.0 6.2 Hungary 49.8 (e) 63.1 4.6 4.9 4.2 5.2 4.1 4.4 4.2 4.8 4.1 3.9 Malta : 74.0 : : : : -1.6 2.6 -0.3 0.1 3.3 3.3 Netherlands 122.0 126.1 4.3 3.9 4.7 3.9 1.9 0.1 0.3 2.0 1.5 2.9 Austria 124.5 124.4 1.8 3.6 3.3 3.4 0.8 0.9 1.2 2.3 2.0 3.3 Poland 44.6 (e) 51.1 7.1 5.0 4.5 4.3 1.2 1.4 3.9 5.3 3.6 6.1 Portugal 76.6 71.9 (f) 4.2 4.8 3.9 3.9 2.0 0.8 -0.7 1.3 0.5 1.3 Romania : 36.4 (f) : : -1.2 2.1 5.7 5.1 5.2 8.5 4.1 7.7 Slovenia 71.0 (e) 83.8 4.8 3.9 5.4 4.1 2.7 3.5 2.7 4.4 4.0 5.2 Slovakia 47.4 (e) 60.6 5.7 3.7 0.3 0.7 3.2 4.1 4.2 5.4 6.0 8.3 Finland 109.5 113.0 6.1 5.2 3.9 5.0 2.6 1.6 1.8 3.7 2.9 5.5 Sweden 115.3 116.2 2.3 3.7 4.5 4.3 1.1 2.0 1.7 4.1 2.9 4.2 United Kingdom 112.6 114.8 3.1 3.4 3.0 3.8 2.4 2.1 2.8 3.3 1.8 2.8 Croatia 40.9 (e) 48.3 (f) 6.8 2.5 -0.9 2.9 4.4 5.6 5.3 3.8 4.3 4.8 (f) Macedonia 25.3 26.4 (f) 1.4 3.4 4.3 4.5 -4.5 0.9 2.8 4.1 3.8 (f) 3.1 (f) Turkey 32.3 (e) 28.4 (f) 7.5 3.1 -4.7 7.4 -7.5 7.9 5.8 8.9 7.4 6.1 Iceland 127.5 128.8 4.8 6.4 4.1 4.3 3.9 -0.1 2.7 7.6 7.2 2.6 Norway 140.5 180.3 5.4 2.7 2.0 3.3 2.0 1.5 1.0 3.9 2.7 2.9 Switzerland 139.4 128.2 (f) 1.9 2.8 1.3 3.6 1.0 0.3 -0.2 2.3 1.9 2.7 United States 152.9 148.2 (f) 4.5 4.2 4.4 3.7 0.8 1.6 2.5 3.9 3.2 3.3 Japan 121.5 108.5 (f) 1.6 -2.0 -0.1 2.9 0.2 0.3 1.4 2.7 1.9 2.2

21 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Employment In the European Economic Area, total employment rose to more than 200 million persons in 2006. Nevertheless, five countries account for 67 % of those 200 million persons: Germany, the United Kingdom, France, Italy and Spain.

With the renowned objectives fixed by the Lisbon Strategy, the recent evolution of the main figures of the European Labour Market can be described briefly as follows:

First of all, the employment rate (percentage of economically active persons in the working age population) has increased by 4.1 points in the last ten years in the EU-25: from 60.6 in 1997 to 64.7 in 2006 (forecast), but still with a large gap between male and female employment as illustrated in Graphic 1.

Graphic 1: Employment rate (% population aged 15-64. EU 25 1997-2006

75,0

72,0 71,0 71,2 71,3 71,0 70,8 70,9 71,3 70,0 70,2 70,6

64,7 65,0 63,8 62,8 62,8 62,9 63,3 61,9 62,4 60,6 61,2 60,0 57,3 55,7 56,3 55,0 54,3 54,7 55,0 53,6 52,9 51,8 51,1 50,0

45,0

40,0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 All Female Male

Source: Eurostat *Information forecast for 2006

By countries, this rate normally rises –with some exceptions—and varies widely between 4.5% (Poland) and 77.4% (Denmark). But there also remains a big gender gap.

22 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Table 2. Employment rates 1997-2006

All Female Male 1997 2006 1997 2006 1997 2006 EU (27 countries) 60.7 64.3 (p) 51.4 57.1 (p) 70.0 71.6 (p) EU (25 countries) 60.6 64.7 (p) 51.1 57.3 (p) 70.2 72.0 (p) EU (15 countries) 60.7 66.0 (p) 50.8 58.4 (p) 70.6 73.5 (p) European Union 60.7 64.7 (p) 50.8 57.3 (p) 70.6 72.0 (p) Euro area 58.6 64.5 (p) 48.0 56.4 (p) 69.2 72.6 (p) Euro area (13 countries) 58.5 64.5 (p) 47.7 56.5 (p) 69.3 72.6 (p) Euro area (12 countries) 58.4 64.5 (p) 47.7 56.4 (p) 69.3 72.6 (p) Belgium 56.8 61.0 46.5 54.0 67.1 67.9 Bulgaria : 58.6 : 54.6 : 62.8 Czech Republic : 65.3 : 56.8 : 73.7 Denmark 74.9 77.4 69.1 73.4 80.5 81.2 Germany (including ex-GDR from 1991) 63.7 67.2 (p) 55.3 61.5 (p) 71.9 72.8 (p) Estonia : 68.1 : 65.3 : 71.0 Ireland 57.6 68.6 45.9 59.3 69.1 77.7 Greece 55.1 61.0 39.3 47.4 72.1 74.6 Spain 49.5 64.8 34.6 53.2 64.5 76.1 France 59.6 63.0 (p) 52.4 57.7 (p) 66.9 68.5 (p) Italy 51.3 58.4 36.4 46.3 66.5 70.5 Cyprus : 69.6 : 60.3 : 79.4 Latvia : 66.3 : 62.4 : 70.4 Lithuania : 63.6 : 61.0 : 66.3 Luxembourg (Grand-Duché) 59.9 63.6 45.3 54.6 74.3 72.6 Hungary 52.4 57.3 45.4 51.1 59.7 63.8 Malta : 54.8 : 34.9 : 74.5 Netherlands 68.5 74.3 58.0 67.7 78.8 80.9 Austria 67.8 70.2 58.6 63.5 77.1 76.9 Poland 58.9 54.5 51.3 48.2 66.8 60.9 Portugal 65.7 67.9 56.5 62.0 75.5 73.9 Romania 65.4 58.8 59.1 53.0 71.9 64.6 Slovenia 62.6 66.6 58.0 61.8 67.0 71.1 Slovakia : 59.4 : 51.9 : 67.0 Finland 63.3 69.3 60.3 67.3 66.2 71.4 Sweden 69.5 73.1 67.2 70.7 71.7 75.5 United Kingdom 69.9 71.5 63.1 65.8 76.6 77.3 Croatia : 55.0 : 48.6* : 61.7 Turkey : 45.9 : 23.9 : 68.1 Iceland : 83.8 : 80.5* : 86.9 Norway : 75.4 : 72.2 : 78.4 Source: Eurostat

On the other hand, unemployment fell in the second half of the nineties, it increased in the early years of the new century, and fell again in the last three years. But the gender gap clearly remains.

23 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Graphic 2: Unemployment ratio: evolution (1994-2006)

12,0

11,0

10,0

9,0

8,0

7,0

6,0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

EU 15 EU 25 All EU 25 Male EU Female

Source: Eurostat

Table 3: Unemployment ratio: evolution (1998-2006)

1998 2005 2006 EU 15 9,3 7,9 7,4 EU 25 All 9,4 8,7 7,9 EU 25 Male 8,0 7,9 7,1 EU Female 11,2 9,8 9,0

By countries, this ratio is especially high in Poland, Slovakia and Croatia, whilst particularly low in Luxembourg, Norway and Denmark.

In any case, in this context we can affirm that perhaps one of the most important factors or characteristics in the recent evolution of the European labour market is the increasing importance of the so-called atypical forms of labour relations: especially part-time and fixed term-contracts. By contrast, self- employment is largely in decline, whilst it continues to play an important role in countries like Italy, Greece, Spain and Poland.

Table 4: Self-employment; part-time employment and fixed-term contract (1997-2005)

EU-25 EU-15 Part-time Part-time Self-employed Fixed term Self-employed Fixed term employment employment (% total contracts (% total Contracts (% total (% total (% total employment) (% total employment) employment) employment) employment) employment) 1997 16,6 16,0 11,7 15,6 16,7 12,4 2004 15,8 17,7 13,7 14,8 19,4 13,6 2005 15,6 18,4 14,5 14,7 20,2 14,3 Source: Employment in Europe

24 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

In any case, it is also plain to see that, for instance, part-time work is very common in the Netherlands, while it is much less so in southern European countries, where it accounts for only one or two in ten jobs. Instead, fixed term contracts are especially common in countries like Spain.

In terms of productive structure, the services sector continues to grow. It is the largest employer in all countries, accounting for three-quarters of jobs in Luxembourg and the Netherlands. The industrial sector has declined in all the countries, and the agricultural sector continues to decline everywhere.

Table 5: Employment by sectors EU 15 and EU 25 (1997-2005)

EU-15 EU-25 Employment Employment Employment in Employment Employment Employment in in Services (% in Industry (% Agriculture (% in Services (% in Industry (% Agriculture (%

total total total total total total employment) employment) employment) employment) employment) employment) 1997 68,7 26,7 4,6 66,1 27,9 6,0 2004 72,2 24,0 3,8 70,0 24,9 5,0 2005 72,5 23,8 3,7 70,4 24,7 4,9 Source: Employment in Europe

25 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

II- INDUSTRIAL RELATIONS

As is common knowledge, national systems of industrial relations are strongly rooted in the institutional, cultural, social and economic characteristics of each country. They constitute a fundamental pillar in most European countries for the normal running of democracy and the participation of social partners (trade unions and employers’ organisations), as well as for the regulation of the macroeconomic environment by means of collective bargaining at both national and sectoral levels.

Therefore, the systems of industrial relations influence and are influenced by these interconnections with their national environments, and are manifested through the types of labour legislation and through its practice (collective bargaining, social dialogue), both bilateral, between social partners, and tripartite, when an active role is played by the State.

Trade union and employers’ organisations are the main actors in this complex institutional framework which also has a significant development in practice. Their relations are not always smooth and the existence of tensions and disputes, reflected at their maximum degree as the exercise of the right to strike, also includes regularly the mechanisms to direct conflicts through mediation systems. These main characters of national and European social dialogue have faced and shared some common processes in the last few years, such as the need to provide an efficient response to the challenges of globalisation, including organisational modifications such as the recourse to mergers or the deepening of sectoralisation. The European Union enlargement has also involved an added effort towards organisational, and at times ideological, integration of the new member organisations.

However, besides affiliation figures, which are always difficult to obtain and sometimes unreliable or not updated, and the density rate of different national structures, the reality nowadays is that both sides of industry are firmly set at the heart of the European system of labour relations, actively contributing to the functioning thereof.

Given the particular nature of labour relationships in the public sphere and the specific features of its collective barganing system, when it exists, we shall not deal with industrial relations in the public sector in this section. To these reasons we may add the singular nature and the extension that an analysis of the characteristics of this sector would entail, given the deep transfornations that have taken place as a consequence of the liberalisation of European markets and the privatisation processes of public undertakings, as well as the intense processes of internal transformation of these organisations. Key issues such as the right to collective bargaining or the right to strike, and even the limitations to trade union membership in certain categories of public employment, have a very different treatment at national level, which dependes foremost on the historic, institutional and legal construction of public administration and the figure of the civil servant.

Literature on industrial relations is relatively abundant, fortunately, although perhaps not as much as to cover all 32 countries simultaneously. This study is probably different as it tries to provide a more integral perspective on the cornerstones of the functioning of industrial relations as a whole and, in particular, on the rights and prerogatives of employees and their representatives within the undertaking. Although the approach taken is a description of the legal state of the issue, we have tried to present it in such a way that it allows us to obtain an overall understanding of the situation as a whole.

Social partners

Unions European trade union organisations continue to face the challenges derived from the deep changes in work organisation which affect membership. Despite the increasing importance of the European Trade Union Confederation (ETUC) and its active institutional role, the lack of a European framework of industrial relations entails difficulties in its capacity for coordinated response and mobilisation. The last few decades of transformation in national and European economy, including privatisation processes that have had a great sectoral impact and the market deregulations (energy, post) that are still taking place,

26 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

have weakened its former strength. In general, the trade union density rate in Europe has decreased in the last ten years3, and is now placed at around 25-30%. The national rate varies greatly between Scandinavian countries – from 80% in Denmark or 70% in Sweden – and the lower values in Mediterranean countries or the new Member States.

Membership data, however, must be read within the national context, where other factors (the measure of representatives, the interventionist role of the State, institutional participation in trade unions, including co-management of certain public aspects) help us to understand the role that trade union organisations play in reality.

It is significant that in some countries – Germany and United Kingdom, amongst others – the trade unions that currently have higher membership levels are those bringing together public sector workers to the detriment of other, more classical, sectors in the industry (car, metal, chemical industries). Also, as a consequence of changes in occupation and social structures, trade unions that group employees in the services sectors (white-collar) tend to grow more than those that group the working class (blue-collar).

The basis for the structure of trade union organisations continues to be mainly sectoral or professional, often organising National Confederations. The plurality of these peak organisations is the dominant feature at national level. National trade unions in Europe are organisationally structured into a single confederation, as in Austria, UK, Ireland or Latvia, or in more than one, as in Spain, Portugal and Greece. In other countries such as France, Italy or Hungary, there are several. Depending on how this is established in the national institutional and legal representativity framework (when such a framework exists by means of systems that measure membership or through counting results in trade union election processes), plurality usually entails competition between organisations.

This organisational configuration does not condition its functioning in practice, which may largely depend on the power and capacity to mobilise certain member organisations, generally sectoral or professional. In many cases, the composition and denomination of these structures point at their ideological or religious origin, although these features represent historical identity signs rather than present bonds. Despite the State interventionism that exists in some countries, a common, generalised, characteristic of national trade union organisations is the autonomy they exercise with regard to the political powers and, more specifically, political parties. This does not prevent some of them from acknowledging their political origins and to underline their ideological principles, something which is quite common in Central and Southern Europe.

The essence of trade union work in most European countries, is the capacity to undertake collective bargaining and to reach agreements at the corresponding level: sectoral, territorial or at undertaking level. In other countries, this essential role, which is typical of the single channel model, coexist alongside the right to bargaining of other unit representations of employees, through works councils or other bodies of representation. The variety of formulae that allow this unit-trade union game simply confirms the richness as regards national solutions and the predominance of mixed representation systems in the undertaking, with common elements and particular requirements, operating with regard to collective bargaining.

The pressure exerted by changes in work organisation has also affected the ways in which trade unions are organised to defend the workers’ interests. New forms of representing the diversity in the labour force (immigrants) are tested to include also new society demands (gender equality, non-discrimination) or to attract collectives (young people) that enter into a labour market that is increasingly fragmented and atypical and, in any case, different than fifteen or twenty years ago. Experiences to organically affiliate important social and labour groups such as the self-employed – until now distanced from trade unions that did not consider them real waged workers – have formally taken place in Spain and Portugal. This bears witness to the dispute with employers’ organisations to take over a space that, according to the most conservative figures, could add up to 30 million employees in the EU. In parallel to the changes that have taken place in the productive structure and within undertakings, sectoral or professional trade union organisations have merged to increase in size and in their capacity for representation and institutional acknowledgement.

3 European Commission. Industrial Relations in Europe 2006. Office for the Official Publications of the European Communities.

27 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

The activity of trade unions in Europe can be differentiated not only by their national strategies, which depend largely on the institutional, legal, historical, social and economic environment in each country, but also by the ways in which they operate. Rendering services to their members stands out as a guideline that may live alongside an approach that is rooted at the work centre itself, serving as the engine to expand trade union power through its representativity. The recent establishment of trade union members who are members of European Works Councils is also a novelty, as we can start to see networking systems with a transnational perspective.

Employers´ organisations National employers’ organisations play an active role in national and European industrial relations. As in the case of trade unions, their base is predominantly sectoral in most countries, with strong organisations that are clearly representative at that level. Similarly, their density rate4 varies significantly both in sectors and from one country to another, influenced by the presence of Small and Medium Enterprises (SMEs) in the productive structure, which are also organised at national level: from the Benelux countries with a very high rate – approximately 80% -, or the case of Austria, where membership is compulsory through Chambers5, to the new Member States that show a limited capacity for representation.

SMEs are organised as differentiated bodies in many countries (in Southern Europe, where they have a great weight in the productive structure, and also in new Member States such as Poland and Hungary), and they have an acknowledged institutional protagonism as a consequence of their specific nature as undertakings.

In general, employers’ organisations do not seem to face a problem in decreasing membership; quite the opposite, the trend shows stability or the appearance of new sectoral or professional organisations.

In most countries there is more than one national confederation or federation established. In some cases, the principle underlying the grouping of employers’ organisations is of a general nature, basically aimed at institutional representation and the coordination of strategies unto the political power. In other cases, representation is very large and fragmented (Italy, Hungary), as a consequence of the characteristics of the productive structure or due to the historical background of the country. The existence of strong sectors that are widely active and have strategic importance in national economy strongly influences the grouping or not of organisations into a suprasectoral instance (confederation), independent of the fact that both situations, belonging to an institutional confederation and sectoral prominence, may exist. In other countries, employers’ organisations also group together bodies of a territorial nature together with sectoral organisations. In composite states such as Germany, Spain, Austria or Belgium, the federal structure seems to correspond with a greater relevance of territorial or regional organisations.

A decisive element in the establishment of national employers’ structures is their capacity to take part in collective bargaining. In most countries this takes place with a sectoral perspective or bound by economic activity, which favours the existence of sectoral or subsectoral employers’ organisations that group into federations or confederations with the aim of achieving certain degree of coordiation. Obviously, the mechanisms to extend collective agreements, when they exist in national legislation or practice, significantly influence the establishment and characterisation of the activity of organisations in the sector. Central coordination may involve the formulation of recommendations or control on the negotiation of salaries, or adopt a more active and monitoring role on the evolution of bargaining at national level.

In other countries, employers’ organisations are more centred around involvement in national social dialogue, playing an essential part in the institutional balance of industrial relations, negotiating and undersigning agreements. It is worth pointing out that, in several countries, the approach of their representation activity in undertakings seems to have a strong sectoral component. In this sense, the peak

4 In te case of employer´s organisaton, density rate is defined as the perecentage of emplyees working in the country for empoyers that are members of an employer organisation. 5Employers’ organisations have substituted the old Chambers in their role representing business interests. In the countries where the latter still exist, they have in general moved on to render specific services of an adiministrative nature to their member organisations. Only in Austria and Luxemburg do they maintain a prominent instituional position of representation.

28 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

organisations defend the interests of sectors with great intensity, carrying out internal and external activities to this end, a role that is compatible with the consolidation of their prominence in the intersectoral sphere. The activity of sectoral organisations is more directed to collective bargaining in their own sphere despite the trend in decentralisation of collective agreement at undertaking level.

In some countries such as Spain, France and Hungary social economy has started to organise itself, bringing together those undertakings in which employees themselves participate in their ownership as major stakeholders, and other institutions of a varied nature (foundations, social institutions) that carry out economic activities – sometimes of an important nature at sectoral level – and that maintain labour relationships with employees.

The following table provides details of the main employers and unions organisations. Trade Union membership figures differs depending on the way it is calculated. Union density rate is defined as the ratio of actual to potential membership (excluding inactives, unemployed, students, retired…). More details can be found in the correspondent national monographs.

Countries Main employers´ Membership details Main trade unions Data on Union rate confederations and confederations and membership associations organisations reported* WKO Main private ÖGB 1,385,000 (2003) 35% Visser 1. Austria6 employers´organisation ABVV/FGTB (2003) ACV/CSC 32% IRE** VBO/FEB -Largest confederation ACV/CSC 1.7 million (2007) 49% IRE ABVV/FGTB) 1.2 million “ 55% Visser 2. Belgium UNIZO -SMEs ACLVB/CGSLB 230,000 (2002) UCM NCK-CNC <50,000 BTPP, 70 sectoral orgs. KNSB 393,843 ( 2003) 28% UCL 3. Bulgaria BSK, SCHSI, KT 106,309 “ SCHP, KRIB-GBB Promiana 58,613 “ HUP 5,000 members, 21 SSSH 211,205 (2004) 40,5% sectoral orgs. covering NHS 87,313 “ estimated 4. Croatia 400,000 emps. HUS 53,000 “ KHIP URHS 50,000 “ KUSP MSJP 49,875 “ OEB 51 professional PEO 63,871 (2001) 53% EC (2002) associations and 4,500 SEK 64,733 “ and IRE; 5. Cyprus enterprises PASYDY 26,498 “ DEOK 7,500 CMKOS 850,000 (2003) 27% Visser Largest employers’ ASO 200,000 (2001) (2001) 6. Czech KZPS organisations CAC 22% IRE Republic SPD KOK 30% (2005) own data 30.000 companies, LO 1,3 million (2006) 70% Visser 650,000 emps. FTF 363.000 (2003) 7. Denmark DA AC 166,000 80% IRE 78% own sources ETK 23 branch, 1500 EAKL 43,776 (2005) 8.5% LFS7 companies, TALO 30,000 (2005) 8. Estonia EKTK -145 000 emps ESEA EVEA EK Largest employers’ SAK 1.000.000 74% Visser 9. Finland orgs. confederation STTK 600.000 (2003) AKAVA 486.000 (2007) and IRE MEDEF -Largest confederation CFDT 803,635 8,2% Visser 85 federations sectors CGT 700,000 (2003) 10. France CGPME -SMEs CGT-FO 600,000 5% IRE UPA CFTC UNAPL CGC 11. Germany BDA -51 sectoral orgs. DGB 6.8 million (2005) 20%8 (2005)

6 Obligatory membership system to the Chambers 7 Estonia Labour Force Survey 2005

29 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

BDI -39 regional and DBB 1.25 million 23% Visser sectoral groups CGB 290,150 (2003) SEV -Largest confederation GSEE 766,000 (for both 20% EC GSEVEE -SMEs: 70 federations, ADEDY GSEE and (2004). 12. Greece 1350 associations. ADEDY) (2004) Est.at 16% and ESEE -14 commercial 28% federations MGYOSZ -6.000 companies MSZOSZ 240,000 (2003) 20% Lado SZEF 270,000 “ (2001) VOSZ -individual and ASZSZ 120,000 “ 13. Hungary corporate members LIGA 100,000 “ 17% IRE ÉSZT 85,000 “ MOSZ 56,000 “ SA 2,000 businesses ASÍ 65% TU members 85% ASI 14. Iceland BSRB (public 19,000 (2004) (1998) services) IBEC 3,485 companies ICTU 784,277 (2006) 35% Visser 15. Ireland (2003) 36% IRE Confindustria -260 federations CGIL 5.5 million (2006) 34% (2004) 16. Italy CISL 4.3 million “ Visser, IRE ARAN -Public sector UIL 1.9 million LDDK 84 enterprises, 33 LBAS 165 000 16% LBAS. 17. Latvia sectoral associations (2006) 18. Liechtens LCCI 37 companies (2007) LANV 1,200 (2007) - tein LPK -37 branches and 8 LPSK, 120,000 (2007) 15% Chasard regional associations ‘Solidarumas’ 52,000 “ (2000); 13% 19. Lithuania LVDK -2000 companies and LDF 20,.000 “ IRE associated structures UEL 30,000 companies, OGB-L 50,000 (2006) 46% EC (2004) 20. Luxembo 80% emps. LCGB 40,000 “ urg

MEA 240 members CMTU 62.1% of TU 55% EC (2004) 21. Malta FOI 9 members (2005) VNO_NCW -150 branch FNV 1.2 million 22% Visser associations; 80,000 CNV 18% of TU (2003); 22. Netherlan enterprises MHP members 25% IRE ds MKB -SME FNV Bondgenoten 8.6% of TU LTO -Agricultural and members horticultural sectors AVV -NHO -Largest confederation LO 831,000 53% Visser 22 branch federations YS 201,000 ( 2004) (2003) -HSH -12,000 companies Akademikene 5% of working 152,000 emps. emps (2004) -Spekter (mainly -186 companies Unio 9% of working 23. Norway deregulated public 165,000 emps. emps (2004). enterprises) -KS ( Local - 896 authorities and Authorities) undertakings, 407,000 emps. KPP -Largest confederation NSZZ 722,000; 4.35% 15% Visser 6,000 companies “Solidarnoć” of TU members10 (2001) PKPP Lewiatan -3.000 companies, 17% IRE 24. Poland 600.000 emps OPZZ state-owned 11-13% own ZRP -craft chambers industry sector. sources BCC-ZP -1,200 companies . . FZZ 400,000. CIP Two federations, 42 CGTP-IN 40 % of TU 17% EC (2004) general and regional members AEP employers’ UGT 25. Portugal AIP associations 57 affiliated unions

ACPR 12 confederations, Cartel ALFA 1,000,000 55-60% UCL 26. Romania CONPIROM two associations of FRATIA . 800,000 (2004); CNPR representative BNS 44% own

8 Germany: Representative survey data. 9 Also Malta Chamber of Commerce and GRTU (for SMEs) 10 According to union data, Solidarity unites 900,000 members

30 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

CNIPMMR employers’ CSDR sources (2002) UPR organisations MERIDIAN RUZ Cov. 310,000 emps KOZ 400,000 (90% of 31% IRE 27. Slovak AZZZ 220,000 emps TU members) Republic

Chamber GZS11 -64,000 members ZSSS 300,000 44,3 % Chamber OZS - 47,000 members KNSS. 40,000 (2003) ZDS -1,400 members Pergam 87,000 28. Slovenia ZDODS - 3000 members Konfederacija ’90 40,000 KSJS 73,000 public sector CEOE -1 million . CC.OO 1,000,000 16% EIRO undertakings UGT 900,000 Spanish 29. Spain CEPYME - SMEs sources (2004)

SN 51 employer LO 1,831,385 77% IRE organisations and trade TCO 1,258,486 30. Sweden organisations. SACO 580,566

TISK. 22 employers’ TURK-IS 2.122.186 58 % National associations covering DISK 412.143 statistics 31. Turkey 1.1 million emps. HAK-IS 391.913 (2006)12

CBI -240,000 businesses TUC 6,463,000 (2007) Estimated 29% IoD -54,000 directors IRE; 32. United British Chambers of -135,000 businesses 16.6% LFS Kingdom Commerce private sector (2006) 13

*Data on membership: based on administrative sources, official census or certifications and self-reporting. ** IRE: Industrial Relations in Europe 2006 (European Commission). Chapter on trade unions drafted by Guy Van Gyes (HIVA Leuven). Usually sources of data and figures on union membership collected from EIRO, European Foundation, Dublin. TU members: % of unionised workers in the country who are membership of this Confederation; Emps. : employees covered by theorganisations, federations and undertakings members; Orgs.: organisations Bolds: most important confederation

Collective bargaining Collective bargaining continues to play a fundamental role in the economic and social balance of the EU. On the one hand, it acts as a local counterweight to the pressure exerted by the increase in world competitiveness and globalisation, socially compensating its impact on working conditions, especially in the sectoral or activity sphere – as well as territorial in some countries -. On the other, it works as a regulator that influences other macroeconomic benchmarks such as inflation, moderating the behaviour of wages or, alternatively, evolving in an anti-cyclical manner. However, collective bargaining, its structure and the number of collective agreements reached and the employees and undertakings covered by these agreements basically serves to assess the degree of articulation and the strength of the systems of industrial relations. Hence, it has an enormous transcendence at national level.

Collective bargaining is based on one of the principles that work as a preliminary requirement. Firstly, the freedom of association of employers and trade unions, acknowledged in all legislations. Secondly, the organisation of the main actors, their autonomy to formalise agreements, strength (representativity) and capacity to articulate the negotiation process, as well as the role played by the State therein. Historic and social traditions are important in this case, but also legislation or the agreements that regulate its development and the scope of its effects. In this sense, the compulsory nature of the agreements (the

11 Obligatory membership. At the end of 2006 some changes were introduced into the system of chambers in Slovenia and membership is no longer compulsory. 12 Official Gazette. Labour statistics issued by the Ministry of Labour and Social Security to serve as a basis in the determination of the authorised union: of the 5,210,046 workers, 3,043,732 are unionised with a unionisation rate of 58.42%. 13 UK: According to Labour Force Survey: 58.8% in the public sector and16.6% in the private sector (2006).

31 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

agreements as a rule to be implemented), with varying degrees in the different countries, constitutes an essential element of this institution.

At times, social dialogue and collective bargaining tend to be confused and, perhaps with the view of simplification, are presented in studies as one, understanding the latter as a form of social dialogue within the undertaking. However, even if they share common features, collective bargaining has its own standing as an institution.

As mentioned earlier, the structure of negotiation, either centralised or multi-level, is conditioned by the type of existing social actors, their number and scheme of activities – trade union concurrence, cooperation, professional trade unions, single employers’ confederations or sectoral federations, etc. The social and productive characteristics of the country (presence of multinationals, prominence of small and micro-enterprises, etc.) also influence its configuration and, especially, extension procedures.

The attribution given to trade union representatives or unit representatives of employees (works councils) or both of the negotiating role constitutes another essential factor to understand the functioning of this basic institution. In general, it is trade unions that hold this power at undertaking level. Only in a few countries does the body of representation have this authority, although it may indirectly receive trade union influence or guidance (Spain, Italy). The model where a supra-undertaking level or sphere exists – usually, at sectoral level – for bargaining and setting framework conditions and, in particular, wages, between employers’ organisations and trade unions, is deeply rooted in Germany and Austria. This framework or macro collective agreement is completed beneath with agreements at undertaking level between employer and works council, establishing the regulation of issues such as work organisation. In several enlargement countries (Czech Republic, Poland, Slovakia), with the predominance of the single channel of trade union representation, unit representation bodies (works councils) are denied the possibility to negotiate. This is also the situation in other countries such as Greece, France and Portugal.

Collective bargaining may adopt several national forms. From bilateral or tripartite agreements, which act as frameworks generating guidelines – on the salary ranges to be applied – for implementation at lower, sectoral or undertaking levels (regular in Spain, Belgium or Ireland, for instance), to the signing of specific agreements on specific issues (pensions, sectoral employment conditions, minimum wage increases, main principles to implement equality policies in the undertaking, etc.).

With a more or less active role, State intervention in the framework of negotiation, in its process and results, is important in many countries. From this perspective, it may contribute to ensure a level of minimum protection (salary), apply mechanisms to extend the efficiency of agreements and enlarge the scope thereof and, in general, to guarantee the foundations for common game rules.

A trend towards decentralisation may still be appreciated, although the sectoral level is still a marked reference in most European countries – see the table below -. On the one hand, we may observe that despite an increase in the number of agreements at undertaking level, the link between articulation at this level and the sectoral level is still maintained (Denmark, Germany). This would suggest that the decentralisation process may be controlled by trade unions to limit the trend towards the individualisation of downward working conditions.

Agreements at undertaking level are used most in United Kingdom, Ireland, Luxembourg, Malta and Turkey, amongst others. Differently to what happens in the voluntarist influence area, collective bargaining in Germany plays the role of setting macro-guidelines in working conditions for sectoral environments. The agreements reached have a limited scope and only oblige those who are members of the trade union and members of the employers’ organisation who subscribe it, although it is possible to extend this scope.

In the Netherlands, collective bargaining at national scale is undetaken in a tripartite manner through the Labour Foundation (STAR) and the Social and Economic Council of the Netherlands (SER). As a form of articulation, we may highlight the intersectoral model of negotiation developed in the National Labour Council in Belgium. This body is formed by employees’ and employers’ representatives and is chaired by a civil servant, who is not a party to the agreements. Below this level, negotiation is organised through joint committees that articulate the scope of economic activity sectors. Finally, at the bottom, agreements at undertaking level have the role of improving, possibly, working conditions as they can not contravene

32 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

what is stipulated at higher levels. Also in France, starting with a minimum that is guaranteed by legislation, each sphere of negotiation (sectoral, regional, undertaking) may add, with some exceptions, benefits in salary or extra-salary compensations and in employment conditions. The role played by collective bargaining to develop and specify regulations (for instance, working hours) has been fundamental in this country, which is historically characterised by an important legal influence in industrial relations, strengthening the contents thereof.

A singular situation arises in the Scandinavian countries – especially Sweden – where the sectoral agreement framework gives rise to local specification, although wages and employment conditions are increasingly agreed at undertaking level. As a differential element in this group of countries, the general scope of agreements is not implemented in Finland.

Decentralisation can not only take place vertically, from the sector to the undertaking level. The impact of flexibilisation and individualisation of employment relationships has effects at the level where collective bargaining that is still to take place is developed. The work centre and not the undertaking could, increasingly, become a new level for the agreement of employment conditions, as mentioned in some of the new Member States. Also, decentralisation in setting wages has increased, for instance in Germany, towards other regional levels.

The coverage of these agreements varies considerably depending on the structure and articulation of bargaining, as well as on the existence of procedures to extend collective agreements to other employees in the same undertaking, sector or territory. In some countries, figures are approximate and come from surveys rather than a system of records. The multi-annual duration of some agreements also makes their quantification more difficult.

An increasing trend in collective bargaining coverage has been observed in Hungary, Bulgaria or Lithuania, whilst a decreasing trend is detected in the Czech Republic.

Level and coverage of collective bargaining. Table 1: Collective bargaining in the private sector

Collective bargaining private sector Rate of Main type of State Country Predominan Tendency employee Source intervention t level coverage 1. Austria industry stable 98% EIRO14 framework/ partnership No data framework – the Government Significant rise Ministry of industry/ available. intervention is restricted to the 2. Belgium at sectoral and Labour, 2005. undertaking According to action of legally declaring the enterprise level (FOD WASO)15 EIRO, 96% CLA by Royal Decree Confederation of undertaking/ the independent 3. Bulgaria increasing 38% consultation/tripartism nationwide trade unions in Bulgaria –2006 undertaking/ National 4. Croatia decentralization low framework industry monograph mainly 5. Cyprus stable 68% EIRO minimum wage setting undertaking The Czech- Moravian 6. Czech industry declining 30% Confederation of framework/autonomy Republic Trade Unions - 2005 industry/ company level Confederation of 7. Denmark 77%16 framework/consultation undertaking is strengthening Danish

14 Hereafter in this table: EIRO. “Industrial Relations in EU Member States 2000-2004” (2007) based on country profiles in 2006. European Foundation for the Improvement of Living and Working Conditions. 15 H. Bocksteins, “Het collectieve onderhandelen in cijfers” in Cox, G. Rigaux , M. and Rombouts, J. Collectief onderhandelen, Mechelen, Kluwer, 67-84, 2007 16 Total, including public sector: 85%

33 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Collective bargaining private sector Rate of Main type of State Country Predominan Tendency employee Source intervention t level coverage although still Employers: linked to the labour Market industry level report 200617 Some surveys No framework no essential and estimations 8. Estonia undertaking administrative change not fully data gathered reliable18 industry/ 9. Finland stable 90% EIRO framework/consultation nationwide Ministry of industry/ 10. France decentralization 97, 7 % employment- extension/ Important role nationwide DARES, 2006 some tendencies to IAB- undertaking 65% West 11. Germany industry Betriebspanel framework/ support level and job- 54% East 2006 specific negotiation 2006, National Slow but visible Industry/ Trade Union framework/ tripartism 12. Greece de- 60-70% professional Confederation’s centralisation Institute Growing (owing to the 13. Hungary workplace 42,6% 2006 tripartism extension procedures) industry/ 14. Iceland decentralization high consultation/ tripartism nationwide National level bargaining Central Statistics nationwide/ 15. Ireland based on 35% Office (CSO) partnership/ tripartism undertaking Partnership 2006 agreement Industry/ local agreements 16. Italy in the stable 43,3%19 ISTAT 200720 consultation/ autonomy framework of sectoral agreements 17. Latvia undertaking21 stable 20% EIRO Framework/tripartism undertaking / industry / implementation No data 18. Liechtenstein undertaking / No data available. framework / tripartism new, increasing available (n.a.) nationwide next year slightly 19. Lithuania undertaking 15 % (estimate) EIRO framework/ tripartism increasing industry/ 20. Luxembourg decentralization 58% EIRO framework/ tripartism undertaking 2000-2002 National Office 21. Malta enterprise stable 33% (est.) framework of Statistics (NSO) 22. Norway Industry stable 55% (est.) Fafo22 2004/2005 framework /consultation

17 Dansk Arbejdsgiverforening: Arbejdsmarkedsrapport 2006 18 Estonia: Some estimates can be drawn from population surveys, but they are not accurate. i.e..Estonian Social Survey (Statistics Estonia 2005) provides the following figures: 17% of employees replied that a collective agreement has been signed in their workplace and around 60% of the employees are covered by the agreement. Thus, the coverage could be 11% of employees. However, there are two industry level agreements, which are not addressed in the survey, thus the coverage is probably higher. Earlier estimates of collective bargaining coverage are based on expert opinions. 19 67% in the industry; 51%-services 20 Contratti collettivi, retribuzioni contrattuali e conflitti di lavoro.2007 21 23 collective agreements at sectoral level; 2.045 at undertaking level. 2006. LBAS (Latvian Free Trade Union confederation)

34 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Collective bargaining private sector Rate of Main type of State Country Predominan Tendency employee Source intervention t level coverage /undertaking 23. Netherlands industry decentralization 80% 2006 framework/tripartism 24. Poland undertaking stable 35% EIRO framework 25. Portugal industry increasing 91% (est.) DGEEP23/2005 framework/ tripartism nationwide/ Decentralizatio 26. Romania n.a. framework industry n Decentralizatio 27. Slovak industry/ framework/ tripartism25 n towards 35% - 40% EIRO 2006 Republic undertaking undertaking24 Industry/ Almost all 28. Slovenia decentralization ETUC 200727 framework/tripartisme nationwide workers26 Economically industry/ Significant rise 68% Active Population in the number nationwide; Survey 2005. 29. Spain of enterprise framework/ tripartism National industry/ collective Statistics agreements county level Institute28 Mainly Decentralised industry – bargaining. framework Wage and 92 % 29 (est.) Ekonomifakta, 30. Sweden agreement working time framework/consultation 2006 leaving scope are increasingly for local dealt with at adjustments. company level. Ministry, publication year - Workplace(s) 31. Turkey stable 4,2%30 2007 according to framework / autonomy /undertaking 2006 data

Undertaking/ 32. United individual 33, 5%31 Labour Force decentralised voluntary system/autonomy Kingdom workplace Survey-2006

The increase in coverage is usually carried out using mechanisms to extend existing agreements which are used in several countries with a social aim as an antidumping mechanisms and the complement of income policy for workers. In general, it contributes also to one of the government objectives expected from collective bargaining, which is the control of inflation (in this sense, extension plays the role of automatic stabilizer).

Indeed, the possibility of extending the effects of an agreement is intimately related to the membership density of trade unions and employers’ organisations. In principle, extension works towards affiliation. Another conditioning factor, also related to density, is the structure and coverage of collective bargaining.

22 Estimate by Fafo based on surveys and register based information 2004/2005 23 Direcção Geral de Estudos, Estatística e Planeamento, Estatísticas em síntese – Quadros de pessoal, 2005, p. 7. The islands of Madeira and Azores are not included. 24 In Slovakia, extension procedures have recently been legally enabled and maybe also industry level will be strenghtened. It depends on the Ministry of Labour whether it will use its renewed competence to extend collective agreements at branch level. 25 Tripartite agreements (if signed) cover only the principles of social and labour law policies. Collective bargaining and collective agreements are bilateral and autonomous, although the State may intervene in conciliation or mediation procedures when required. 26 Slovenia: Official Statistics shows 95% (estimate) due to the employers´ obligation to be members of the Chambers of Commerce and Industry. Recent (2006) legislation on collective bargaining provides that in future -three year transitional period- only employers or employers’ associations will be able to sign collective agreements, and that the Chambers will no longer be signatories. 27 Slovenia: worker-participation.eu, an information service of the ETUI-REHS 28 Spain. Statistics from Yearbook of Spanish Labour Ministry 29 Sweden: According to LO (2007) it might be less. 30 Turkey: for the private sector: 187,015 out of 4.384.651 workers covered. 31 UK: 69 % public sector;19,6% private sector

35 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

In those countries with greater sectoral articulation and coverage, it is easier to use the extension mechanism than in those where bargaining takes place centrally.

In general, extension is based on the compulsory application of all or certain aspects of a collective agreement to all employees and undertakings, even when their representatives do not undersign it (erga omnes principle). Although this type of extension usually has a sectoral nature, the extension that is carried out in certain cases, such as enlarging the scope of functional or geographical application to certain areas, territories or economic activities where no articulated representation exists through trade unions and/or employers’ organisations, is particularly important in economic and social terms.

Although this procedure is usually present in national legislations and practices, the way in which it is implemented usually varies, from a limited extension (to employees of a specific sector or territory) to an extension in the sphere of the undertaking or group (see Table 2). In turn, the procedure requires an express request, for instance, of the organisations signing the agreement, if the requirements are met; or from employees and their representatives. The type of authorisation and the authority that issues the extension also differentiate the national casuistries.

In Italy, collective agreements are, in principle, only binding for the signing parties; however, in practice, Italian case law of the Corete de Cassazioni has established that any employer who is a member of any employers’ association signing a collective agreement, is also obliged to implement the contents thereof to all employees in his or her undertaking, even if they are not members of the signing trade unions and as long as they wish it voluntarily. From a different perspective, the membership principle also rules in Portugal, although in practice agreements are applied to all employees in the category within the undertaking, even when they are not affiliated.

In Spain, statutory agreements (negotiated pursuant to the Statute of Workers’ Rights, the Labour Code) are generally effective; that is, they oblige all employers and all employees included in their scope of implementation and throughout the time they are enforced. Extra-statutory agreements have the nature of a private contract between the signing parties and only obliges these parties.

No extension procedures exist in Denmark or Romania, nor in those countries with a voluntary system (UK, Ireland, Malta).

The obligation to negotiate collective agreements is usually prominent in EU countries. No legal obligation exists in countries such as Germany, Croatia or Netherlands. Even in countries with voluntary systems, an obligation may exist to renegotiate existing agreements even if only to cancel them (Denmark), or agreements at national level may favour and recommend the start of negotiations (Ireland).

Table 2: Obligation to negotiate, legal binding and compulsory nature

Collective bargaining in the private sector Country 3. Obligation 1. Capacity 2. Basis 4. Legal binding 5. Extension to negotiate Some provisions - Chambers of Due to the Chambers´ Yes. (normative part) Commerce32. system, the agreements Works Internal become legally - Voluntary signed have a very wide 1. Austria Constitution company binding for all representations of application, covering Act (ArbVG) agreement is individual employers interests (including most of the workforce. obligatory33. and employees. TU and EO)

Employers and employees reps at Binding for the 2. Belgium national, sectoral Legal Non existent Customary 35 employers of a sector (and undertaking level34

32 Austria: approximately 95 % of all collective agreements are concluded by organisational units of the Chambers of commerce. 33 The internal company agreement is different from the collective agreement. It concluded between the company owner and the works council. Pay is mostly excluded from the regulatory framework of internal company agreements. 34 Belgium: a) employers: national: representative employers’ organisations VBO/FEB, UNIZO, UCM, Boerenbond/FWA; sectoral (joint committees): representative employers organisations; undertaking(s): one (or more) employers

36 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Collective bargaining in the private sector Country 3. Obligation 1. Capacity 2. Basis 4. Legal binding 5. Extension to negotiate At sectoral and Yes. municipal level: Negotiations The CA has effect for employers’ reps and start at the Only binding for the the employees who are EO request of the signatories of the 3. Bulgaria Labour code members of the TU TUs and no agreement organisation signatory Enterprise level: later than 1 to the agreement36. employer and TU month after the request National and sectoral Minister of Labour can, employers’ on suggestion of one 4. Croatia Legal No No organization. party, extend a CA to a TUs whole sector Gentlemen’s Not being legally Agreement: TU confederations binding, but CA play Industrial 5. Cyprus and employers No a leading role in No regulation relations organisations regulating minimum code, not standards binding. Legal; TU organisations and Act No. Extension to additional Yes employers 2/1992 Coll., employers only at high On the written organisations; on collective No obligatory scope, level CAs in the course 6. Czech request –a bargaining; law sets certain of agreement validity; Republic proposal of CA- Individual employers Act No. limitations This possibility is by one social and TUs at enterprise 262/2006 applied at enterprise partner level Coll., Labour level and higher level Code Voluntarism, Employers: but there is an Confederation level obligation to re- Agreements are and sectoral level negotiate an binding and cover the 7. Denmark CAs existing level at which the No extension Employees: agreement agreements are Confederation and whether the aim signed37 TU level is to renew it or to cancel it. Employees: employees union or Yes. A CA may be CA applies to federation or extended on agreement employers and authorised between the parties employees representative of with respect to wages, Yes38 belonging to an 8. Estonia employees; Legal working hours and rest organisation which central federation of time conditions. The has entered into a employees scope of the extension CA, unless the CA Employers: employer is determined in the prescribes or EOs at central or CA39. federal level The system is Legal and Yes Binding 9. Finland orientated towards collective Yes

differentiation by agreements

b) employees: national: representative employers’ organisations ABVV/FGTB, ACLVB/CGSLB, AVC/CSC; sectoral: (joint committees) idem; undertaking(s): idem 35 The individual regulatory provisions of a sectoral CLA are binding for the employers of a sector (article 26 CLA Act); The individual and collective regulatory provisions of a national and sectoral CLA declared generally binding are applicable to all employers and employees represented in the joint body in which the CLA was concluded (National Labour Council or a joint committee) 36 Employees who are not members of a trade union organisation which is a party to a CA may accede to a CA concluded by their employer through a written application to the employer or the leadership of the trade union organisation which has concluded the agreement. 37 Denmark: i.e. confederation level (e.g. the cooperation agreement), sectoral level and company level (agreements on pay and working conditions) 38 The party which initiates negotiations gives another party a notice. Negotiations shall commence within seven days after receiving such notice. 39 Estonia: A collective agreement entered into between an association or federation of employers and a union or federation of employees and a collective agreement entered into between the central federation of employers and the central federation employees may be extended on agreement between the parties with respect to wages, working hours and rest time conditions.

37 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Collective bargaining in the private sector Country 3. Obligation 1. Capacity 2. Basis 4. Legal binding 5. Extension to negotiate branch Employers’ Yes on various Binding and with organizations at issues. Burden erga omnes effect 10. France Legal Yes, at sectoral level appropriate level lies on the within the scope of TUs employer. the agreement Legal (Act No legal Any EO and on Collective obligation to Limited to affiliates Extension on industry 11. Germany individual employer; Bargaining, negotiate of the signatory level possible Representative TUs “Tarifvertrag (enforceable by parties sgesetz”) strike only) The CA covers the Extension by Individual Statutory workplace(s) to ministerial decree for employer+any EO; obligation to which its level industry and bargain in good corresponds. It is 12. Greece Law professional level TU at enterprise, faith at the mandatory for all the agreements to the industry, professional request of either members of the whole industry and and national level of the parties signatory EOs and profession40 unions At undertaking: TUs, a.) Signatories New draft Extension procedure: on the criteria of b) members of law: TUs and the minister of the representativeness signatories, provided EO should Ministry of Labour and based on votes Upon the it is included in the meet the Social Affairs is received during request of both constitution of the criteria of authorised on the 13. Hungary works council (TU and organisation representativ request of most elections employer) c.) or based on single eness based significant TUs and EO employer parties authorisation 41 on complex at branch level Branch level: most d.) to whom it is calculation significant TUs and extended by the on both sides EO branch State. Legal. Act Legally binding as Centralized. Only on Trade the minimum right of one level, nation or Unions and Under certain the worker. The 14. Iceland Possible local of bargaining Industrial requirements worker can negotiate exist42. Disputes No. for better wages and 80/1938 terms. Partnership model: Not binding. -Employers: Irish However CA may be Business Employers CA do not have legal Voluntary incorporated into Confederation No obligation44 effect, and are not 15. Ireland system employment (IBEC); applied nationally45 contracts to enable -Unions: Irish the agreement to Congress of TUs become binding. (ICTU)43 At undertaking: TUs, Tripartite Any employer who is a Protocol of member of any Employer Legally binding for July 1993 employers’ association Yes the signatory parties 16. Italy laid down signing a collective Branch level: branch and their members the agreement, is also TUs and employer only46 fundamental obliged to implement organisations rules for the contents thereof to

40 Greece: Only if the agreement is signed by employers employing at least 51% of the labour force of that industry or profession. 41 Hungary: there is a new draft law (not yet in force) concerning the right to initiate the extension procedure: they should meet the criteria of representativeness based on complex calculation on both sides 42 The most common form is joint CAs negotiated on behalf of several or all unions belonging to the same national federation. 43 A significant feature of the Irish model has been a gradual widening of the partnership approach to include not only the traditional social partners - trade unions, employers' associations and farming organisations - but also the organisations of unemployed people, women's groups and others working to counter social exclusion. 44 Since 1987, a succession of ‘Partnership Agreements’ has enabled the main parties to engage in the collective bargaining process. 45 However, it is possible that the bargaining coverage is greater than union density suggests because some non-union employers might use the national agreements as a guide to pay increases, but there are no empirical data on the extent of such an effect. 46 Italy: Nevertheless, a consolidated case law recognises wages defined by national collective agreements as a reference point for the judge in deciding whether the constitutional principle of sufficient wage laid down in art. 36 Cost. has been respected by the employer, also in case he/she has not signed the collective agreement or is not a member of the employers’ associations which have signed it.

38 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Collective bargaining in the private sector Country 3. Obligation 1. Capacity 2. Basis 4. Legal binding 5. Extension to negotiate collective all employees in his or bargaining her undertaking Undertaking: Legally binding to all employer, TU or Yes. Employer employees employed authorised employee is not entitled to by the employer Legal. reps, if no TU exist. refuse to start signatory part. Constitution 17. Latvia Sector: employer, negotiations, Sectoral or regional Possible and labour employer though no CAs appliy to all law organizations obligation to members that have and TU or conclude CAs. concluded the association of TU agreement47. The government, on Employers: member suggestion of both National Employers of signatories parties and when the and employees CAs legal requirements (for 18. Liechtenstein 48 no representatives example the quorum) Employees: all are fulfilled, can extend a CA to the whole sector. Compulsory - National, sectoral, applicable to all territorial CA: EOs Yes. employees in an and TUs; Legal enterprise and in all - enterprise level – obligation to enterprises – Yes, sectoral and 19. Lithuania employer and local Labour Code negotiate after members of the territorial level TU, in their absence presentation of employers’ – sectoral TU or another party organization – works council. signatory party to the

agreement - Unions: negotiating committee made up of nationally Yes. representative unions, Applies to all the plus unions who are CA may be extended employees of sector representative Law. Yes (declared “generally 20. Luxembourg employers belonging Labour Code binding”) to the whole to a signatory - Employers’ : profession 49 employers’. national and sectoral employers organisations

- General Manager Once the period Although collective and Human Resource covering the bargaining is on a Manager No legal agreement No. voluntary basis, once 21. Malta - Secretary of basis. elapses, parties CAs are specific to a CA is signed it is relevant union Procedural are bound to company involved. legally binding for section and shop renew both parties. steward. negotiations. - Organised Companies Extension may take employers: National covered by place only in special EOs at confederatate Collective Basic CA are situations. level and/or agreement obliged to Agreements are Extension may be federation level (no legal negotiate if binding and cover the 22. Norway demanded if proven - In non-organised rules as to demanded by members of signatory that foreign workers are companies, single representativ TU covering at parties subject to substandard EOs ity) least 10% of the wage and working - Employees: employees. conditions. Confederations and

47 Latvia: If members of an organisation of employers or an association of organisations of employers employ more than 50 per cent of the employees in a sector, a collective agreement (general agreement) entered into by such organization and trade union shall be binding on all employers of the relevant sector and shall apply to all employees employed by the employers. 48 Liechtenstein: Employers: Liecht. Chamber of Commerce and Industry (LCCI); Liecht. Chamber of Trade and Commerce; Liecht. Civil Engineering Authority (LBA). Employees: Liecht. Employees and Workers Association (LANV) 49 Luxembourg: professon affected by a Grand Ducal regulation, following a proposal agreed by the two parties to the National Conciliation Service (ONC)

39 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Collective bargaining in the private sector Country 3. Obligation 1. Capacity 2. Basis 4. Legal binding 5. Extension to negotiate TUs Non-organized companies: no obligation Binding for the signatories and their Sectoral unions; Legal (very members. individual employers limited Signatory employers 23. Netherlands and sectoral no Yes requirements have to offer same employer ) terms to non-union organisations members in their firms A supra-establishment CA may be extended by -Employers: the Ministry of Labour Binding for the employers and EOs to other employees in 24. Poland legal Yes signatories and their cases of social interest members - Employees: TUs. upon the demand of an appropriate EO or union. -Employers: employers and EOs Only binding for the CA can be fully or 25. Portugal Legal Yes50 signatories of the partly extended 51 - Employees: TUs. agreement

- Employers and EOs Limited to scope of representatives that Employers CA . meet representation hiring at least criteria established by 21 employees At industry and law; 26. Romania legal have the group of companies No procedure - at undertaking level, obligation to level, the companies in case no such TUs start are expressly exist, the EOs negotiations mentioned in the especially elected for agreement the purpose - Undertaking At undertaking level: level:covers all TU and employer CA at branch/sector Legal (Act Yes, on request employees. 27. Slovak At branch level: level can be extended on Collective of the other Republic branch-level TUs’ on the decision of the Bargaining) party -Branch level organisation and Ministry of Labour 52 covers/applies to branch-level EOs signatory parties. It can be proposed to Representative trade Legal Legally binding for the Minister of labour unions or their (CA Act the partners to the to extend the CA to all 28. Slovenia confederations; adopted in CA and their the employers within Employers’ 2006) members the sector53. organizations

Yes. Undertaking: works Sections 37.1 CA can be extended to Legally binding for council or the TU and 28.1 of Obligation to other undertakings, all employees and 29. Spain reps (if there are any) Spanish start sectors or territorial employers of the when these branches Constitution negotiations on levels on the decision undertaking or sector of the Labour hold a majority in the request of one entity with Administrative

50 Portugal: if the petitioner does not receive a reply he can request conciliation, which is mandatory for the other party. 51 The scope of collective agreements may be extended through an extension regulation issued by the Labour Minister when the economic and social circumstances justify in relation to: a. employers of the same sector of activity and employees of the same or similar profession, as long as they perform their activity in the geographic area and within the professional and industrial scope determined in the agreement b. employers and employees of the same sector and profession, as long as they perform their activity in a geographic area different from that in which such agreements apply, and there are no unions or employer’ associations and the identity of the social and economic circumstances is verified 52 Slovak Rep: CA at branch/sector level can be extended to undertakings which did not sign the respective collective agreement (are not members of the branch level employers’ association) but are operating in the same branch/sector of the economy. 53 Slovenia: the decision of the minister has to be based on the fact that one or more representative trade unions and one or more representative employers’ organizations – that employ more than half of employees in the sector – concluded the agreement.

40 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Collective bargaining in the private sector Country 3. Obligation 1. Capacity 2. Basis 4. Legal binding 5. Extension to negotiate works council. Legal: bargaining Authority Statute of capacity; Sector or branch Workers’ agreements: most Rights representative TUs at national level or autonomous community level.54

Employers: No extension in An EO or an principle. However, an employer. Yes employer who is not a 30. Sweden Law and CA Legally binding Employees: member of an EO can EO or a TU join a CA through a representative separate agreement Legally binding for Employers: EOs / Yes the workplace/ Yes, partial or total unaffiliated employer Obligation on undertaking. extension under certain 31. Turkey Law the request of Legally binding for requirements Employees: the authorized the signatories and 56. authorized TU union member workers of the signatory union55. No legal requirement for the employer to negotiate CAs Not legally binding One or more unions except where on the parties unless Voluntarism 32. United there has been a the two sides system No regulation Kingdom One or more legally binding specifically state in

employers or EO decision that writing58. the unions should be “recognised”57

CA: Collective agreement; EO: Employers´ organisations; TU: Trade union

Industrial disputes

54 Spain: legitimacy to negotiate and also trade unions with a minimum of 10 per cent of the members of the work council in the company, or delegates appointed to represent personnel within the territorial area or within the implementation field of the agreement. For this type of branch agreement, employers’ associations are also entitled to negotiate provided that they include at least 10 per cent of the employers within the implementation field of the agreement, and who, moreover, can count on at least 10 per cent of the workers in the area concerned.

55 Turkey: Workers who are not members of the signatory union may benefit through paying solidarity dues, no need for the signatory union’s consent. 56 Turkey: One of the CA concluded by the sectoral union with the largest number of member workers among TU, representing at least 10% of the total number of workers employed in the concerned branch, could be extended totally or partially or with the amendments deemed essential to one or more or all the workplaces without CA. Extension done by the Cabinet upon the proposal of the Minister of Labour, a union or an employers’ association founded in that sector, or an unaffiliated employer 57 UK: In the cases that the union has been recognized, it has the right to bargain over pay, hours and holidays. However, such cases are rare and generally it is the balance of forces between union and employer at the workplace that determines whether bargaining takes place.

58 UK: state in writing a collective agreeent use to be a very rare occurrence. However, items within the agreement that can be incorporated into an individual’s contract – such as pay rates, hours or holidays – become binding conditions of the contract. Items which cannot be included in this way – such as procedural arrangements for redundancy – are not normally legally binding.

41 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

The right to take industrial action is acknowledged in all legislations of the countries analysed. In many of them, the legal rank thereof is the highest, that is, constitutional. However, regulation varies from one country to another depending on the procedure used (the requirements established to call industrial action, for instance, the need to vote or the approval of workers or trying to reach prior conciliation) and the treatment given to the exercise of this right in the essential community services. The consideration of unlawful strike due to solidarity or other reasons also sets a difference between countries.

On the other hand, the right to lock-out is not so widely acknowledged and its exercise is subject to significant limitations.

Conciliation, mediation and arbitration procedures exist in practically all the countries studied. Their aim is to maintain social peace, considered as a collective good. These mechanisms seek to favour the solution to industrial conflict prior to the judicial sphere and to the appearance of the problem itself (industrial action).

In general, collective labour conflict is usually related to the application – or non-application – of collective agreement and, therefore, to the different interpretation thereof made by both sides of industry, employers and employees’ representatives. Mediation and arbitration are usually of a voluntary nature, although the option exists for compulsory mediation or arbitration with State intervention. The system by which these mechanisms are carried out, either autonomous – regulated by the parties – or with the intervention of a specific body or labour authority, is another aspect that sets a difference between countries with regard to how these mechanisms are used.

The mechanisms to solve these conflicts basically differ in the procedure used, although the terms used do not fully coincide in their meaning and scope in some countries. Thus, although they are conceptually different, conciliation and mediation are used in several countries in a very similar way, conceived as the intervention of a third party to try to favour communication between the parties, placing the problems in a hierarchical order with the aim of bringing the different positions closer.

42 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Table 3: Prevention and settlement of trade disputes

Prevention and settlement at national level: Country mediation, conciliation and arbitration systems 1. Austria Voluntary conciliation by Federal Conciliation Office. Dispute resolution procedures in collective labour agreements 2. Belgium The NLC and the joint committee are assigned the task of conciliation. The joint committee sets up a conciliation bureau A National Institute for reconciliation and arbitration is created. The mediation procedure can be used by mutual agreement between the parties, or at the request of one of the parties. 3. Bulgaria When a collective labour dispute has not been settled through direct negotiations or a mediation procedure, the parties may request its resolution by an individual arbitrator or an arbitration commission. Decisions or agreement reached are binding for the parties. The arbitration decision is final and not open to appeal. The Social Partnership Office, which operates at national level, supervises the conciliation process and provides 4. Croatia logistic support. Act, in the event of a dispute, if the parties do not come to an agreement they must initiate a conciliation process. There is no conciliation system. The Department of Labour Relations is responsible for mediating in labour 5. Cyprus disputes in the private and semi-government sector. All collective conflicts are dealt with by the Ministry of Labour and the main procedure for conflict resolution is mediation. Arbitration exists but is not dominant. 6. Czech The law on collective bargaining regulates agreement settlement disputes and the fulfilment of agreement Republic obligations. Mediation and Arbitration Institutes are used In the event of a breakdown in negotiations, the Public Conciliator intervenes and draws up a compromise proposal. If unsuccessful in bringing the parties to sign the compromise, the conciliator can postpone the 7. Denmark scheduled general conflict. If in the end the compromise is rejected by ballot by the trade union members, the state can intervene and legally enforce the compromise proposal. If an agreement is not reached through negotiations and the threat of work disruption arises, the parties shall consult the Public Conciliator, who initiates the conciliation procedure. 8. Estonia Failing agreement, the employers and the employee reps have the right to call to of employers and employees federations in order to form a committee on a parity basis for settling the labour dispute (very rarely used) 9. Finland Compulsory mediation provided by the Conciliation service. State intervention possible. Little use of voluntary procedures for dispute settlement, except in the public sector; informal intervention of the 10. France labour inspectorate or the courts. Many sectoral collective agreements make provision for conciliation and mediation procedures. 11. Germany Breakdown of negotiations between a works council and an employer may or must, depending on very limited factors, be submitted to a conciliation committee. Mediation provided by OMED (independent) since 1990. In the event of failure, any party may seek arbitration 12. Greece unilaterally if the other party has refused mediation. A trade union may also seek arbitration unilaterally if it accepts the mediator’s proposal and the employer has not accepted it. In the event of a breakdown in negotiations, the negotiating parties invite a voluntary mediator from the state 13. Hungary operated “Labour Mediation and Arbitration Service (LMAS). 14. Iceland Recourse to public mediator compulsory. The Industrial Relations Act 1990 requires all industrial relations disputes to be referred to the Labour Relations Commission (LRC) for settlement (in exceptional circumstances a dispute may be referred to the Labour Court). 15. Ireland The LRC Annual report (2006) states that the Conciliation Service recorded a high level of voluntary settlement (81%), and likely to continue in 2007. 16. Italy Settlement by negotiation, with court or State mediation if necessary. The Law on Labour Disputes (2002) provide a speedy and efficient resolution of labour disputes. It emphasises the role of mutual consultations of parties as the main instrument for resolution of collective disputes. 17. Latvia The law provides for three procedures of peaceful conflict resolution: conciliation, mediation and voluntary arbitration. The different procedures are used depending on the nature of the collective dispute. Latvian legislation differentiates between ‘rights dispute’ and ‘interest dispute’. 18. Liechtenstei There is a tripartite office of mediation (state, employer representative and employee representative). n After breakdown in negotiations, conciliation in the joint commission is compulsory. The subsequent non- 19. Lithuania compulsory option of arbitration is seldom used. 20. Luxembour The legislation stipulates conciliation by the national conciliation office; the parties are free to accept the proposed g settlement. Arbitration is voluntary. No distinction made between conciliation and mediation. Conciliation services offered, with ministerial intervention, by the Department of Industrial and Employment 21. Malta Relations. When a deadlock is reached, the Minister may appoint a court of Inquiry to establish causes and circumstances of dispute. The Minister, on the request of either or both parties, may refer the case to an industrial tribunal. Compulsory mediation provided by the State Mediator. Parliament may intervene ad hoc, compulsory arbitration 22. Norway in essential services. No system for collective bargaining. Some agreements provide for settlement procedures. In case of major 23. Netherlands conflicts (which are rare) sometimes mediation. For conflicts between works councils and employers there is a binding mediation system Many collective agreements establish dispute settlement procedures. However, parties usually prefer to apply the 24. Poland Collective Disputes Settlement Act, which provides for three procedures: negotiation, mediation and voluntary

43 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Prevention and settlement at national level: Country mediation, conciliation and arbitration systems arbitration to be applied in that order59. Legal mechanism for conciliation and mediation provided by the Ministry of Labour at the request of one or both 25. Portugal parties. Whenever requested by one of the parties it is compulsory for the other to attend. Voluntary arbitration is less frequent. For settlement of disputes associated with the negotiation of collective agreements, the law provides the following procedures: conciliation (mandatory) organised by the Ministry of Labour, Family and Equal 26. Romania Opportunities upon request of the parties, mediation and arbitration (both voluntary). Usually, disputes associated with the rights of employees established by law or in labour contracts are settled by the courts. Negotiation between the parties to settle such disputes is rare. The parties may ask a mediator to propose a solution appointed by the Ministry of Labour, Social Affairs and Family from candidates. The proposal of the mediator is only a recommendation, not a binding decision. 27. Slovak Failing this, the parties may either agree to ask an arbitrator to decide on the dispute (decision of an arbitrator is Republic binding to both parties) or initiate a strike (trade unions) or a lockout (employer). Arbitrators are elected by the Ministry of Labour in the same way as mediators. Disputes related to the rights of individual employees (not as a result of a collective bargaining agreement) are settled by the district courts. Out-of-court conflict resolution procedures exist for resolving disputes and are included in collective agreements (at national level) as obligatory. Conciliation procedures are mostly initiated to interpret the content of a CA 28. Slovenia (interpretation committees) Arbitration is a voluntary procedure. Arbitration solutions and settlements can be appealed only through legal action National and regional extra-judicial systems for dispute settlement are in place since 1996. Implemented by the 29. Spain Inter-Regional Mediation & Arbitration Service (SIMA). Compulsory arbitration is exceptional to strikes that pose a danger to the national economy Mediation: the National Mediation Office mediates in disputes occurring in the Swedish labour market. The National Mediation Office appoints mediators in the event of a dispute between the parties in the labour market 30. Sweden during bargaining over pay and terms of employment. The National Mediation Office has six regional mediators at its disposal. They are called in when local disputes occur at company level. In the event of a breakdown in collective negotiations: compulsory mediation, mediator from Official Mediation 31. Turkey Organization. Private arbitration in contract and grievance disputes. Compulsory arbitration where industrial action is prohibited Voluntary conciliation undertaken by ACAS (independent service). ACAS can provide voluntary arbitration; 32. United disputes concerning trade union recognition and the information required for negotiations are submitted to a Kingdom Central Arbitration Committee (CAC).

59 The information on Poland has been taken from “Social dialogue and conflict resolution in the acceding countries”. Christian Weltz and Timo Kaupinen. European Foundation for the Improvement of Working and Living Conditions. 2004

44 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

III- EMPLOYEE REPRESENTATION IN THE COMPANY

In European countries, two different institutions contribute to represent employees in the workplace: the works councils and the trade union representatives. Studies traditionally differentiate national systems between those characterised by a single structure and those adopting a dual one. On the one hand, those where employee representation is achieved exclusively through the union channel and, on the other, those also providing representation through works councils. In many ways, this classification appears too systematic.

Firstly, in a growing number of countries both types of institutions exist. The question that remains is which of the two is the prevailing channel for employee representation. It is important to determine their respective competences and, in particular, which plays the most important role in economic issues. Furthermore, in some countries, the works council as an institution does not exist although they may have a subsidiary system in place consisting of electing employee representatives (Latvia, Romania).

Secondly, trade unions may also be active in the works council. In many cases, trade union representatives have been elected as members of the works council. National law sometimes establishes the structure of this interaction. In France, only trade unions may stand in the first round of the election of the works council. In some countries, the two bodies may compete, such as in the case of Greece, where trade unions are against the creation of works councils in undertakings where a local trade union exists. The Hungarian situation also shows a reluctant attitude by trade unions towards works council. Trade unions try to enter into works council. In other words, there is a process of “trade-unionization” of works councils. In Norway, the creation of the works council in undertakings with a workforce of less than 100 workers requires the agreement of the trade unions. With a body composed of trade union members and elected employee representatives, the Italian system provides a good illustration of a joint institution.

In a few countries, the trade union is the only institution representing the workers in undertakings (Sweden, Malta, Turkey). However, in most countries a dual channel exists, even if one appears more competent to deal with economic issues. In some countries the works council is the dominant institution dealing with economic issues, and it must be informed and consulted on such matters (Belgium, Croatia, France, Spain, Greece, Slovenia, Portugal). In other countries, trade union representatives play a central role (Denmark, Norway, Czech Republic, Latvia, Lithuania, UK, Estonia, Romania). In Lithuania, works councils are established when no trade union is in place in the undertaking. Finally, in another group of countries, the works council is the only representative institution and it therefore has economic prerogatives (Germany, the Netherlands). In Italy, a single institution exists which combines union and non-union representatives.

The threshold for establishing a representation body varies substantially from one country to another. This diversity refers both to the thresholds for unions and elected representatives. By contrast, the term of office is quite similar from one country to another (3 to 4 years). In most countries, the chairman of the works council is elected, with the exception of France and Denmark where the chairman is the employer. This issue only concerns the mode of representation via elections. When representation exists through unions, the workers’ representatives are either nominated or elected according to the rules governing the union.

Most countries provide employee representatives with perks to fulfil their tasks. Time off is generally allowed, although the number of hours varies from one country to another. In the UK, the law speaks of “reasonable” time off. In addition, many countries impose on the employer the duty to put premises and material at the disposal of employee representatives. In the UK, this is a matter of agreement between the employer and the union. By contrast, only a few countries entitle employee representatives to training paid by the employer (Germany, Greece, Lithuania, Slovenia, France). One major issue is the budget of works councils. Only a few national legislations (France) establish the allocation of a specific and independent budget to the works council paid by the employer. The absence of an independent budget is considered by workers representatives an obstacle for the missions of the works council. As regards the protection of employee representatives, its scope mainly covers dismissal and sometimes discrimination. However, in a few countries no specific protection exists (Sweden, UK).

45 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Economic prerrogatives As to their economic prerogatives, there is a clear distinction between, on the one hand, information and consultation, and, on the other, codetermination. Information and consultation to employee representatives appears to be a common feature in national representation systems (Belgium, Croatia, Czech Republic, Denmark, Estonia, France, Germany, Greece, Iceland, Italy, Latvia, Liechtenstein, the Netherlands, Norway, Portugal, Romania, Slovenia, Spain, UK). However, the scope of this information and consultation differs between countries. Collective redundancies and the transfer of undertakings constitute the most common events that give rise to information and consultation. This might be a direct consequence of European standards on such issues. Often, information and consultation have a broader scope which ranges from economic data (production, turnover, prospects), legal aspects (company structure and corporate body) and employment information (structure of employment, wages, changes in working conditions).

Codetermination Information and consultation rights can be completed with other prerogatives affecting to the making- decision processes within the undertaking. Codetermination systems show a largest diversity between European countries and may have a different meaning according to each national system. It ranges from the employer’s obligation to submit decisions to the works council to the duty to negotiate with unions on specific matters. The weakest form would be limited to consultation of the employees’ representatives. Under this form, it exists in most of the countries and covers economic and social issues.

The strongest forms of codetermination correspond to those of a possible veto in the hands of employee representatives and the need to take join decisions in some matters (Germany, Austria). Under this specific meaning, it is absent in most of the EU Member States.

However, another forms of codetermination consist of compelling the employer to negotiate with workers representation on specific issues (France); or the right of the representative body to intervene on the essential modifications on the work activities, for instance, by giving its consent and failing this, having the capacitiy to put in stand-by the execution until the decision of the competent court as the Netherlands, Slovenia or Croatia; o the obligation on the employer to take the initiative in negotiating with a union before deciding with regard any major change to the business or to the employment and working conditions as in Sweden (where trade unions may veto outsourcing practices); or definitely the prerogative of the employees´ representatives to take the final decision as regards social and cultural activities as in Finland.

In Belgium, the works council has decisive competence in a number of cases defined by law, e.g. drafting and changing the work rules or setting the dates of annual holidays if necessary; also in Luxembourg, the joint committee has decision-making capacity on some measures affecting health, safety and risk prevention as well as internal regulations. Certain codetermination rights also appear in the legislations of the new MS, basically with regard to social issues (training, holiday periods, funds) or related to work organisation (Czech Republic, Hungary, Latvia and Lithuania) or wage compensations (Poland) exercised by trade union representatives.

46 EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE

Table 4: Main body of representation with economic prerogatives

Chair/internal Main body of representation with a say in economic matters Threshold Members Duration of office rules elected by the Betriebsrat Austria 5 elected 4 years members of work Works council council Conseil d’entreprise Belgium 100 Elected + employer 4 years employer Works council Bulgaria Trade Union representatives (predominant) - Appointed Union rules - 50 or 20 (workplaces) for the Employee reps for information and consultation purpose elected by the general meeting purpose of I&C - - (EU directive effect) of all the employees RADNIČKO VIJEĆE Croatia 20 Elected 3 years elected Works council Cyprus Trade Union Representatives 10 Elected - elected 3 individuals to set the body Trade Union representatives(predominant) Appointed up Czech Republic elected from Rada zam stnanc elected Elected 3 years members of works

4 Works council in the absence of trade union council 7

deputy chair, if Tillidsrepraesentanten 5 Elected by the trade union rules unions have elected - Trade union representatives and the CA of the industry a joint Denmark representative Samarbedjdsudvalg 35 Employer

½ Management 2 years Cooperation committee ½ Elected /management Union or non-union trustee 5 Elected 3 years - No threshold, but 10% of the Estonia Employees’ representatives employees elected 3 years - or union decision to set up Elected by the trade union Luottamusmies (predominant) members at the work place by collective No legal requirement by collective agreement Trade Union representatives (shop steward) according to legally binding agreement Finland collective agreements Henkilöstöryhmien edustajat 20 Elected by the groups of 2 years - Representatives of the personnel groups personnel Comité d’entreprise/Délégués du personnel Employer (for France 50/11 Elected + Employer 4 years Works council/personnel delegates works council) Betriebsrat Germany 5 Elected 4 ans elected Works council “Symvoulia ergazomenon” Greece 50 Elected 2 years Elected Works council EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE

Chair/internal Main body of representation with a say in economic matters Threshold Members Duration of office rules Electing an Union Trade union representatives at” primary level” (predominant) 20 Appointed 3 years executive committee local trade unions Union rules - - - Hungary Üzemi tanács Elected Elected from 50 3 years Works council Members : employees members) None in the private Trúnaðarmenn stéttarfélaga Iceland 5 Appointed sector, 2 years for the - Shop stewards (Trade union representatives) public sector Trade unions (predominant) “reasonable" relationship Recognition procedure - - Process only begins if 10% of employees, with a lower limit Ireland Work councils of 15 and an upper limit of - - - (new law transposing the directive 2002/14/EC) 100, ask for information and consultation rights or the employer takes the initiative Rappresentanze Sindacali Unitarie 2/3 elected Italy 15 3 years No legal provision Unitary trade union representation 1/3 appointed Elected according to the rules of

4 Trade union representatives (predominant) - - -

8 the trade union

Latvia Darbinieku pilnvaroti p rst vji 5 Elected - - Authorised employees’ representative The size of employee representation is established No duration established No statutory Liechtenstein Employees’ representatives 50/20 jointly by employers and by law provision workers. At least 3 Members are elected Trade union representative (predominant) - Appointed Union rules - Mons profesin sjunga Lithuania Works council in the absence of trade union 20 Elected 3 Employee (elected) Darbo taryba Elected (for staff Elected delegates) Luxembourg Works council/staff delegates 150/15 + 5 years Employer (for Employer works council) According to statute of union. 2 years. Malta Shop steward No threshold Elected according to statute of In some unions every - the largest union. year Ondernemingsraad/personeelsvertegenwoordiging/personeelsvergadering Elected (for works Netherlands 50/10 Elected 3 years Works council/personnel delegate/personnel meeting councils) Tillitsvalgt Norway - Elected by local union branches 1 year Elected Shop steward (predominant) EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE - - - - - 250 rules set up labour labour Elected Elected Elected councils) councils) commettee work placework form a union form Chair/internal representative at management and management Joint consultative committee can be Elected (for works Alternatively from Several unions can Several Elected trade union rules rules - - years years years years 1 year 4 4 years 4 years Nominated 2 years 4 4 Union rules Union rules Union rules Union rules Union Union foreseen by law Duration of office office of Duration No specificNo duration - Elected 4 ½ Elected Members Members workplace trade unions trade the trade union ½ Management ½ Management In theory elected In practice appointed practice In Elected by the trade union Elected by the trade union members in the members workplace members in the members workplace Elected but priority given to but priority Elected Elected according to the rules of Elected by union members in the by union members Elected - - Elected - 50 50 Appointed 20 Elected 20 compulsory) (non Elected 2 years - 100 250 50/6 Elected process process No limits limits No Threshold Threshold Union rules - - - 21 employees 21 employees 5 for works trustee enjoying protection protection enjoying 50 for works council council works 50 for employers can only be can only employers compelled to recognise No threshold – although – although threshold No Unions decision but a legal decisionUnions but No preciseNo rules as toit how should be structured, though should be structured, some indications for the I&C the I&C indications for some limit for thelimit number of those unions where there are at least

(predominant) ilor

ly in order to implement the ly in order to implement EU tion (in workplaces without unions) without unions) workplaces tion (in , employees’representatives ii salaria

used used Bedriftutvalg Svet delavcev Works council Works Works council Works Works council Works Förtroendevald Förtroendevald Union delegates Union delegates Delegados sindicais Workers’ committeeWorkers’ Delegados sindicales Reprezentan Comissões de trabalhadoresComissões Trade unions (predominant) (predominant) unions Trade Trade unions representatives representatives unions Trade Trade unions representatives representatives unions Trade Works council or Works trusteeworks Works council/ personnelWorks delegates Trade union representation (predominant) (predominant) unionTrade representation Trade union representatives (predominant) (predominant) unionTrade representatives In the absence of trade union Comités de empresa/ Delegados de personal de empresa/ Delegados de personal Comités Main body of representationMain body with in economic a say matters Employee representatives, particular representatives, Employee Shop stewards although other names such as union representative are are also union as such representative names although other stewards Shop directives on information and consulta on information directives

Spain Spain Poland Turkey Turkey Sweden Slovenia Slovakia Slovakia Portugal Portugal Romania Romania United Kingdom

49 REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE

All countries provide employees’ representatives with time off. However the number of hours vary greatly between countries. Regarding facilities given to the employees’ representatives, it contains under most if not all countries premises and material. As to the protection of employees’ representatives, it covers in some countries discrimination and dismissal but in others only one of these aspects. The most uncommon provision regards the training of employees’ representatives. Only few countries (Slovenia, Luxembourg, Lithuania, Belgium, Croatia, Denmark, France) impose to the employer to give training facilities to the employees’ representatives.

Table 5: Facilities available for workers’ representatives

Country Time Training Material facilities Protection three weeks, in special cases five weeks, Time-off paid if necessary; in plants with more than paid time-off (during the entire term in 150 employees one member is completely out of duty, premises, material and staff within a Austria office, i.e. four years); additional time-off in against dismissal and discrimination in plants with more than 700 employees two members, reasonable measure plants with more than 200 employees for 1 more than 300 employees – three members year Paid by the employer. Subject of an Covered by the employer. Subject to an Belgium Paid time-off agreement between the unions and the agreement between the unions and the Against dismissal employer employer Bulgaria - - - - (1) WC meetings and other activities carried out during working hours. 50 (2) WC members entitled to compensation for six working hours weekly. Employer must ensure training of WC Croatia (3) WC members entitled to assign to each other members. Premises, material and staff Against discrimination and privileged treatment. working hours from point (2) above. (4) If available working hour fund allows, WC

president or member’s assignments can be performed full time. Cyprus Time off paid If agreed by the employer Premises and material Against dismissal and discrimination Czech Against discrimination, dismissal and privileged Republi Time-off paid - Premises and material treatment c Up to six weeks Cost split between the employer and Denmark Meetings counted as working hours Newly elected: Two times two days of a Against dismissal and discrimination the union training and cooperation programme Paid time off from 4 to 40 hours depending on the size Premises and material, if agreed by the Estonia If agreed by the employer Against dismissal of the workforce employer Finland Paid time off - Premises and material Against individual or collective dismissals

France Paid time off up to 20 hours per month 5 days per year paid by the employer Premises, material and budget Against dismissal and discrimination Germany Paid time off Yes, paid by the employer Premises, material and staff Against discrimination and dismissal Greece Paid time off 12 days paid of educational program per year Premises Against dismissal and discrimination Hungary Paid time off up to 10 % of the monthly working hours Covered by employer if it is included the “Appropriate” cost of operation of Against dismissal EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE Country Time Training Material facilities Protection agreement on cost of operations works council covered by employer on the basis of agreement between employer and works council Ireland Time off depending on a collective agreement No Against dismissal Iceland Time (only in the public sector) - Facilites (public sector) Against dismissal Employers with more than 200 employees has to guarantee to the RSU Time off paid up to 8 hours per month (art. 23 WS) Day off not paid to participate to trade union Italy a room within the establishment or very Against dismissal and discrimination seminar or congress (art. 24 WS) Day off not paid up to 8 days per year (art. 24 WS) close to it in order to allow the RSU to perform its tasks (art. 27 WS) Latvia - - - Against discrimination and dismissal No disadvantage in terms of carrying out their activity, either during the mandate or after its Premises, auxiliary means and Liechtenstein Paid time-off - conclusion. This is also applicable to those who put administrative services themselves forward for election to employee representation. Yes, paid by the employer up to 3 working Lithuania Paid time off up to 60 working hours per year Premises and material Against dismissal and disciplinary sanctions days per year Paid time off from 2 to 40 hours per week depending on the size of the workforce up to 500 workers per 51 delegation From 500 to 750 workers : 1 “délégué libéré” Between 40 hours per five years (paid by Luxembourg From 751 to 1500 workers: 2 délégués libérés State) up to 40 hours per year paid by Premises and material Against dismissal From 1501 to 3000 workers: 3 délégués libérés employer From 3001 to 5000 workers: 4 délégués libérés

Above 5001: 1 délégué libéré supplémentaire per 2000 workers Special leave for training and attending Time off for union related work is normally included in Provided only in large undertakings. Malta conferences normally not exceeding 10 Against discrimination and dismissal. Collective Agreements. Sometimes even office space. working days. Training by union. Protection against discrimination and dismissal. By specialised training institutes, partly Netherlands Paid time-off , at least 60 hours per year Facilities When dismissal is allowed, burden of proof for subsidized employer. Meetings counted as working hours. Time off as Norway By unions - Against dismissal “necessary” Poland Time off No provision Against dismissal and discrimination Against discrimination, transfer, disciplinary Portugal Paid time off up to 25 hours per month - Premises and material measure and dismissal Time off up to 5 days per month for trade union Premises, office equipment and Against discrimination and dismissal for trade representatives/ administrative facilities, contribution to Romania By unions, for their members union representatives/ Time off up to 20 hours per month for employee the common funds for carrying out the Against dismissal for employee representatives representatives collective negotiation Slovakia Time off up to 4 hours per month for one trade union No Premises, offices Against dismissal EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE

Country Time Training Material facilities Protection representative with less than 50 workers, 12 hours for one trade union representative with 50 or more workers and16 hours for one trade union representative with 100 or more workers. Slovenia Paid time off up to five hours per month Up to 40 paid hours a year Premises and material Against dismissal Against discrimination, disciplinary measures and dismissal. Priority over other workers in cases of Paid time off per month depending on the size of the The law only establishes it for bodies mass redundancy and geographical mobility. Right Spain workforce specialized in prevention of occupational Premises, material and notice board to open an objection procedure in case of sanction hazards for serious or very serious breach of labour contract. Time for union training activities paid either Sweden Paid time off Premises and material Against dismissal on grounds of union activities by employer or by unions No time off under the law but may be determined in the To be determined in the collective labour To be determined by the collective Against dismissal, change of workplace, substantial Turkey collective labour agreement agreement labour agreement change in the job and discrimination Union reps have no specific protection. Where are acting as employee reps for the purpose of redundancies, or business transfers, protection against dismissal and detrimental treatment

52 United For recognised unions, “reasonable “ paid Kingdo For recognised unions, “reasonable” paid time off As provided for in agreement time off for appropriate training Information and consultation reps have protection m against dismissal and detrimental treatment for carrying out their duties. This also applies to candidates and to reps involved in the negotiation of original agreement.

EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

Table 6 shows that the possibility to have recourse to an expert is not systematic in all countries. Furthermore even if some national legislations establish that the cost of the expert is borne by the employer (Belgium, Estonia, Finland, France) in other coutries the trade unions must pay for it (Austria, Cyprus, Slovakia, United-Kingdom). Few countries condition the recourse to the agreement of the employer (Germany, Estonia, Norway, Slovenia). The expert has mainly an advisory role.

Table 6. Facilities: regulation of external expertise

EXPERTS Country Provision on experts, appointment and Financing Main Functions* matters Generally the trade unions and the chamber of labour provide external Experts advice on advice; demand; no specific The works council is legally entitled to Trade unions; chamber of 1. Austria matters or functions (with obtain external advice from associations labour the exception mentioned defending employee’ interests in case of in the first column) consultation on reorganisation or relatively important matters Main functions - certify that the information given by the employer is complete and Yes 2. Belgium Paid by the employer correct

- analyse and explain figures about the financial structure and developments 3. Bulgaria No provision - - WC may request expert advice on issues Costs of advisory services to 4. Croatia related to their tasks. be paid by employer - according to agreement No provision. Costs by Trade Unions, or Trade Unions, Ministry of Labour and 5. Cyprus Ministry of Labour and Social Not specified Social Security if necessary Security if necessary

One expert is paid by the 6. Czech Republic No specific provision employer only in the case of Advising role EWC 7. Denmark Yes Paid by the employer Advising 8. Estonia Yes, submitted to agreement Paid by employer, if agreed Advising 9. Finland Right to use company experts in Paid by the employer Advising role preparation and negotiations if necessary Right to request external experts on 10. France Paid by the employer Advising role accounting and new technologies issues Advice (advice on specific questions as well as in Paid by the employer who negotiations) 11. Germany Yes must agree in advance nomination as full member in arbitration committee is possible 12. Greece No - - Involvement of experts is optional, needs

to be agreed between works council and 13. Hungary As agreed As agreed employer (most of the time trade

unionists) 14. Ireland No, except agreement No No Not paid by the employer, cf. In the field of collective redundancies 15. Iceland though EWC: Employer´s Advising role and European Works Councils cost limited to one expert Attendance to the Within the field of collective For SNB by the European negotiations in institution redundancies; involvement of employees Company and the European of SNB (EC/ECS); 16. Italy in the European Company and in the Cooparative Sociaty for one attendance in the joint European Cooperative Society expert exam in case of collective redundancies 17. Latvia No No No 18. Liechtenstein No regulation No regulation No regulation 19. Lithuania No No No

53 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

EXPERTS Country Provision on experts, appointment and Financing Main Functions* matters 20. Luxembourg Works council: union experts are allowed Paid by unions Consultative function No specific provision. In case of Legal Notice : for Only in the case of Legal Notice 224 SNB by employer for one 21. Malta Not specified implementing Directive 94/45/EC on expert; for EWC Committee EWCs for SNB and EWC committee no such provision. Paid by the employer if 22. Netherlands Yes informed in advance of the Mainly advisory cost 23. Norway Yes paid if agreed with employer Advising role Depending on the way the 24. Poland Yes Advising role WC was elected Give support in pertinent 25. Portugal In case of redundancy Not defined subjects such as legal, financial or accounting No provisions. Possible upon parties’ 26. Romania agreement 27. Slovakia No provision Paid by unions Advising role Paid by the employer who 28. Slovenia Yes Advising role must agree in advance During the negotiation of the collective The employers is not legally 29. Spain bargaining, outside experts are allowed Advice in negotiations obligated to pay these experts to help the workers’ negotiators. Advisory In the case of H&S matters, the employees/the Yes , according to the codetermination union can always turn to Paid by the employer and the 30. Sweden legislation, before a decision is taken the Work Environment State Authority, where government employed labour inspectors can handle these matters. 31. Turkey No provision 32. United Kingdom No right to have external expert - -

54 EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE Table 7. Rights of the body of representation

Information Consultation Codetermination • specified personnel questionnaires (negotiation and joint rule) • staff evaluation systems ,disciplinary measures, general “rules of order” (e.g. prohibition of smoking or alcohol in a plant) and provisions for control or technical control systems (negotiation • Generally on current matters, principles of business and joint rule) management on social, personnel, economic and • General right of information about all economic, social, • specified “achievement wages” (e.g. piece-work pay; negotiation technical issues, organisation of work relations medical and cultural matters concerning the employees and joint rule) • Safety and health protection • special right of information about collection, processing and • IT based collection of specified employees’ data (negotiation and • Women’s advancement and measures on 1. Austria transmission of employee data joint rule) harmonisation of work and family duties • right to supervise all employment law matters, social security • general determination of beginning and end of working hours • economic situation of the enterprise/plant and matters and safety and health protection concerning the (negotiation and joint rule) measures planned by management (e.g. employees • “social plan” (i.e. measures in the case of reorganisation or other reorganisation; mass dismissal, rationalisation) fundamental changes in the plant; negotiation and joint rule) • recruitment, advancement, mutual termination • protection against dismissal and employee transfer (veto right) • employee representation in the supervisory board • other legally specified matters, in which the employer is free to negotiate and regulate together with the works council or not • Drafting and changing the work rules 55 • Economic and financial situation 2. Belgium • Same matters • Setting the dates of annual holidays • Social situation • Disciplinary measures • Business prospects • When redundancies are in prospect • When a business transfer is planned;

• Changes to working hours; • Same matters • Short-time working to cope with a lower volume of work; 3. Bulgaria • Employment issues and changes to work - • Plans to introduce flexible working; a organisation and employment contracts • Permanent positions available to those on fixed term contracts, and full-time positions available to those working part-time, and vice-versa.

• Approving company labour relations by-laws • Decision to terminate the employment contract of a member of the • Status of operations of the company and its performance • Recruitment plan, transfers to other job positions and WC and to appoint a candidate for membership in the WC lay offs. • Decision to terminate the employment contract of a disabled • Development plans and their impact on economic and social employee or when an eminent threat of disablement is established position of employees • Expected legal, social and economic consequences of transferring employment contract to a new • Termination of the employment contract of a male worker over 60 4. Croatia • Salaries – changes and trends employer, programmes for resolving redundancies years of age, in case of female workers over 55 years of age, of a • Amount and reasons for overtime work • Measures related to safety and security at work worker who is a representative in the supervisory board, of a • Safety and security at work • Introducing new technology, changes in organization pregnant employee or of a female /male employee who exercises • Other important issues for employees and methods of work, Compensation for any right stemming from motherhood protection; innovations and technical advancements • Gathering, processing and disclosing data about an employee to a EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE Information Consultation Codetermination • Plan of annual vacations, Work hours schedule, third person Night work • Appointment of a person to monitor the gathering, processing and disclosing of data about employees to third parties • Consulation takes place in the Advisory Board on Labour and Social Insurance. • Safety and health protection , proceeding to improve work hygiene and the working environment, • Right of information on economic, social, and labour issues organization of social, cultural and physical needs 5. Cyprus concerning the employees. of employees • Legislation on data protection is active, if violation has been • The same • Women’s advancement and measures of detected by the Commissioner of Data Protection. harmonisation of work and family duties • economic situation of the enterprise/plant and measures planned by management • Changes of work organization • Economic situation of employer • Workload and pace of work, changes of work organization • Drafting work regulations; • Evaluation and compensation system • Examination of unauthorised employee absence • Training and education system • Immediate termination of employment contract of top union

5 official by employer • Economic and financial situation • Working conditions of specific categories of workers

6 6. Czech (adolescents, individuals looking after children • Preparing the holiday schedule and the exceptional shortening of Republic • Wages under the age of 15, and disabled individuals). the two-week period within which employees must be informed • Proceeding to improve work hygiene and working about accession to holiday environment, organization of social, cultural and • Set up of fund for cultural and social needs and the rules for physical needs of employees withdrawal.

• Further proceedings regarding the higher number of employees • Economic and financial situation (market and production conditions, plans for major industrial changes or 7. Denmark • Same matters • restructurings, introduction of new technologies) • Social situation (pay scheme, employment structure) • Employer’s structure, employee structure and changes to them, planned decisions with substantial impact on employment or employer’s structure; • Planned decisions potentially involving substantial changes in 8. Estonia work organisation or in contractual relations of employees, • Same matters including termination of contracts; • On the annual report, at latest 14 days after it has been approved. • Transfer of undertaking and collective redundancies The annual accounts; Major changes in work organisation and methods; Works regulations and training in codetermination itself 9. Finland an annual report on staffing levels and plans; Major investment plans; Running of social resources -such as canteens and crèches, where these

pay and salary information; Closures and transfers of production; exist. EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE

Information Consultation Codetermination a twice yearly economic statement showing trends in production, Company mergers; employment and profitability. Rationalisation proposals; Redundancies and dismissals, both individual and collective; Changes in normal working hours; Recruitment policies; The use of outside labour such as agency staff, and the mechanisms for internal communications.

• Legal status of the company, structure. • Economic situation (inter alia, turnover, profit and losses, perspectives, subcontracting, merger, transfer, collective • On exceptional issues, the employer must have the consent of the redundancies) work council: shift from collective to individual working time, 10. France • Financial information (inter alia, transfer of capital, all • Same matters refusal of individual training leaves, replacement of the payment documents given to shareholders, accounts) of supplementary hours by compensatory rest. • Employment situation (inter alia, wages, working conditions, training programs, health and safety, part-time work, fixed- term work, temporary work, employment per gender, wages) • Reconcilement of interests in the event of changes. • Rules of procedure, discipline • New working procedures and methods

57 • Working time, holidays, rules and methods of remuneration, • Change in establishment’s organisation or aims workforce assessment mechanism • Economic and financial situation • Establishment mergers • Health and safety rules/Infringement of ergonomic data • Production and sales situation • Establishment transfers • Complementary systems and organisation of social activities, • Production and investment programme 11. Germany • Company cut-backs and closures allocation of housing • Rationalisation plans • Building and improvement of premises • Employee demands not amounting to “rights” • any processes and projects likely to seriously affect the • Technical facilities • Questionnaires concerning workforce,workforce selection rules interests of the workforce • Work places or processes (recruitment, transfer, dismissal) • Requirements in terms of staff and vocational • Organisation of vocational training, training officers training • Social plan in the event of changes • Change of the legal status of the company • Issuance of an internal regulation for the undertaking, of a health • Total or partial relocation, expansion or contrition of the and safety regulation for the undertaking company’s size • Drafting of informative programmess on a new method of the • Introduction of new technology undertaking’s organization and the use of new technology • Terms and conditions of employment • Change in the structure of the personnel or increase in the • Programming of regular paid leave • Increase of productivity number of employees or rotation of personnel • Means of controlling the presence and the behaviour of the • (if there is no enterprise trade union) collective 12. Greece • Annual programme of investment on the health and safety personnel dismissals and any other issue which other measures of the enterprise • Programming of life-long training and re-training of personnel, provisions of labour law provide for consultation • Any issue related to codetermination (see below). especially after any technological change with the trade union • Programming of overtime work (if any). • Reinstatement in appropriate job positions of handicapped persons • General trends of the company in the economic field and the due to a work accident in the undertaking programming of production • Programming and control of cultural, entertainment and social • Account balance of the undertaking activities. EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE Information Consultation Codetermination • Decisions likely to lead to substantial changes in status of the company especially those that might • significant changes in profile of the company affect the majority of the workforce, such as: • collective redundancies, changes of the work • planned investments • The works council has a codecision right with regard to the organisation, technological changes, training plans • number of home workers, contracted labour and their jobs expenditure of welfare funds, as well as the use of welfare 13. Hungary for workforce, employment plan for disabled Economic and financial situation of the company facilities and properties, as set out by the collective bargaining • personnel,pension schemes, new ways of agreement. • wages, employment situation, liquidity of payment , balance of management, personnel data system, awards, working time programming paid leave. • Issues related to the economic and social interests of the workers • Collective redundancies and transfer of undertakings • Recent and probable development of the undertakings’ or the establishment’s activities and economic situation • • Situation, structure and probable development of employment • Same matters, cf. although in the case of transfer of 14. Iceland within the undertaking or establishment and on any undertakings consulation is only required if anticipatory measures envisaged, in particular when there is a employers envisage measures in relation to their threat to employment employees • Decisions likely to lead to substantial changes in work organisation or in contractual relations 58 No automatic rights of information and consultation. Under the 2006 legislation, information is initially a matter for agreement. Fall-back provisions require the employer to provide information on: 15. Ireland • the “recent and probable development” of the company’s • Same matters

business and to inform on issues connected to employment, particular where jobs might be threatened. • Current redundancies and transfers. • • Recent and probable developments of undertaking’s activities and economic situation • Situation, structure and probable development of employment within the undertaking and, where there is a threat to 16. Italy employment, the anticipatory measures envisaged • Same matters • Decisions likely to lead to substantial changes in work organisation or in contractual relations • Transfer of undertakings and collective redundancies • Health and safety • Economic and social situation of the enterprise • Decisions that may affect the interests of employees, • Decisions that may affect the interests of employees, in in particular a decision which may substantially 17. Latvia particular a decision which may substantially affect work affect work remuneration, working conditions and remuneration, working conditions and employment in the employment in the undertaking. undertaking EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE Information Consultation Codetermination • All matters employee representatives need to be aware of as a prerequisite for fulfilling their task properly a) Security in the workplace and health protection as defined in • Financial situation of the operation and its anticipated national law. development b) Transitional operations (for example: transfer of an 18. Liechtenstein Employment situation and its anticipated development, as well • Same matters • undertaking, business, or part of an undertaking or business to as, if applicable, the planned strategy, particularly if another employer as a result of a legal transfer or merger). employment is under threat; • Fundamental changes in the organisation of work, particularly c) Mass redundancies as defined in national law. in the case of changes in existing employment contracts. • As purely indicative for the employer: current and future activities of the undertaking and its economic and financial • Work (shift) schedule position; current state and structure of labour relations and • Work regulations which define the procedure of work in the • Dismissal of employees on economic and similar 19. Lithuania potential changes in employment, information; measures workplace grounds application whereof is intended in case of a possible collective • Regulations of the occupational safety and health committee redundancy; other information associated with labour relations and activities of the enterprise • Construction, transformation or extension of production or • Introduction or application of technical systems intended to administrative facilities; monitor employee conduct and performance in the workplace; • Introduction, improvement, renewal or transformation of • Introduction or modification of measures regarding employee equipment or work methods and production procedures except 59 health and safety and occupational disease prevention; for trade secrets.

• Establishment or modification of general criteria regarding staff • Effects of such measures on working conditions and the work selection in recruitment, promotions and layoffs and, if applicable, environment. priority criteria for entitlement to early retirement; • Current and foreseeable needs for labour and measures in • Same matters • Establishment or modification of general criteria for employee 20. Luxembourg particular concerning occupational training, staff development assessment;

and retraining. • Establishment or modification of staff regulations or site • Economic or financial decisions liable to have a major effect regulations taking account, where applicable, of current collective on the structure of the company or the level of employment, or bargaining agreements; effects on the volume and structure of the workforce and on employment and working conditions. • Granting of rewards to employees whose initiatives or proposals for technical improvements have been of particular value to the • Social measures, especially occupational training and company, without prejudice to the laws and regulations governing retraining, introduced or envisaged by the company manager. patents and inventions. • Economic and financial developments in the company. To employees’ Representatives: Transfer of Business and Take Over. 21. Malta In Works Council at Air Malta: Financial Matters No provisions and no practices In the only Works Council in existence in Malta at Air Malta : Future Policies; Strategies, Budgets and Business Plans • Any information and data needed to carry out its task. • Consent of the works council, except where the matter is already • Major decisions regarding the company (inter alia: • Legal status of the enterprise, the composition of the settled by a collective agreement, for any decision planned in transfer, acquisitions and divestments, closure, 22. The supervisory board and the management board, group and relation to rules on recruitment, dismissal, promotion, personnel relocation, changes in the organisation of labour, Netherlands dependent relationships and undertaking organisation assessment, pay, grading and training; pensions, saving and profit- major investments, technological innovations, • Economic and financial information sharing schemes; the provisions on working time and leave, measures to protect environment) • Employment situation (inter alia: employment policy, provisions on health, safety and working conditions; personnel EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE Information Consultation Codetermination remuneration of employees and management board) records, personnel monitoring systems and expenditure reimbursement methods; welfare schemes in the undertaking; rules on workplace consultation and the processing of grievances in the undertaking. • Economic status of the undertaking • Issues related to the workplace and everyday operations • General payment and working conditions in the undertaking • Undertaking reorganisation and transfers • Financial information (accounts) • Reorganisations of operations, production and • Changes in shareholders and in operations affecting the status redundancies of the company • Technology and work organisation • Recruitment of new employees, list of employees and • Individual claims and grievances 23. Norway applicable collective agreement • Employment of disabled people • Individual claims and grievances • Promotion of equal professional status between men • Employment of disabled people and women • Promotion of equal professional status between men and • Recruitment in the year following redundancies women • Control systems • Recruitment in the year following redundancies • Control systems • Recent and probable development of the employer’s activities • recent and probable development of the employer’s and economic situation; 60 activities and economic situation; • situation, structure and probable development of employment, • the situation, structure and probable development of 24. Poland and on any measures envisaged with a view to maintaining • No provision employment, and on any measures envisaged with a current staff levels; view to maintaining current staff levelsstate, • measures likely to lead to substantial changes in work • organisation or in contractual relations.

• Regulation of remote surveillance methods in the • Economic and financial situation: general plans of activity and work place; handling biometrical information; budget, production organization and its implications on the • Approval of internal regulations; level of use of the workforce and plant, supply position, • changing the basic criteria of occupational grading forecasts of the volume and administration of sales, employee and promotion; management, undertakings’ accounting position, financing • Definition or modification of work schedules methods, tax and tax-related charges, plans to modify the applicable to all or to the majority of employees; corporate purpose or company capital and plans to redeploy • Preparation of the annual leave plan; the enterprise’s production activity, temporary reduction of 25. Portugal • Relocation of workplace resulting from the working time or suspension of labour contract due to reasons relocation of the undertaking or establishment; applicable to the employer, training plans. • All measures that substantially reduce the number of • Employment situation: information regarding part-time work, employees, that substantially aggravate their fixed-term work, overtime hours, reduction or exclusion of the working conditions or likely to lead to substantial rest periods, individual dismissals, use of employees in a changes in work organization or labour contracts; temporary assignment regime. • Closure of the establishment or production line; • Collective redundancies and transfer dissolution of the enterprise or bankruptcy declaration. • Collective redundancies and transfers EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE

Information Consultation Codetermination • Temporary reduction of working time or suspension of the labour contract. • Training plans • Decisions likely to substantially affect their rights and interests • Problems of a professional, economic, social, cultural, and sports nature • Work loads • All aspects giving rights to consultation particularly those • Collective redundancies and transfer • Days of weekly rest granted on a cumulative basis after a period of 26. Romania “likely to affect substantially their rights and interests” • Collective schedule of annual holidays continuous activity

• Safety and health measures • Measures for health and safety training • Internal rules and regulations • Flexible working arrangements and on the use of any social fund the company • Situation, structure and anticipated future of employment and planned measures, in particular • Economic and social situation • Working time 27. Slovakia where there is a threat to employment; transfer • Transfer • Leave • Improvement of working environment; • Termination of an employee representative contract • Substantial changes in organisation of work; • Safety and health protection for employees

61 • status changes;

• organisation and execution of safety measures not stipulated by law • sale of the company or of essential parts; or other regulations and not covered by collective agreements; • the economic status of the company; • closing of the company or of essential parts; determination of measures to prevent injuries at work and • the development targets of the company; workforce reduction; • occupational illnesses, as well as measures to protect the health of • the state of production and sales; • essential ownership changes. employees, not stipulated by law or other regulations and not • the economic position of the branch as a whole; • need for new employees (number and profile); covered by collective agreements; • changes of activity; • job systematisation; 28. Slovenia • the bases for determining the use of paid leave and other instances • any decline in economic activity; • movement of a significant number of employees to of work absenteeism; • changes in the organisation of production; outside the company; movement of a significant • criteria for assessing work performance and for remunerating number of employees from one place to another; • technological changes; innovative activity in the undertaking; employee promotion • the annual accounts and annual report; • measures in the sphere of additional pension, criteria disability and health insurance; • other issues under mutual agreement • management of housing fund, company vacation homes and other • adoption of general rules of disciplinary worker welfare facilities; accountability • Economic situation (inter alia: general evolution of the economic situation of the undertaking, production and sales of the undertaking, transfer, merger, collective redundancies) • plans for collective geographical mobility or for a • Collective redundancies, also in bankruptcy or insolvency cases. • Financial situation (inter alia: balance sheet, results, annual major collective change to working conditions • Some employment issues , failing collective agreement (inter alia: 29. Spain report and any documents forwarded to shareholders) • labour measures taken by a buyer or seller of an occupational classification, promotion system, irregular • Employment situation (inter alia: probable evolution of undertaking distribution of working time) employment in the undertaking, subcontracting, application of • Equality between men and women (equality plans) the right to equal treatment and opportunities between women and men, contracts used in the company EMPLOYEE REPRESENTATIVES EMPLOYEE ANIN ENLARGED EUROPE

Information Consultation Codetermination • Merger, takeover or modification of the legal status of the undertaking with impact on the volume of employment. The Codetermination concept in the Codetermination Act includes such Extensive rights according to the codetermination legislation, The local trade union has a general right to ask for areas as information, negotiation/consultation, right of association etc. mainly the CodeterminationAct (1976) but also other labour laws. negotiation/consultation on any matter of “major “Codetermination” cannot be separated from the right to information As a rule, the right to information covers everything that concerns importance” and the employer has a duty to answer (see and consultation. the undertaking (economy, finances, work organisation etc) or the 30. Sweden information). Should negotiations fail – no collective There is no works council system in Sweden. The codetermination working conditions of employees, (also one single employee). The agreement, an unfair dismissal etc – these issues can be concept is built on the relations between the employer (organised or information should concern a “major change”. The employer should taken to higher levels, central employer/trade union not) and the trade unions, and there must be collective agreements take the initiative to inform. The union also has a right to demand organizations or the Labour Court. concluded by the parties. (coverage of coll. agreements about 90% of information, and the employer is obliged to meet that demand. the labour market) • Information on individual employment conditions • Information on occupational risks and illnesses • collective redundancies (information and 31. Turkey • Information on part-time work and forced vacation period consultation) • Information on substantial changes to employment conditions • Information on transfer of the workplace If the union is recognised: If the union is recognised: • Collective redundancies and transfer • Right to information to conduct collective bargaining

62 • Health and safety: • According to ACAS: pay and benefits - structure of the

payment system, earnings analysed by work group, details of If no union is recognised: fringe benefits; employee numbers - numbers employed by • In case of redundancies and business transfers: age and sex, turnover, absenteeism; performance - election of an ad hoc representative having productivity and efficiency data, sales; and financial - profit, 32. United consultation rights, unless there is an existing body assets, liabilities, loans, sales. No areas

Kingdom for information and consultation • Ttransfer • For health and safety matters Plus information on the employer’s business, developments in Plus consultation on developments in employment and employment and decisions likely to lead to substantial changes in decisions likely to lead to substantial changes in work work organisation or contractual arrangements (the issues covered organisation or contractual arrangements (the issues by 2002/14/EC) if there has been an agreement on this issue – covered by 2002/14/EC) if there has been an agreement whether or not the union is recognised. (These are the fallback on this issue – whether or not the union is recognised. provisions – an agreement can vary the arrangements.) (fallback provisions.)

EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

IV- EMPLOYEE PARTICIPATION ON THE BOARD OF DIRECTORS, SUPERVISORY BOARD OR OTHER CORPORATE BODIES60

Giving employee representatives a role at board level is one way of ensuring that their concerns are at least heard at the highest level of decision-making within companies. This occurs in some form in a majority of the 32 states examined – with employee representatives present both on supervisory and single-tier boards61. However, in some of the 32 states, employee representatives at board level are only found in publicly-owned or recently privatised companies, and the states that have legislation providing for employee board-level representation across the private sector are in a minority, although a substantial one.

There are also major differences in the employment thresholds for board-level representation, the proportion of the board made up of employee representatives, the way that employee representatives are chosen, the bodies they sit on, and, to a more limited extent, the powers they have. There is, however, one clear common factor. This is that in none of the countries examined do employee representatives have a majority of seats on the board. Even the arrangements for the coal, iron and steel industries in Germany, which provide the most extensive board-level representation to employees in any of the 32 states, do not result in an employee majority.

Employee participation at board level (corps en 10 et non en 12) There are 13 states, the biggest single group, where employee participation at board level extends to a wide range of private companies. This group includes four of the five Nordic states, Denmark, Finland, Norway and Sweden (although not Iceland), Germany, Austria, the Netherlands and Luxembourg as well as the Czech and Slovak Republics, Hungary and Slovenia among the EU members states that joined in 2004 and Croatia among the candidate countries.

The employment thresholds for the provision of employee board-level participation vary substantially between these 13 states. The lowest are found in three of the Nordic countries. In Sweden, a company must only have 25 employees for there to be a right to employee board-level representation; in Norway, the threshold is 30, in Denmark 35, while in Finland the threshold is significantly higher at 150. In both the Czech and Slovak Republics, the threshold is 50, and this is also the figure for Slovenia, where a company has a single-tier board. (Slovenian companies with a two-tier structure and a supervisory board must have employee representatives, no matter what number they employ.) In the Netherlands, companies must have at least 100 employees, as well as meeting other conditions, before they are required to have employee representation at board level. In Hungary and Croatia the figure is 200, and in Austria the threshold for most companies is 300, although all companies able to be traded on the stock market (AGs) must have employee representatives at board level.

The highest thresholds are found in Germany and Luxembourg. In Luxembourg, a company must have 1,000 employees, or have substantial state involvement (defined as at least a 25% stake or a state concession) before they are required to provide employee participation at board level. In Germany, employee participation at board level begins when companies have 500 employees, where employee

60 The material in this section is taken from the national reports as well as Workers’ participation at board level in the EU-15 countries: Reports on the national systems and practices, Hans Böckler Foundation / European Trade Union Institute (ed.), Brussels, 2004; Worker board-level representation in the new EU Member States - Country reports on the national systems and practices, ETUI-REHS and SDA (ed.), Brussels 2005; The European Company - Prospects for worker board-level participation in the enlarged EU, Norbert Kluge and Michael Stollt (ed), Brussels 2006; The forgotten resource: Corporate governance and employee board-level representation. The situation in France, the Netherlands, Sweden and the UK, Lionel Fulton (ed), Dusseldorf 2007, and www.worker- participation.eu, 2007 61 There are the two main ways in which European companies organise their governance structure: either with a two- tier board with a supervisory board, whose job is to set broad targets and monitor their achievement, and a management board, which is responsible for the day-to-day running of the company, or with a single-tier board which does both.

63 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

representatives have a third of the seats on the board. But it is only in companies with at least 2,000 employees (1,000 in the coal, iron and steel industries) that employees have the most extensive rights, with an entitlement to half the seats (see below for details).

There are a further five countries, where board level participation is limited to some state-owned or municipally-owned companies, and these are Belgium, Greece, Ireland, Poland (where partially- privatised companies are also covered) and Spain (where local savings banks plus the privatised Iberia also have board level representation). In a further two – France and Malta – board-level representation is extended to recently privatised companies. French companies can also decide voluntarily to have employee representatives at board level.

However, there are significant differences in the legal basis for employee participation at board level in these seven states. In France, Greece, Ireland and Poland, there is general legislation covering publicly- owned companies (and privatised ones in France). However, in both Belgium and Malta, employee representation depends on specific arrangements for specific companies. In Spain, there is legislation covering local savings banks, but the presence of employee representatives in large state-owned companies is the result of past agreements reached between the government and the unions.

Finally there are 12 states where there are no legal arrangements for board level representation. The majority of new EU member states fall into this category, including the three Baltic states, Estonia, Latvia and Lithuania. Cyprus also has no legislation giving employees a right to seats on the board, although in practice trade union representatives have recently been appointed to the boards of two banks. As regards the two states which joined the EU in 2007, employee representatives have no right to be at board members in Romania, although they can attend board meetings for some items. In Bulgaria, employees have no rights to board-level representation but in public limited companies with 50 employees or more they can participate in shareholders’ meetings on a consultative basis. Among longer standing EU members neither Italy nor the United Kingdom have any legal requirement for employee board-level representation, while in Portugal, although there is a constitutional right for workers' representatives to be present at board level in state-owned companies, this has never been implemented. Outside the EU, neither Liechtenstein nor Iceland (both EEA members) have board-level employee representation, nor does Turkey.

The proportion of seats The extent of employee board-level participation – the proportion of board seats they have – also varies, although not to the same extent. The most common variant is that employee representatives have a third of the seats, either precisely, as for example in the Slovak Republic (although in state-owned Slovak companies the proportion is 50%), or in practice, as in Sweden, where in companies with between 25 and 1,000 employees there are two employee representatives, but boards typically have five or six members, giving employees a third of the seats in three-quarters of companies.

Overall, among the 13 states with widespread employee board-level participation in the private sector, there are nine where once the employment threshold has been crossed, employee representatives generally have a third of the seats on the board. These are Austria, the Czech Republic, Denmark, Hungary, Luxembourg (in companies with more than 1,000 employees), the Netherlands, Norway (in companies with more than 50 employees), the Slovak Republic and Sweden. In two states there is a lower level of representation – Croatia has only one employee representative on the board and in Finland only a quarter of the board represents the employees. There are also two states where the proportion of employee representatives is higher. These are Slovenia, where employee representatives have between one third and half of the seats – the precise arrangements being determined by the company – in a two-tier board structure, and Germany. In Germany, employee representatives have a third of the seats in a company with between 500 and 2,000 employees, but above 2,000 (1,000 in coal, iron and steel companies) they have 50% of the seats. However, except in coal, iron and steel companies, even in these larger companies this is not genuine parity with the representatives of the shareholders, as the chair, who always comes from the shareholders’ side has a second vote which he or she can cast if the votes are tied. In coal, iron and steel companies, both employee and shareholder representatives have the same number of seats and there is an independent chair, who is chosen by agreement between the two sides.

64 EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

There are greater variations in the seven states where employee board-level participation is limited to state-owned or, in some cases, recently privatised companies. It is one third of the board in most Irish companies in this position and in French state-owned companies (around a fifth or fewer in privatised companies) but is it two board members in Greece and Spain (where the two board members are chosen by the two main union confederations), while in Belgium and Malta the numbers vary from company to company. In Poland, there is a workers’ council with significant powers in state-owned companies, and in partially privatised companies, employees have between 40% and about a third of the seats.

Choosing the representatives In the case of the 13 states with widespread board-level representation there is a fairly even split between those countries which choose representatives at board level through workforce elections, and those where they are chosen by the works council. In five states, the Czech Republic, Denmark, Germany, Norway and the Slovak Republic, the employee representatives are elected by the whole workforce, although sometimes this is indirect through delegates. In another six, Austria, Croatia, Hungary, Luxembourg, the Netherlands and Slovenia, it is the works council or similar body (employee delegation in Luxembourg) that chooses them. (In the Netherlands, the works council nominates the employee members but the final decision is taken by the shareholders meeting on the basis of a recommendation from the supervisory board which should not normally overturn the work’s council’s recommendation.) In Finland and Sweden the employee representatives at board level are agreed with the unions.

Among the seven states, where board-level participation is limited to state-owned or formerly state- owned companies, workforce elections are found in France, Greece, Ireland and Poland, with other arrangements in Belgium, Malta and Spain.

There are also differences in the individuals who can be chosen. Typically they are employees of the companies involved. But in the Netherlands, company employees and trade union officials who negotiate with the company are specifically excluded from sitting on supervisory boards. In France, employees elected as board-level representatives must give up other representative positions that they hold. In Germany in companies with more than 2,000 employees, two or three of the six to 10 seats for the employees’ representatives are nominated by the unions with membership in the company and normally are take by external union officials (numbers depend on the number of employees). In addition, in these larger companies, one of the employee representatives must be a senior manager.

The position and powers of employee representatives In most cases, employee representatives sit on supervisory boards – bodies whose job is not to manage the company on a day-to-day basis but to set broad objectives and monitor the work of a management board.

This is always the case in six of the 13 states with board-level representation across the private sector – Austria, Croatia, the Czech Republic, Germany, the Netherlands and the Slovak Republic – and in Denmark, Hungary and Slovenia there are both single-tier and two tier systems. (In Hungary and Slovenia companies have a choice and in Denmark private limited companies have a choice, while public limited companies must have a two-tier structure.) However, in Norway and Sweden, as well as Luxembourg, employee representatives sit on a single-tier board. In Finland the exact arrangements are worked out between the unions and the employer, with the possibility of representation on a single-tier board, a specially set up supervisory board, or at the level of management for specific operating units.

In the states where employee board-level representation is limited to state-owned or privatised companies the situation is less varied. French companies can choose between a single-tier and a one-tier system but, with the exception of Poland, the other states have a single-tier structure in which employee representatives are present.

One notable variation is where the employees are on the supervisory board but there is also a single member of the management board, who is chosen by the employees, or at least cannot be chosen against their wishes and is normally responsible for personnel issues. This “labour director” is found in iron, coal

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and steel companies in Germany, in larger companies with a supervisory board in Slovenia and in partially privatised companies in Poland.

Most employee representatives at board level have the same rights and duties as other board members. However, this is not the case in Finland, where they may not take decisions on the appointment of management, the terms and conditions of the workforce or industrial action, nor in Sweden, where similarly employee representatives may not be involved in decisions on collective agreement or industrial action.

Table 8: Board level representation

Country Type of companies covered Extent of representation 1. Austria From 300 employees A third of supervisory board 2. Belgium Small number of state-owned companies Varies 3. Bulgaria No board level representation, but in public limited companies with 50 employees or more they can participate in shareholders’ meetings on a consultative basis. In private limited companies, they can participate in meetings of the shareholders regardless of the number employed – but only on social issues. 4. Croatia Privately-owned companies from 200 A single employee representative on the employees and public companies where the supervisory board state owns at least 25% 5. Cyprus No statutory board level representation but at least two examples where union representatives are on company boards 6. Czech State-owned companies and private A third of supervisory board Republic companies from 50 employees 7. Denmark From 35 employees A third of board – (supervisory in public limited companies) 8. Estonia No board level representation 9. Finland From 150 employees A quarter of members of board or other decision making body 10. France State-owned and recently privatised A third of board in state-owned companies, companies around a fifth in others 11. Germany From 500 employees A third of supervisory board in companies with more than 500; half in companies with more than 2,000; special arrangements including management board member in coal, iron and steel companies 12. Greece State-owned companies Two board members 13. Hungary From 200 employees A third of members on supervisory board (fewer rights in single tier board system) 14. Iceland No board level representation 15. Ireland State-owned companies A third of board (less in some smaller companies) 16. Italy No board level representation 17. Latvia No board level representation 18. Liechtenstein No board level representation 19. Lithuania No board level representation 20. Luxembourg From 1,000 employees or with state A third of board in companies with 1,000 plus involvement employees, up to a third in others 21. Malta State-owned and recently privatised Varies, often just one companies 22. Netherlands From 100 employees Up to a third of supervisory board 23. Norway From 30 employees One member on board in companies with

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Country Type of companies covered Extent of representation between 30 and 50 employees, a third of board in companies with more than 50 employees 24. Poland State-owned and partially privatised A workers’ council has substantial powers in companies state-owned companies; in partially privatised companies employees have between 40% and about a third of seats on supervisory board and a seat on management board 25. Portugal State-owned companies Right to be present in constitution but never realised 26. Romania No board level representation. Elected delegates of the representative trade union should be invited to participate in management boards to discuss “problems of professional, economic, social, cultural and sports interest” 27. Slovakia State-owned and private sector companies Half supervisory board in state-owned from 50 employees (also other conditions) companies; a third in private sector 28. Slovenia Companies with supervisory board; and Between a third and a half of seats in companies companies with single tier board from 50 with supervisory board plus management board employees (also other conditions) member if more than 500 employees; around a third in companies with single tier board 29. Spain Some state-owned and recently privatised Two members in state-owned companies; companies and local savings banks, plus between 5% and 15% in savings banks; one cooperatives, if they have more than 50 board member in cooperatives permanent employees 30. Sweden From 25 employees Around a third of single tier board 31. Turkey No board level representation 32. United No board level representation Kingdom

Recent changes In most countries the legislation on employee representation at board level has remained broadly unchanged for several years, since the 1970s in many of the older EU member states, since the change to a market economy in many of the newer EU members. However, the EU directive on employee involvement in the European Company (2001/86/EC), which requires Member States to permit the establishment of European Companies with both single-tier and two-tier structures, has led both Hungary and Slovenia to introduce a similar choice for their national companies. In both cases the level of employee involvement has been potentially reduced as a result of these changes.

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V- EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

The interests of employees are at times affected by decisions external to the undertakings’ management. These situations may be foreseeable, but still involve the labour prospects of employees. The most common examples may refer to legal decisions with regard to undertakings facing difficulties (bankruptcy protection, etc.), takeover bids from other undertakings that alter the composition of capital and/or the structure of shareholders.

In general, the right to information and consultation on economic issues and their evolution in the undertaking usually involves situations of this kind, given that the undertaking has a duty to communicate these external events to the representatives.

This issue is not normally studied in labour law. Its special feature resides in that it may involve employee rights of information and consultation besides the general rights assigned to their representatives in national labour legislations. They are not an addition to existing rights but they are aimed towards and exercised in specific situations.

The national regulations of the countries under study do not recognise prerogatives in a uniform manner other than the general right of information and consultation.

A decisive element of access to information in these situations is the presence of employee representatives participating in the board of directors and supervisory bodies of the undertaking. In countries where legislation establishes this system of participation, belonging to the board of directors is an added value for employees.

V.1. RECOVERY AND BANKRUPTCY PROCEDURES

From a point of view of undertakings anticipating problems, employee representatives are sensitive to the possibility of experiencing a restructuring process. Thus, the practical exercise of the right to receive information about the undertaking’s economic situation and prospects exists and is consolidaded in all countires.

In addition, we can highlight the following features:

– Early warning systems may be activated by employee representatives in Belgium, Luxembourg and Germany, and a right of information exists in the Netherlands and France; compulsory prior information is established in the event of change of activity in the case of Sweden.

– Works councils may be consulted in France under amiable settlement procedures;

– Procedures for consulting employee representatives on the implementation of special measures for undertakings in difficulty exist in Belgium, Italy, Spain and Hungary; in Portugal, the representation body has the right to a management audit;

– Participation in management boards, codetermination systems and, more generally speaking, systems for involving employees, allow for information and intervention before the undertaking gets into serious difficulty. The possibility of calling on expert assistance in economic matters is also available;

– Safeguard clauses, exceptions to collective agreements and collective agreements designed to reduce costs, may be negotiated between the social partners, as occurs in Germany, Luxembourg, Malta and Spain,.

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As part of the legal recovery or liquidation procedures:

– Most of the countries have a system for informing employee representatives. However, this information is often limited to the effects of redundancy decisions;

– Employee representatives or unions may make their views known in Austria, Belgium, France, Spain, Portugal, Hungary, Czech Republic and Norway;

– Negotiation procedures exist in Germany and Finland.

Table 9: Involvement of employee representatives in case of employer bankruptcy or insolvency

PROCEDURES FOR RECOVERY OR Country PREVENTING DIFFICULTIES LIQUIDATION Representation on Supervisory Board 1. Austria Codetermination with works council for changes Works council informed-consulted as part of Works council informed-consulted on economic situation procedure No specific procedure, but Works Council or Trade Union Delegation informed about payment delays WC informed about the economic situation (data) and informed/consulted about closure, take-over; consulted on 2. Belgium No specific procedure the social restructuring plan; WC or Health and Safety Committee or Trade Union Delegations consulted about pursuing the company’s activities. According to the labour code, in the event of a fall in the volume of work or for recovery reasons, the Employee representatives are informed on latest and employer may assign, for a period of 3 months in a forthcoming changes in the activity and the economic 3. Bulgaria calendar year, part time work to the situation of the undertaking, the prospects of employment, workers/employers in an undertaking, after the anticipated preparatory measures preliminary coordination with the trade unions and employee representatives WC must be informed about the business situation and 4. Croatia results. The employee representative on the supervisory Not specific board is another source of information. No specific procedure No specific procedure 5. Cyprus Employee representatives have a right to information 6. Czech Employee representatives have a right to information and and consultation on these matters; Republic consultation on these matters; Trade unions have the right to participate in meetings of creditors’ committee; Employees represented on Board of Directors Negotiations with UDs on effects of changes Cooperation Committee, including UD, informed and 7. Denmark Uds and cooperation committee informed about economic consulted as part of procedure situation and future prospects on a regular basis General right to information and consultation on matters of Employees and representatives informed about major concern to employees: working conditions, employees’ redundancies. structures and contracts In both cases there are no specific obligations with 8. Estonia In case of EWC, the information and consultation in the respect to bankruptcy or insolvency. An information event of liquidation is specifically mentioned, also and consultation system is generally established for information and consultation about economic and financial the purpose of reducing contradictory information. situation is regularly carried out Representation on Board of Directors Negotiation with Uds compulsory, with staying 9. Finland Information-negotiation with staying effect in the event of effect, in the case of procedure for reorganisation of major changes undertaking Works council right to early warning: request for explanation ; advice by chartered accountant

Expert legal advice on management operations requested by Works council informed-consulted at different stages works council 10. France of procedure: before the ruling; during the Works council informed-consulted on amiable settlement of observation period and the implementation phase. difficulties Works council may appeal against rulings Financial information to works council + advice by chartered accountant

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Works council informed/consulted about recovery Early-warning systems plan Employees’ representation on Supervisory Board Employees form a creditors group 11. Germany Works council informed/consulted on economic situation Negotiations with Works council about changes in Safeguard clauses in collective agreements the establishment and fast-track social plan Safeguards against redundancies maintained Works council or (if there is none) an ad hoc elected 12. Greece three-member committee. Union representative on Supervisory Board (when more than Consultation involves: the principle of planned 200 employees employed) measures, the way of preventing disadvantages as a 13. Hungary Trade union should be informed and consulted, if no TU, result of the liquidation, and measures to mitigate the works council; if no WC, representatives of non- organised consequences. workers 14. Iceland Negotiations with Uds No specific procedure In companies covered by information and consultation law, there is a legal requirement to inform and consult employee about transfers of production, mergers, cutbacks or closures of 15. Ireland No specific procedure undertakings, establishments or important parts thereof, and collective redundancies. Company law rules apply in procedures for recovery or liquidation by way of registering a charge against the company’s assets. Settlement by negotiation, with court or State mediation if necessary. Generally low degree of formalization of conflict resolution procedures. At local level the mediation is performed by the Prefects and the regional governments (through the Labour Counsellor) on their own initiative, in pursuance of their function as guardians of public order. Mediation by the regional governments tends to concentrate 16. Italy on disputes connected with serious employment problems. Government mediation mainly occurs when industry-wide agreements are due for renewal, through the intervention of the Minister for Labour. Besides, IRI Protocol of 1984 hasintroduced institutionalized procedures. Also, the directive of the Scotti Agreement of 1983 covers the introduction of this kind of procedures in industry-wide and undertaking agreements. 17. Latvia No Stipulation No Stipulation Employers inform employee representatives on issues involving the employment situation and its prospects, Employee representation at workplace level. as well as, if need be, the anticipated planned 18. Liechtenstein Employee representation defends the common interests of strategy, particularly if employment is under threat the workers in relation to the employer and on fundamental changes in the organisation of work, particularly in the case of changes to existing employment contracts. 19. Lithuania No stipulation No stipulation Tripartite coordination on undertakings’ situation Employees represented on Board of Directors WR and joint committee informed-consulted on economic 20. Luxembourg No specific procedure situation Collective agreements on reduction of production costs (crisis law) Consultation with union about possible redundancies Safeguard clauses in collective agreements. 21. Malta and redundancy benefits. Information and negotiation with union. Plans discussed with union. Representation in worker representative bodies in

22. Norway undertakings Plans discussed with employee representatives Procedure for cooperation with works council No specific procedure. No right of advice for the works 23. Netherlands council if the employer files a suspension of payments or No specific procedure bankruptcy application. 24. Poland No stipulation No stipulation Prior opinion of workers’ committee on restructuring Right to management audit (workers’ committee) plans, dissolution or declaration of bankruptcy 25. Portugal WR informed-consulted on economic situation Workers’ committee involvement in bankruptcy

procedure 26. Romania No specific procedure No specific procedure

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No specific procedure with respect to prevention of insolvency/bankruptcy, but: Work council and/or trade union (or directly - Trade union and/or works council to be informed on (i) employees) to be informed (in writing) on an economic as well as (ii) financial situation of the employer; 27. Slovak employer’s suspension of payments (insolvency) and (iii) projected development of the employer’s activities Republic within a period of ten days after it has occurred. and to be consulted on anticipated development of Employees asked to announce all their claims against employment and employing at undertaking; collective an employer. redundancy etc. - Employee representatives in the Supervisory Board 28. Slovenia No specific stipulation No stipulation Works Council informed regularly about the economic situation (general data)

The Works Council must also be informed and is entitled to Works council can be involved in bankruptcy review give an opinion –not binding for the employer—within 15 procedure. Works Council is also consulted in case of days and prior to the implementation by the employer of collective redundancy, collective geographical 29. Spain decisions taken about reduction of working time and the full mobility or a major collective change to working or partial transfer of units, or about job restructuring and conditions during this kind of procedure. final or temporary, full or partial job cutbacks.,

Works Council is also consulted in case of collective redundancy, collective geographical mobility or a major collective change to working conditions Representation on Board of Directors 30. Sweden Prior information in the event of a change in activity No specific procedure Information and negotiations with Uds No specific procedure of involvement No specific procedure of involvement 31. Turkey

No specific procedure of involvement No specific procedure of involvement 32. United

Kigdom

Works council: Works council or equivalent body; UD union delegate; WR: workforce representative.

V.2 OPERATIONS AFFECTING SHAREHOLDERS

In the event of operations affecting shareholders, the action available to employees, apart from that available to them as shareholders or through the unions, may be of a general or specific nature.

Participation in the management boards within the undertaking, codeterminationsystems and, more generally speaking, workers’ involvement systems, are means through which the workforce can be informed before the operations take place and economic experts can be called in to provide assistance.

In the event of a specific operation affecting the shareholders:

– Most countries make provisions for informing the employee representatives;

– Prior consultation is provided for in France, Belgium, Czech Republic, Luxembourg, Malta, Norway, Romania, Slovak Republic and Spain;

– Negotiation procedures are provided for in Austria, Denmark, Finland, Germany, the Netherlands, Sweden and usually focusing on the consequences for the employees

As regards transfers of undertakings or establishments, the Directive 2001/23/EC has largely harmonised the procedures for informing and consulting employees. Other recently issued directives concerning company law, such as Directive 2005/56/EC on cross-border mergers of limited liability companies and Directive 2004/25/EC on takeover bids, also establish information and consultation procedures.

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V.3 STATE AID

As regards State aid, employees can take action under the general participation procedures and the institutionalised systems for consultation between the social partners and public authorities.

In most cases, general employee involvement systems (right of the representation body to be informed and the participation in Corporate Boards) in the undertakings allow workers’ representatives to be informed and consulted. In some cases, managers of companies who receive government support have to specifically communicate this to the works council.

Tripartite consultation systems and the possibilities for union representation in the aid-giving governamental institutions that the workers have a say in the granting of aid, i.e. for employment and training.

Table 10: Participation by workers or their representatives in the case of operations affecting shareholders and the granting of State aid (excluding action in their capacity as shareholders and Community provisions on transfers)

Country OPERATIONS AFFECTING SHAREHOLDERS STATE AID

State aid: works council informed Change in shareholding: works council informed Change: codeterminationwith works council Change: codetermination with works council Participation in Supervisory Board 1. Austria Representation on Supervisory Board Works council informed-consulted on economic Works council informed-consulted on economic situation situation Social partnership Works Council consulted on take-over bid 2. Belgium Works Council informed on State-aid Works Council informed/consulted on mergers/acquisitions Change of employer, activity and the economic situation of the undertaking - workers/employees representatives and trade 3. Bulgaria No such procedures unions informed

4. Croatia Not specified Not specified 5. Cyprus Not specified Not specified State aid is established in legislation; The State Employee representatives have a right to information and provides for a legislative framework for social consultation in the event of structural changes and on economic dialogue and the methods of employee matters, restructuring measures and issues regarding the representation at all levels; The State provides for 6. Czech relocation of the employer; the right of employees to information and Republic In case of joint-stock companies, they also participate in consultation on these matters; supervisory boards –control the activities of top executives; In the case of unions, the State also provides for In the banking sector, they also participate in the board of the right to information/consultation and directors; codetermination in some matters; Tripartism Representation on Board of Directors Negotiations with UDs on effects of changes UDs and cooperation committee informed on 7. Denmark Representation on Board of Directors financial situation UDs and cooperation committee informed on financial situation Union representation on organisations providing aid for employment, training and prevention State level social partners are represented on the Employees are informed and workers representatives are Labour Market Board and are also represented in consulted in the event of transfer on matters concerning 8. Estonia monitoring and management committees of the employees (contractual relations, structures, termination of commissions distributing EU Structural Funds. contracts etc).

Transfer, merger: UDs informed ; if workforce reduced, Major decision affecting employees: negotiations negotiations with UDs, with staying effect with UDs, with staying effect. Major decision affecting employees : negotiations with URs, 9. Finland Representation on Board of Directors with staying effect Tripartite work premises development programme Representation on Board of Directors Cooperation on ongoing basis UDs informed-consulted on economic situation Takeover bid. Purchase or transfer of shares, mergers, divisions, Works council given detailed information 10. France contractual links : prior consultation with works council Works council informed-consulted on employment

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Country OPERATIONS AFFECTING SHAREHOLDERS STATE AID

Subject of a takeover bid: works council informed, works aid council hears the views of bidder Negotiations for an agreement on aid for shorter List of shareholders, capital distribution, shares : works council working hours informed + accountant’s advice Union representation on aid allocation bodies Works council informed-consulted on employment and training aid Transfer: codetermination with works council Employment pacts 11. Germany Representation on Supervisory Board Representation on Supervisory Board Works council informed-consulted on economic situation Works council informed-consulted on economic situation Links between social partners/regions Duty to inform and consult the trade union of the undertaking (or in its absence, the works council) on: the planned date of the 12. Greece Local employment pacts change, the reason, the legal, economic and social effects on employees, considered measures for the employees. Change in shareholding: works council is informed. Pre-condition of state aid: settled (peacefully) Representation on supervisory board (employing more than 200 industrial relations at the undertaking. 13. Hungary workers). Works council is informed on sate aid Works council informed on economic situation at least once

every six months. The transferor and the transferee are required to inform about the date, the reasons, the legal, economic and social Union representation on aid-allocation bodies 14. Iceland implications of the transfer for the employees and Tripartism any measures envisaged.

Employees in the private sector are covered by the Transnational (Information and Consultation of employees) Local partnership arrangements Act 1996 and the Employees (Provision of Information and Union representation in “aid for training” 15. Ireland Consultation) Act. 2006. A change in shareholding requires programmes information and consultation with the employee representatives. Tripartism/ Partnership.

Where the transfer concerns a company with more than 15 Industrial agreements employees, the transferor and transferee are required to give Local pacts 16. Italy notification of it to the workplace union structures in their Union representation for training aid respective companies and to the relevant industry-level unions, Tripartism which may initiate a consultation procedure. 17. Latvia No stipulation No stipulation Employee representatives are entitled to legal participation rights in the case of transfer operations (for example: transfer of Employers inform employee representatives of 18. Liechtenstein an undertaking, business, or part of an undertaking or business employment situation and its anticipated to another employer as a result of a legal transfer or merger) and developments in the case of mass redundancies. 19. Lithuania No stipulation No stipulation Representation on Board of Directors Financial decisions with a decisive impact: prior information Workers’ representatives and joint committee and consultation of joint committee or, if operation at risk, 20. Luxembourg informed-consulted on economic situation information within three days Training aid managed by occupational chambers Joint committee informed-consulted on economic situation Tripartism Employee representatives are be informed as soon as an announcement for a take-over bid is made. The company The supervisory authority is to be informed within subject of the bid must communicate to the employee seven days from the date the offeror acquires a representatives its opinion on the bid and the reasons on which controlling interest. it is based. The opinion of the employee representatives to be In the case of transfer of business, the written 21. Malta attached to the document. statement shall be forwarded to the Director In case of a transfer of business the transferor and transferee are responsible for employment and industrial bound to inform employee representatives by means of a relations on the same day that the employee written statement which is to be delivered at least 15 days representatives are notified. before the transfer is carried out Change in shareholding: Union delegates immediately informed Representation on board of directors and Transfer, merger, reorganisation, division : works council supervisory board informed-consulted UDs and works council informed-consulted on 22. Norway Representation on boards in the undertaking economic situation UDs and works council informed-consulted on economic Tripartism situation Transfer of authority, including cooperation and participation : Large investments and loans : works council can 23. Netherlands works council’s opinion with staying effect plus possibility of issue a standby opinion and possible appeal appeal

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Country OPERATIONS AFFECTING SHAREHOLDERS STATE AID

Takeover bid : unions informed about social consequences Works council informed-consulted on economic Works council informed –consulted on economic situation situation Right of advice if a change in corporate structure affects the undertaking 24. Poland No stipulation No stipulation Change in capital or activity: workers’ committee informed Workers’ committee or UDs informed-consulted on economic Workers’ committee informed about undertaking’s situation 25. Portugal financing, economic plans and resources Transfer, merger, division of the undertaking: workers’

committee or UDs informed (also consulted if measures in relation to employees are envisaged) Transfer of undertakings or businesses or part of undertakings 26. Romania or businesses: specific procedure for informing and consulting No specific procedure UDs or WR (if no trade union) In case of transfer of an undertaking, part of it, an activity or a No special procedure (only general obligation of task, trade union and/or work council to be informed and 27. Slovak an employer to inform trade union and/or work consulted on the transfer by the transferor as well as the Republic council on employer’s economic and financial transferee at least one month prior to the transfer. situation) Employee representatives in the supervisory board 28. Slovenia No stipulation No stipulation The Works Council must be informed and is entitled to give an opinion –not binding for the employer-- within 15 days in cases of merger, takeover or modification of the legal status of the Territorial pacts undertaking with an impact on the volume of employment (ET

29. Spain Article 64.1.5) and prior to the implementation by the employer Works council informed on general economic of decisions taken. Also, when an enterprise is transferred, both situation of the establishment or undertakinng undertakings –the seller or assignor and the buyer-- must inform the legal representatives of their respective workers affected by the change of ownership 62 Change of activity: negotiations with UDs , with Change of activity: Negotiations with UD, with staying effect staying effect 30. Sweden Representation on board of directors Representation on Board of Directors Union delegates informed-consulted on economic situation Cooperation on an ongoing basis 31. Turkey No specific procedures No specific procedures Recognised unions informed about aid (code of 32. United practice) No specific rights of involvement Kingdom Union representation in employment and training programmes Works council: works council or equivalent body; UD: union delegate; WR: workforce representative.

62 If there are no workers' representatives, both undertakings must facilitate this information directly to the workers affected by the transfer. The seller or assignor must facilitate this information sufficiently in advance prior to the transfer. The buyer must communicate this information sufficiently in advance and, in any case, before the employment conditions of the workers are affected by the transfer. When the seller or the buyer of an undertaking or productive unit foresees the adoption of labour measures in connection with their workers, they shall begin a period of consultation with the legal representatives of the workers on such foreseen measures and their consequences for the workers. This period of consultation will take place before the measures are taken. During the period of consultation, the parts will negotiate in good faith, with a view to reaching an agreement.

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PART TWO. NATIONAL SITUATIONS

EMPLOYEE REPRESENTATIVES IN AN ENLARGED EUROPE

PART TWO. NATIONAL SITUATIONS

AUSTRIA

Austria is a federal republic with around 8 million inhabitants, established in 1918 following the dismantling of the Austro-Hungarian Empire. Austria’s entry into the European Union (EU) became effective in January 1995. The Austrian political scene has been dominated for 50 years by the Social Democrat Party (SPÖ) and Popular Conservative Party (ÖVP), often allied in a “grand coalition”. In the 1990s there was a shift in the political balance that led to a conservative government, but today there is another grand coalition led by the SPÖ which has been in power since October 2000.

The “social partnership” and “the social market economy” have formed the basis of Austrian industrial and economic relations since the end of the Second World War. As a federal state with nine administratively independent federal states (Länder) responsible for implementing legislation, considerable importance is attached to regional interests in Austrian economic and social policy.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Austrian industry is made up of heavy industry concentrated in particular regions, with services increasingly dominating the economy and employment. Commercial activities, associated particularly with tourism, form approximately one sixth of total employment in Austria, with a well-developed banking network. Foreign trade is essential to the Austrian economy and accounts for approximately 40% of GDP. Three quarters of this trade is with the European Union, the lion’s share with Germany which is Austria’s leading trading partner with over 40% of trade, making the Austrian economy therefore heavily dependent on the German economy. Austria also has strong links with Central Europe, which the prospect of enlargement is enhancing and developing. The economy is also becoming increasingly international with increasing foreign investment in Austria, and direct Austrian investment abroad.

In the post-war period, Austrian economic life has been organised into two parts:

– Industries and services nationalised in 1946 with to the aim of reconstruction and full employment without private capital and negotiation with the allies. Directly, or indirectly through the state-owned banks, the State therefore owned or controlled the insurance and energy sectors and the bulk of industry, services, investment and exports; and

– Many small and medium-sized enterprises.

With the privatisation programmes currently being undertaken across the major industries and services, the organisation of enterprises and the Austrian socio-economic system are undergoing major transformation.

Labour market Some general trends which impact on the industrial relationship, labour legislation and employee representatives have been observed over the last decade:

• the increase in the non-standard forms of employment relationship (fixed-term contracts, temporary agency workers, free-lancers…) which is both socially and politically sensitive.

• outsourcing of public services. Because of outsourcing, areas that used to be regulated by public service law in the past, are now regulated by civil labour law. One consequence of this is that

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internal company agreements applying to civil servants and contracted employees can be concluded as collective bargaining in the new companies created is often governed by special laws.

• the increase in atypical employment The “new self-employed”, – people who earn a commercial income without a trade licence, and who are treated as self-employed under social security legislation, but very often in economic dependency, are generally excluded from the scope of the labour law by definition There are around 32,400 new self-employed in Austria.

• Freelancing is also increasing. Austrian law does not allow the application of collective agreements to freelance employees. Employers have increasingly introduced these contracts in recent years because in addition to minimising working and social security costs, they offer higher flexibility for the employer. The phrase “flight from the labour law” has been coined for this phenomenon. At present, more than 100,000 employees could be affected, and the trend is rising. According to figures from the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund or ÖGB) for May 2004 there were 25,331 freelance employees many of whom had no social insurance cover; and.

• Other forms of precarious types of employment also saw a strong growth, namely part-time work and temporary employment.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues The social partnership was established in the early Second Republic (i.e. after 1945) and became one of the political pillars of the state. Aswell as negotiating collective agreements, influencing wages policy, it also influences the price of some essential goods, and therefore the development of the national economy as a whole. This system of the social partnership has long been widely recognised as uniquely Austrian and an exemplary consensus model, creating security and social peace, and as with Austrian neutrality under international law, it is almost a feature of the Austrian identity.

The most important part of collective relations is channelled through the social partnership. The holders of this social partnership are the umbrella organisations: The Austrian Chamber of Commerce (Bundeswirtschaftskammer) and the Presidential Conference of the Chambers of Agriculture (Präsidentenkonferenz der Landwirtschaftskammern) on the part of the employers, the Federal Chamber of Labour (Bundesarbeitskammer), and the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund).

The Chamber of Commerce (i.e. the former Economic Chamber) and the Chamber of Labour act as the legal representations of interests on the part of the employers (Chamber of Commerce, i.e. Economic Chamber) and on the part of the employees (Chamber of Labour). Their capacity to conclude collective agreements is based on law (in contrast to the voluntary representations of interests). They are characterized by obligatory membership and a legally determined organizational structure. The membership of an employer in a certain sectoral subunit of the chamber of commerce is determined by the subject of his/her trade and was absolutely autonomously determined by the chamber of commerce before. Due to the fact, that this membership in a sectoral subunit – which was formerly beyond any judicial control – is of vital importance to the participation in a certain collective agreement, the legislators have created a process in the year 1993, in order to review the membership in a sectoral subunit, which has been included in the new law on chambers of commerce in 1998 (Law Gazette # 1993/22; I 1998/103, on this issue see also Cerny 24, and critically 105 seqq.).

In particular each federal state (Land) has its legally autonomous chamber, which means that there are nine chambers, joined together in one umbrella organization on the federal level (Federal Chamber of Commerce, Federal Chamber of Labour). The provincial Chambers of Labour on the other hand, have their own subdivisions: A (provincial) Chamber of Commerce is basically divided into seven sectors,

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which are again subdivided into branch-oriented sector subunits. The sector subunits are legally autonomous and usually conclude collective agreements on the part of the employees. Individual memberships in the (provincial) Chamber of Commerce and the relevant sector subunit are created with a trade licence. The membership in the relevant (provincial) Chamber of Labour is the legal consequence of the characteristics of being an employee. There are exceptions for managerial staff and public servants.

The social partnership and the central role of its players in the entire political structure are increasingly questioned (reproach of a “chamber State”). The obligatory membership in the legal representations of interests has been strongly questioned in the political discussion. The reaction of the representations of interests can be regarded as the promotion of, and stronger emphasis on the “service“-functions that are focussed on the individual members, that is, advice and legal representation in court as well as training programmes.

2. Social partners Trade Unions

The Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund – ÖGB), functions as a voluntary representation of interests – similar to the Association of Austrian Industries or the Association of Banks and Bankers on the part of employers. It is an association and therefore legally autonomous. Legally dependent trade union organisations are organised by industry into branches – with two important exceptions (Trade Union of Public Servants and Trade Union of the Private Employees) – although recently different branches have merged. As what is known as a unified trade union, the ÖGB is an all- party organisation, comprising all political orientations in the form of factions.

The ÖGB has faced a continuing loss of members. Union density decreased from 60% in the 1970 to 42.3% in 1993. During the 1990s, this downward trend continued, down to 1,385,000 members in 2003. However, despite these difficulties, the ÖGB still appears an important and strongly positioned representation of employees in the entire political fabric.

Employers´ organisations

There also exist organized bodies of employers formed to represent the interests generally, and the labour market interests particularly, of its members vis-à-vis the unions and the government. An employers’ organization is therefore a specific form of business association and to be distinguished in particular from a trade association, which represents the poduct market interests of its members. But there can be “combined” organizations, too, which combine the functions of both an employer’s organization and a trade association.

There are only a few employers’ organizations of cross-sector importance. Both are “combined” business associations and are also among Austria’s social partners. This is, besides the Economic Chamber of Austria (non-voluntary representation), the Federation of Austrian Industry.

Despite the fact that the conclusion of collective agreements hardly ever takes place through voluntary associations of employers, it remains an option and the fact that an employer has the power to influence whether a collective agreement continues to be valid in his/her company, by switching to another association, became relevant as a result of a sensational case a few years ago63.

63 The Bank-Austria-Creditanstalt, a renowned credit institute, changed from the association of savings banks (“Sparkassenverband”) to the association of banks and bankers (“Verband der Banken und Bankiers”) in October 2004 – both of them are voluntary representations of interests. The consequence has been that the collective agreement for savings banks, which would have been more favourable to its 11,400 employees, was replaced by the collective agreement for banks on a legal basis. However, a legal dispute on the admissibility of such a change of the collective agreement is to be expected.

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3. Collective bargaining Austria can look back on a 100-year old tradition of collective bargaining. The first legal regulation of a collective agreement was made in 1919. Now the main legal text on this issue is the Works Constitution Act (Arbeitsverfassungsgesetz or ArbVG) 1974.

Legal basis and key issues (en italique pour avoir une ciohérence avec l'ensemble du texte) The collective agreement is characterised by its double nature as a civil law contract on the one hand, created by an agreement between the parties to the contract, and as a general norm, directly affecting third persons, on the other hand. Some provisions of a concluded collective agreement become legally binding for all individual employers and employees (§§ 2, 3 ArbVG). This normative effect, however, only regards what is called the normative part of the collective agreement. This part covers pay (representing the central part of all regulations in collective contracts), working time and all other working conditions, for example period of notice, occupational pensions, the extension of the works council’s competencies to take part in decisions, just to mention a few important regulatory elements of content.

There is also the legally obligatory part that regulates the (contractual) relationship between the parties to the collective agreement which has no normative effect, for example, the termination of the collective agreement or any duty not to engage in industrial action (i.e. the contractual obligation not to initiate any industrial action on a subject of the collective agreement during its period of validity).

Although it is possible to limit the area of validity of collective agreements, they are usually valid for the entire federal territory. There is in fact a functional division between legislation and collective agreements: The law sets the general minimum working conditions for all employers and employees, but not minimum wages. The collective agreement standardises working conditions in detail.

According to Austrian law only certain institutions have the capacity to conclude collective agreements, including the Chamber of Commerce and the Chamber of Labour. Voluntary representations of interests64 can gain the ability to conclude collective agreements by way of an official administrative act - an administrative decision from the Federal Arbitration Board, which is integrated in Federal Ministry of Economics and Labour. Voluntary membership and representation of interests must be included in the organisation’s written rules, and the organisation must be independent from the opposing side (that is employees or employers and their representation of interests). The relevant opposing side must not have right of membership or be able to influence the organisation in any way.

In addition, proof has to be presented that its range of activity covers a wide geographical area and a large number of l fields and its economic importance has to be measured according to the number of members and activities. This is aimed at ensuring that only relatively large and important organisations (rather than splinter groups) are able to conclude collective agreements (§ 4 ArbVG).

The role of main players in collective bargaining is played by the actual representations of interests namely:

• the Chambers of Commerce with their subdivisions, especially the sectoral subunits and federal sectoral subunits (approximately 95 % of all collective agreements are concluded by organisational units of the chambers of commerce); and

• the trade union organisations of the Austrian Trade Union Federation, which are basically organised according to the different branches.

Chambers of labour usually do not conclude collective agreements.

Main features

64 The Chamber of Commerce and the Chamber of Labour, which are not voluntary, have this capacity by act of law and therefore without any further procedure. In contrast to this, the voluntary representations of interests, such as trade unions and employers associations, do not have this capacity “automatically”. But they can gain this ability in the way described in the following part of the sentence.

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The internal company agreement (i.e. works agreement) is different from the collective agreement. It is not concluded by external (voluntary or legal) representations of interests, but between the company owner (who is also very often the employer) and the works council (or the company works council or representative of employees in a group of companies). This is obligatory. Neither external representations of interests (irrelevant of which side) nor individual employees are entitled to conclude an agreement. With regard to the admissible regulatory contents, the legislators have set out a clearly tighter framework for internal company agreements than for collective agreements (cf § 2 section 2 ArbVG for collective agreements; §§ 96-97 ArbVG for internal company agreements; for the latter other special legal provisions for both can be found e.g. in § 4 Holidays Act [Urlaubsgesetz]).

In particular, pay is mostly excluded from the regulatory framework of internal company agreements. In practice, the most frequent regulations regard working time, disciplinary procedures, the introduction of monitoring measures or occupational pensions and other internal social welfare benefits etc. A law or a collective agreement can also allow internal company agreements to regulate certain matters. In combination with the collective agreement, the internal company agreement has an immediate, law-like validity for all affected partners who are not parties to the agreement (§§ 29, 31 ArbVG). In this case, this would include the staff of the firm, company or group of companies.

Collective agreements and internal company agreements normally have a unilaterally binding effect. This means, they may not be waived to the detriment of an employee through regulations in working contracts (§ 3 ArbVG).

4. Collective disputes There are no provisions for mediation or arbitration bodies in Austrian law with regard to collective industrial disputes. This follows the principle of the “impartiality of the state” in the case of industrial disputes.

The Federal Arbitration Office (Bundeseinigungsamt) intervenes through optional arbitration if there is a dispute between the parties concerning collective agreements or collective bargaining (§ 141 ArbVG). There is also a “mediation and arbitration board”, which plays a major part in appeals under the system of cooperation within the enterprise (Schlichtungsstelle; § 144 ArbVG) and the “State Economic Committee” (Staatliche Wirtschaftskommission), which intervenes where economic measures taken by an enterprise employing more than 400 employees, place the employees at an economic disadvantage. This intervention only takes place when the joint arbitration committee (Schlichtungskommission) is not able to reach an agreement (§ 112 ArbVG).

Strikes In Austrian law no clear principles are laid down for assessing the lawfulness and consequences of industrial disputes. Since few industrial disputes occur in Austria, there have been few court decisions on this subject and therefore only a few principles have been established. The legitimacy of strikes as a form of industrial action by employees can be inferred from the legal provisions which ensure the impartiality of the state, particularly regarding the right of unemployment benefit recipients to refuse offers of employment as strike breakers made to them by the Employment Service (Arbeitsmarktservice; this is regulated in § 3 of the Promotion of the Labour Market Act [Arbeitsmarktförderungsgesetz]).

Nevertheless, this legitimacy applies only to strikes perceived as collective action.. With regard to an individual employee’s participation in a strike, prevailing legal opinion still holds that, in principle, such participation represents a breach of contract unless the employee concerned has given due notice of termination of the contract (which, in fact, rarely happens). Consequently, the dismissal of a striking employee is generally regarded as lawful. In practice, the strike settlement often includes a clause stipulating the reinstatement of striking employees who have been dismissed.

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III. EMPLOYEE’S REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues Austrian law on the works constitution takes the establishment or plant (Betrieb) as its central point of reference for the organisation of the workforce (cf. § 33 section 1; § 34 ArbVG). Thus, smaller parts of an enterprise like sections and departments or other smaller units have no own employee representation. An establishment is defined by Article 34 of the Act as “any premises constituting an organisational unit within which a natural or legal person or partnership, using technical or non-technical resources, regularly pursues certain work results irrespective of whether or not there is a profit-making objective”. This means that a given company can in practice comprise a number of establishments. An establishment has to include at least five employees (age 18 and above) for the works constitutional rights to come into force (§ 40 section 1 ArbVG).

The holder of the rights and obligations on the employees’ side as laid down under the law is in principle the workforce, which is deemed by prevailing opinion to possess limited legal personality and therefore acts through its organs (§ 40 section 2 ArbVG). These are the works meeting and the works council. The works meeting (Betriebsversammlung) consists of all the establishment’s employees, with the exception of executive staff, and takes decisions on fundamental issues. The works council (Betriebsrat) is the main employee representative body within the establishment.

2. Legal basis and scope The so called “works constitution” (Betriebsverfassung), the set of legal provisions to regulate workforce representative bodies at establishment or company level, is laid down as a part of the 1974 Labour Constitution Act (Arbeitsverfassungsgesetz). This Act regulates consultation and codetermination rights in social, staff and economic matters.

3. Capacity for representation The works council is a body which represents the entire workforce within a plant or establishment. Its power of representation is limited within legal boundaries, i.e. the works council can make legally valid and binding declarations only within the subjects which are legally defined as matters for the employee representation. In particular, the works council is legally enabled to conclude works agreements (Betriebsvereinbarungen, cf below I.3.4.2) and as such to create binding duties (and rights) on the employees without their approval. The works council president is empowered to oppose/negotiate with the owner of the establishment and to other parties in general (§ 71 ArbVG).

4. Composition The works meeting consists of all the establishment’s employees, with the exception of executive staff. The works council is elected by the workforce (essentially all employees within the establishment aged 18 and over), by secret ballot. Since in Austria the Labour Constitution Act differentiates between white- collar workers and manual workers, it provides for the election of separate category-based works council in establishments where there are five ore more employees belonging to each of the two categories although the two employee categories can decide, each by a qualified majority, to form a combined works council. Matters which jointly concern both categories are dealt with by a works council combined committee (§ 40 section 2, 3 ArbVG).

5. Protection granted to the members The law stipulates that an employee must not suffer any disadvantage as a result of holding office as a works council member, and this principle applies equally to pay-related aspects, promotion prospects and transfers. In addition, council members may not be dismissed, either with or without notice, unless the prior consent of the court has been obtained. Correspondingly, however, the law stipulates that works council members may not be granted special privileges as a result of holding office to prevent any

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possibility of their being “bought” by the management. They are also subject to a special duty of confidentiality (§§ 115 – 122 ArbVG) .

6. Working of the body and decision-making If the works council consists of more than one member (i.e. in establishments with at least ten employees, cf. § 50 ArbVG), decisions are made by simple majority (§ 68 section 2 ArbVG). In the case of parity of votes, the president’s vote is decisive. Decisions about the acceptance of a unilateral termination with notice or a protected dismissal (§ 105 ArbVG) require a two-thirds majority. If the works council consists of two members, a decision can be made up only by agreement of both of them (§ 68 section 2 ArbVG). Decisions about the resignation of all members require the majority of all members (i.e. not only of the members who are present at the meeting; § 68 section 3 ArbVG).

The quorum is half of the members (§ 68 section 1 ArbVG). Meetings have to take place at least once half-yearly (§ 43 section 1 ArbVG).

The day-to-day working of the body involves far more than meetings and formal decision-making. The members typically deal not only with matters of the works constitution but also with subjects concerning individual employment law, i.e. employees ask them for advice in connection with their employment contracts, or management asks them to mediate where there are issues with individual employees.

7. Means Members of all works councils are guaranteed as much time off work, without loss of pay, as is necessary to perform their duties, and in large establishments one or more works council members (depending on the size of the workforce) must be given full-time paid release (§§ 116, 117 ArbVG). Council members are also entitled to time off (with or without pay) for educational and training purposes (§§ 118, 119 ArbVG). Although theoretically 25% of the works council members may be outside union officials (§ 53 section 4 ArbVG), in practice they are normally all employees. The office is honorary and therefore attracts no payment (§ 115 section 1 ArbVG).

8. Capacities and rights The functions of the works meeting include: appointing the electoral board for works council elections and appointing auditors; deciding whether a works council levy should be imposed on employees, advising on day-to-day problems, and monitoring the policy aspects of the works council’s activities. It can even decide to remove the council from office (§ 42 ArbVG).

9. Information and consultation The works council is responsible for exercising certain consultation and codetermination rights which are conferred on the workforce within an establishment: information, consultation and participation rights (§§ 89 – 93 ArbVG); rights to codetermination in social matters (§§ 94 – 97 ArbVG); special consultation rights in staff matters (§§ 98 – 107 ArbVG); and special consultation rights in economic matters (§§ 108 – 112 ArbVG).

The employer is required to hold regular discussions with the works council and keep it informed on important matters for the workforce (§§ 91, 92 ArbVG). In addition, the council is entitled to present complaints to the employer on all matters of concern to employees and to request appropriate measures or demand the corrective action (general right of intervention; § 90 ArbVG). It is also entitled and required to monitor the employer’s observance of the rules on employee protection (§ 92a ArbVG).

The works council must also be informed and, if demanded, be consulted about the intention to:

• Recruit new employees,

• Promote an employee;

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• Transfer an employee on a long-term basis (here it even has a right to object; § 101 ArbVG); and

Dismiss an employee (§§ 99, 104, 104a, 105 section 1 ArbVG). This protection against dismissal also applies to terminations with notice, in practice, it is a very important right. In addition, every employer must provide the works council with regular information on the firm’s economic and financial situation, including business trends, inflow of orders and turnover, and, if the council so requests, consult it on that situation. If the company is part of a group, this applies also to the whole group. In large companies the employer must give the council a copy of the annual report (and the group annual report where appropriate) and, if the council so requests, explain and clarify the content (§ 108 ArbVG). In addition, the employer must inform the works council of any projected change to the establishment that implies far- reaching consequences (§ 109 ArbVG).

If the change entails serious disadvantages for a significant proportion of the workforce, the council can demand the conclusion of a social plan (redundancy programme) in the form of an imposable works agreement (see I.3.13), setting out measures to prevent, eliminate or mitigate these disadvantages (§ 109 section 3 ArbVG). The employer’s duty to inform and consult the employee’s representatives in the undertaking in connection with collective redundancies contained in § 109 of the Austrian “Labour Constitution Act” (ArbVG), which requires the employer to inform the employee’s representatives about planned modifications in the business in general. The regulation concerning information and consultation of employee representatives or employees when there is a transfer of undertakings has been adopted by an amendment to the “Employment Contract Law Amending Act” (§ 3a), which contains the duty to inform employees who do not have a work council as their representative institution. If there is a work council, it has to be informed and consulted (Labour Constitution Act (§ 108 section 2a ArbVG)).

10. Other functions and responsibilities The works council is responsible for health and safety issues. The main basis for this is the Employees’ Protection Act (ArbeitnehmerInnenschutzgesetz, 1994), which consists of rules prescribing how work premises, work areas and workplaces must be constructed and equipped in order to ensure that the people employed in or on them suffer no injury to their health or bodily well-being. The works council has a legal right to be kept fully informed by the employer on all matters of safety and health protection and to be consulted on the appointment of safety experts and works doctors. The works council has the legal right to enter and observe all rooms, facilities and places of work (§ 89 No 3 ArbVG).

Depending on the size of the workforce (at least 10 employees), the employer must appoint a certain number of employees as safety officers (Sicherheitsvertrauensperson), whose appointment must be agreed with the works council. In workplaces with 100 or more employees, a health and safety committee (Arbeitsschutzausschuss) must also be formed. In many establishments, therefore, the works council is not the only body that deals with health and safety issues.

11. Other representation bodies If an establishment in which a works council has been elected forms part of a multi-establishment company and a council has been elected in at least one of the company’s other establishments, a company works council (Zentralbetriebsrat) must be formed, elected by and from the members of the individual works councils (§ 81 ArbVG). This company works council is responsible for matters affecting the employees of more than one of the company’s individual establishments, and in particular is empowered (and required) to exercise their consultation and codetermination rights at company level (§ 113 section 4 ArbVG; § 114 section 1 ArbVG).

In groups of companies with (company) works councils in more than one member company, a group works council (Konzernvertretung) may be established (§ 88a ArbVG). This group works council is responsible for dealing with matters which affect the interests of employees in at least two member companies. In particular, it can also conclude works agreements with the group’s management on matters whose regulation is referred to it by individual establishment- or company-level works councils within the group.

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European Works Councils On the basis of Directive 94/45/EC Austrian law has also provisions on the establishment of European Works Councils. These are laid down in Part V of the Austrian Labour Constitution Act (§§ 171 – 207 ArbVG which has been in force since September 1996.. These apply to companies or corporate groups with their central management situated in Austria and have at least 1000 employees, at least 150 of whom are employed in each of at least two EU member states.

A special negotiating body (Besonderes Verhandlungsgremium) has to be created if this is requested by employees or proposed by management. This special negotiating body is composed of representatives of the company workforces in each member state. It has the task of deciding whether a European Works Council (Europäischer Betriebsrat) should be set up or whether, instead, there should be a procedure for the information and consultation of employees. If it opts for the former, an agreement with central management has to be concluded, in which the European Works Council formation and the corresponding rights are regulated. If the efforts to such an agreement fail, however, a Council must be established by force of law.

The European Works Council has information and consultation rights in all matters concerning the economic, social, health and cultural interests of the employees (§ 198 section 1 ArbVG). It has a right to information and consultation within an annual meeting with central management on the recent economic development and perspectives of the company or group of companies. Special information rights apply in circumstances such as closure or mass dismissals. (§ 200 ArbVG).

12. Protection of rights In general, the rights of the works council as the employees’ representatives are protected by the labour legislation, which along with social security legislation falls within the jurisdiction of ordinary courts. The Austrian system of legal procedure is laid down in the Civil Procedure Act (Zivilprozessordnung).

The labour and social security courts are governed by the provisions of the Labour and Social Security Courts Act (Arbeits- und Sozialgerichtsgesetz 1985, ASGG). Therefore the courts can be applied to, for example, if the owner of the undertaking or its management prevents members of the works council fulfilling its functions. The entitlement to information which results from legal information rights is also enforceable in the courts.

But not all of the workforce’s rights can be enforced in the courts. There are special provisions dealing with works agreements: A conciliation board has to be set up on application of either party to decide on any dispute concerning the conclusion, amendment or cancellation of a works agreement (in the matters which are reserved by law to conciliation boards (§§ 144 – 146 ArbVG)).. The conciliation board is always set up for a specific dispute. The board consists of a presiding judge and four assessors. The conciliation board mediates between the parties but can also make a final decision.

The State’s Economy Commission (Staatliche Wirtschaftskommission) also deals with special provisions of the works constitution: in establishments which employ more than 400 employees the works council can make an objection to planned restructures or other economic measures by the management which will cause substantial disadvantage to the employees (§ 111 ArbVG). When no other settlement can be reached, this commission declares in the form of an expert opinion whether the objection is justified (§ 112 ArbVG). It is to be installed by the Federal Chancellor’s Office and other authorities. But in practise this authority has no importance. In other words, this Office can only recommend rather than impose what is set out in the opinion due to it is just a kind of recommendation and there is any sanction. Many employees’ rights within the works constitution, especially some information rights, are enforced in a more effective way by penalties of up to € 2,180 (§ 160 ArbVG). Failure to comply with these provisions is prosecuted by the regional office authority (Bezirksverwaltungsbehörde). But only special, detailed, listed aspects of information and consultation rights are covered by this provision. With regard to the economic situation of the establishment there are just a few information rights mentioned in § 160 ArbVG, such as the information about mass dismissal or the management’s duty to submit the balance sheet to the works council in time.

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13. Codetermination rights The works council must participate in the regulation of all social matters within the establishment, e.g. the introduction of a disciplinary procedure, the installation of systems for monitoring employees which intrude on human dignity, the distribution of working hours across the week, the introduction of computerised systems for the collection, processing and transmission of personal data on employees; the introduction of company welfare facilities, the introduction of an occupational pension scheme and others (§§ 96 – 97 ArbVG).

Powers and the right to approve or veto management decisions Works agreements can be concluded between the company’s owner and the works council (or company works council or group works council) within the matters mentioned above. For some of these matters the works council possesses a right of “parity” co-decision-making, and for others it can call on a mediation and arbitration board if agreement cannot be reached with the employer (the latter is called an imposable works agreement). For some social matters the works council has the right to regulate them in conjunction with the employer. There is a group of social matters where the council has a full right of co-decision making which means the employer cannot take any action until a works agreement has been concluded (called a mandatory works agreement) and a further type, where the parties decide whether they want to establish a works agreement (so-called optional works agreement).

Therefore, in law and in practice the works agreement is an important instrument of all these forms of codetermination in social matters. It should be stressed that the permitted scope of formal works agreements is restricted to the matters specified by law. Pay-related issues in particular are excluded (with some exceptions, see § 96 section 4 for incentive wages; § 97 section 1 No 18, 18a ArbVG for occupational pension systems and § 97 section 1 No 15, 16 for some special payments, e.g. anniversary bonuses, and for profit-sharing systems) and any works agreements on the subject are invalid.

IV. EMPLOYEES’ PARTICIPATION IN CORPORATE BODIES

Legal basis and scope Austrian legislators have also made provision for a form of codetermination which is related to the company rather than the establishment: seats on the supervisory board (Aufsichtsrat) of a joint-stock company (a private or public limited company) must include, in addition to the shareholders’ representatives, employee representatives (all of whom must be employees) with voting rights (§ 110 ArbVG). The main parts of this provision came into force in 1974 with the introduction of the Labour Constitution Act since when some minor corrections and amendments have been made.

This rule in general applies to all enterprises to which the works constitution is applicable, that is in all sectors where the enterprise is established in the form of a public limited company (Aktiengesellschaft, AG), a private limited company (Gesellschaft mit beschränkter Haftung, GmbH), a cooperative (Genossenschaft) employing more than 40 employees, a mutual insurance company (Versicherungsverein auf Gegenseitigkeit) or a savings bank (Sparkasse). There are special provisions for particular undertakings (cf. the exemption for the Austrian broadcast company [ORF] in § 110 section 7 ArbVG), but not for particular sectors. Special rules are laid down on the composition of the supervisory board of a group’s controlling company (§ 110 section 6 – 6b ArbVG). The general aim of these is to make sure that codetermination within the supervisory board takes place where the important decisions are made within a group of companies, i.e. the dominant company.

Composition and appointment/election system The codetermination model concerned is not one of “parity” but only “one-third parity”: one employee representative for every two shareholders’ representatives. The right to appoint these board-level employee representatives lies with the company works council. The selection of members must ensure an appropriate representation of the categories of manual and white-collar workers and, in the case of a

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group of companies, of the employees of the various establishments. The company works council (or works council) may also dismiss the representatives that it has elected.

Functions The functions of the employees’ representatives within the supervisory board are basically the same as that of the shareholder representatives. The supervisory board itself is a supervisory, consultation and decision-making body on certain issues, as Austrian company law provides a two-board-system:

• The supervisory board of a public limited liability company (Aktiengesellschaft), elected by the general meeting, directs the company’s general policy, appoints and supervises the management board, which is responsible for the day-to-day business; and

• Within a private limited liability company (Gesellschaft mit beschränkter Haftung), the supervisory board owns less power, because it is the General Meeting (Generalversammlung) which elects the supervisory board and appoints the director.

Although employee representatives on the supervisory board generally have the same rights and duties as the other board members, there is an important exception: The appointment and dismissal of management board members, (the chairman of the supervisory board and the senior vice-chairman by the supervisory board requires a majority vote by the shareholders’ representatives. Another exception – this one in favour of the employee representatives – is that two of them may ask the management board for a report on the business of the company (including its relations with the dominant company of the group) at any time.

The office of employee representative on the supervisory board is honorary and no specific resources are provided for them. Their liability is the same as that of the share holders’ representatives and there is no special protection for them, although because they are members of the works council, they do have special protection against dismissal (§§ 120 – 122 ArbVG).

Representation of employees in the boards of European Companies In § 252 of the Labour Constitution Act it is clearly said that the regulations on European Companies (Europäische Gesellschaft) are a supplement to the existing provisions of the Austrian “Labour Constitution Act”. That means that in plants of European companies which are situated in Austria the new SE-works council and/or the new process of worker’s information and consultation does not replace the traditional Austrian works council and company works council and their rights in these plants.

The Austrian regulation of workers’ participation in the advisory board of a company is not applicable to European Companies based in Austria itself; but to their Austrian subsidiary companies (§ 252 section 2 ArbVG). There is an exemption for European Cooperative Societies (Europäische Genossenschaft) to which § 254 section 2 ArbVG does not apply. These are European Cooperative Societies which are founded by natural persons (or by one company and natural persons together) and which employ less then 50 employees in more than one EU-member state.

V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

In general employees’ rights in the case of an external decision impacting on the undertaking, e.g. decisions relating to competition policy or sectoral strategies, are provided only by their rights of information and consultation in economic matters and their representation in the supervisory board of a limited liability company. Therefore they have no power to influence the external decision itself.

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This is also the same with matters like State aid or the State’s decision on how to deal with undertakings in difficulties, although these can be dealt with by the social partnership. The social partners have an informal, but still powerful influence on politics and legislation.

When an owner anticipates initiating a bankruptcy or receivership procedure, it is his responsibility to inform the works council, as when a creditor initiates such a procedure. The works council must be able to read the documents submitted to the court. The latter must inform and hear the works council (Law on bankruptcies No. 370/1982).

When the holders of an enterprise (or the management) attempt to restructure it, there are special rights that apply to the workforce, represented by the works council. An important example is where a measure has a serious negative impact on the entire workforce or a significant proportion of employees there is the right to conclude a social plan/redundancy programme (Sozialplan), which may be drawn up in the form of an imposable works agreement (§ 109 section 3 ArbVG).

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BELGIUM

Belgium is a federal state with three communities (the Flemish Community, the French Community and the German-speaking Community) and three regions (Flemish Region, Walloon Region and Brussels- Capital Region). The Federal State controls employment and social security, but education falls under the jurisdiction of the Communities. In the Flemish Community there are growing calls to also split competences on social matters.

There is a north (Flanders) south (Wallonia) divide, with the decline of the steelmaking and mining industry seriously affected the Walloon economy, while Flanders has become the economic centre with industry (eg the chemicals industry) concentrated in the Port of Antwerp. Brussels is mainly an (international) administrative centre.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Belgium has a population of some10.4 million people, of which around 4.6 million is active. In terms of employment as well as share of GDP, the agricultural sector accounts for 1%, the industrial sector 24%, and the service-related sector 75% (62% private sector and 13% public sector). For a long time industry formed the core of the Belgian economy, but in the last two decades it has become more service-oriented, and particularly heavy industry is likely to continue to decline. The closure of Renault Vilvoorde and the downsizing of Ford Genk and Volkswagen Vorst have already led to heavy job losses.

Belgium is mainly an exporting country. Although it represents only 0.2% of the global population, it ranks tenth on the list of exporting countries. Export is targeted mainly at the Member States of the European Union and the most important trading partners are neighbouring countries, France, Germany and the Netherlands.

In terms of employment as well as share of GDP, the agricultural sector covers 1%, the industrial sector 24% and the service-related sector 75% (62% private sector and 13% public sector).

With 118€ (2006), the GDP per capita is above average. The 2.7% GDP growth rate (2006) is within the growth percentages of EU25 (2.8%) and EU15 (2.6%). In 2006, labour productivity was about 30% higher than the European average. This applies per person as well as per hour worked. The comparative price levels of final consumption by private households amount to 104.7 (2005) and is slightly above the European average (EU-25 = 100).

There is a big gap between the north (Flanders) and the south (Wallonia). The decline of the steelmaking and mining industry seriously affected the Walloon economy. Flanders is now the economic centre with the Port of Antwerp where a lot of industry is located, e.g. the chemical industry. Brussels is mainly an (international) administrative centre.

Labour market The total number of workers in the 15 to 64 age group was 61.1%, which is below the European average. For women this was 53.8% and for men 68.3%. The employment rate of elderly workers (55 tot 64 years) is particularly weak in Belgium. Belgian workers retire at an age (60.6 years), roughly the European average. In terms of employment rates, there are significant differences between the regions: Flanders 64.9%; Brussels 54.8%; Wallonia 56.1% (2005 figures). Total employment rose by 0.9% in 2005, close to the European average, and this was entirely due to an increase in female employment (a 2.1% rise) with no increase for men.

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In 2005, 867,268 persons were self-employed - for 636,620 of these, this was their main occupation (a slight increase from 584,088 in 1994). The remaining group was either self-employed in a second job (170,357) or following retirement (60,291). Men make up two thirds of the self-employed (2005: 577,459).

Though the number of fixed-term contracts has risen during the last decade, it remains quite low. This can be explained by the fact that such contracts are subject to certain restrictions. In 2006, 23.2% worked on a part-time basis, with the number of women working part-time higher than the European average (2006: 42.6%). (The number of men working part-time is 7.9% (2006) – the European average.) In 2006, average working time was 23.6 hours. Although some people work part-time due to a lack of full-time jobs (2005: 15.9%) most choose to work part-time for family reasons (2005: 33%). Certain sectors like construction (2005: 5.6%) and manufacturing industry (2005: 11.4%) have fewer part-time workers. In catering (2005: 47.7%), the retail trade (31.8%) and the health sector (48%) the number of part-time workers is very high.

The unemployment rate (2006: 8.3%) fluctuates around the European average, for men (2006: 7.5%) as well as women (2005: 9.4%). However, for people aged under 25, this rate (2005: 21.5%) is much higher than the European average (2005 – EU-15 countries: 16.7%) and youth unemployment is a serious problem, as is long-term unemployment (i.e. more than 12 months) which affects 4.4% of the active population compared to 3.3% across Europe (2005 – 15 countries). Women are particularly affected: 5% compared with 3.8% of men (2005). In terms of very-long term unemployment (i.e. more than 24 months), Belgium is also above the European average.

There is also a significant difference between the regions. In November 2006, the distribution of 322,628 unemployed people was as follows: Flemish 136,092; French 132,668; German speaking 1,311; Brussels 52,557. Flanders is the biggest region with 60% of the population, so its share in the unemployment rate is lower than in the other regions

Considering the youth education attainment level (i.e. the percentage of the population aged 20 to 24 having completed at least upper secondary education), Belgium scores above the European average. Women score considerably better than men. In terms of life-long learning, the participation is below the European average. It is mainly people with low levels of education facing unemployment.

II. INDUSTRIAL RELATIONS

1. Key issues In the past, during periods of social conflict, tripartite conferences were held with representatives of government, employers’ organisations and unions in order to solve social and economic problems. The blueprint of a consultative system was drawn up during the Nazi occupation. Employers and workers clandestinely negotiated ways to work together after the Liberation. The result was the Social Pact, a draft of cooperation between Labour and Capital at the national, sectoral and business level providing an institutional framework of collective bargaining. The appropriate structures for social dialogue were set up in the period between 1945 and 1952.

Belgian industrial relations has three main characteristics: firstly, all parties are free to conclude collective labour agreements; secondly, industrial relations are embedded in a tripartite neo-corporatist public-law industrial regulatory body; and finally, the principle of subsidiarity applies, i.e. the state intervenes and regulates only when employees' and employers' organisations fail to do so.

2. Social partners Unions

The Act of 24 May 1921 guarantees freedom of association. Anyone residing in Belgium is entitled to set up an association – e.g. a trade union – but cannot be compelled to join an association. Unions can

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acquire legal personality when their statutes comply with the Professional Associations Act or the Non- Profit Organisations Act., although they have not used this provision for various reasons. After the Second World War, the public authorities granted “functional legal personality” to the unions. This covers a wide range of union powers. The most important is undoubtedly the right to conclude collective bargaining agreements and take part in social elections.

However, this does not mean that the government automatically accepts any trade union as a full social partner; there are criteria of representation65. Article 3 of the Collective Labour Agreement Act of 5 December 1968, for example, stipulates that collective labour agreements can only be concluded by multi-industry trade unions on condition that they are organised at national level; represented in the National Economic Council and the National Labour Council; and have at least 50,000 members.

Unions in Belgium

Three organisations fulfil these conditions66 and are entitled to conclude collective labour agreements:

- the Algemeen Belgisch Vakverbond/Fédération Générale du Travail de Belgique (Belgian General Federation of Labour, ABVV/FGTB),

- the Algemene Centrale der Liberale Vakbonden/Centrale Générale des Syndicats Libéraux de Belgique (Federation of Liberal Trade Unions, ACLVB/CGSLB)

- the Algemeen Christelijk Vakverbond/Confédération des Syndicats Chrétiens (Confederation of Christian Trade Unions, ACV/CSC) representing respectively a social democratic, a (left) liberal and a Christian profile.

The exact number of members is not officially known, but according to a study carried out in 2000, the ABVV had 1,051,961, the ACLVB 194,439 and the ACV 1,449,413 members. The trade unions give higher numbers: 1.2 million (ABVV), 230,000 (ACLVB) and 1.7 million (ACV). Both ABVV/FGTB and ACV/CSC are union confederations. Union federations, such as the metal workers’ union are affiliated to the confederations.

- The Nationale Confederatie van het Kaderpersoneel/Confédération Nationale des Cadres (Belgian Confederation of Executives and Managerial Staff, NCK-CNC) has less than 50,000 members and has a multi- industry structure. It is only representative in the framework of the Organisation of the Economy Act. It takes part in the social elections.

In the private sector a distinction is made between blue-collar federations and white-collar federations. ACLVB/CGLSB is a general organisation, grouping workers from different occupations and sectors in a single structure. Its members are not divided into different federations. ABVV/FGTB and ACV/CSC are affiliated to ETUC and ITUC. NCK/CNC is affiliated to the European Confederation of Executives and Managerial Staff.

Employers

Provided they are representative, employers' organisations can also participate in the social dialogue. For example, Article 3 of the Collective Labour Agreements Act also applies to employers’ organisations, but they do not have to fulfil the same quantitative criteria as workers’ unions.

Employers´organisations in Belgium

The most important employers' organisation is the Verbond van Belgische Ondernemingen/Fédération des entreprises de Belgique (Belgian Federation of Enterprises, VBO/FEB). It represents various professional federations and has several seats in the National Labour Council.

Other – smaller - representative employers' organisations are Unie van Zelfstandige Ondernemers (UNIZO), Union des Classes Moyennes (UCM, representing small and medium sized enterprises), Boerenbond and the Fédération Wallonne de l’Agriculture (FWA, both farmers).

65 This results from the fact that trade unions have no legal status. 66 The criteria for representation are not generally laid down. In other laws than the Collective Labour Agreements Act, other criteria might be written down.

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VBO/FEB is affiliated to the International Organisation of Employers and to BUSINESSEUROPE. UNIZO and UCM are affiliated to the European Association of Craft, Small and Medium-sized Enterprises (UEAPME).

The regional employers’ organisations are Vlaams Economisch Verbond (VEV) in Flanders and Union Wallonne des Entreprises (UWE) in Wallonia.

3. Joint bodies Social dialogue is conducted in the Nationale Arbeidsraad/Conseil National du Travail (National Labour Council (NA/CNT)), in joint committees and in private enterprises (the public sector has its own consultative structure). It is a public-law body entrusted with submitting opinions or proposals relating to general issues of a social nature affecting employers and employees; concluding national and multi- industry collective labour agreements; and preventing or solving industrial conflicts. It also mediates during disputes arising between joint committees.

The NA/CNT is composed of active and deputy members designated by the representative organisations. The chairperson is neutral and is appointed by the King from a group of specialists in social and economic matters. Collective bargaining at branch level is conducted within joint (sub) committees. The joint committee or a joint (sub) committee concludes collective labour agreements; prevents and settles disputes between employers and employees – a conciliation bureau can be set up within a joint committee; and advises the government and the National Labour Council etc.

Joint committees often play an important role in the implementation of laws. They are composed of an independent chairperson and deputy chairperson; an equal number of representatives from employers’ and employees' organisations; and two or more secretaries. They are set up by Royal decree for blue- collar or white-collar workers; for employees do not fall into either of these categories, e.g. home workers; for specific professions (taxi drivers for example); for the entire country or for particular regions. In 2005, there were 99 committees and 78 subcommittees, in which 5,828 representatives of workers' and employers' organisations had a mandate, and 1971 meetings.

In the eighties, Belgium became a federal state and the framework was adapted. Economic and social consultation bodies were established at regional level, e.g. the Flanders Social and Economic Council and the Walloon Economic and Social Council.

4. Collective bargaining

Legal basis and key issues The oldest collective labour agreement can be traced back to the agreement on pay and working conditions concluded by employers and workers in the cloth industry of Verviers in 1789. During the period between the two World Wars many attempts were made to grant legal status to collective labour agreements, but they failed for various reasons. Finally, on 5 December 1968, the Collective Agreement and Joint Committees Act was approved by Parliament. This Act applies to all workers and employers in the private sector.

A collective labour agreement can be concluded between one employer and one or more representative unions (at company level); various employers and one or more representative unions; and representative employers’ organisations and one or more representative unions. It can be concluded in the National Labour Council; in a joint (sub) committee; or at enterprise level.

Employers are free to conclude collective agreements with a non-representative group, but the agreements reached by bodies other than the representative organisations are only gentlemen’s agreements as they are not covered by the Collective Labour Agreements Act. However, an employer’s commitment has legal effect because it is a unilateral commitment. The conclusion of a collective labour agreement is subject to certain formal validity requirements: it has to be a written document; it has to be drafted in French and in Dutch, unless it refers exclusively to a specific region; and it should provide certain compulsory information, e.g. the signature of the persons with signing authority. The agreement must be registered

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with the Ministry of Employment, Labour and Social Dialogue. The objective, the date, the duration and the scope of the Collective Labour Agreement in the National Labour Council or in a joint (sub)committee must be published in the Official Journal.

A Collective Labour Agreement is declared generally binding when the Crown declares the individual and collective provisions applicable by way of Royal Decree to all employers who fall under the joint body in which the Collective Labour Agreement was concluded.

Article 19 of the Collective Labour Agreements Act summarises the people and organisations bound by a non-generally binding agreement:

• the organisations which have concluded the Collective Labour Agreement and the employers who are members of such an organisation;

• the organisation and employers adhering to the agreement and employers who are members of such organisations;

• the employers who become affiliated to the organisation bound by the agreement; and

• all workers in the service of employers bound by the agreement.

If the Collective Labour Agreement is not binding on the employer but his enterprise falls under the jurisdiction of the joint body in which the Collective Labour Agreement was concluded, he is nonetheless bound by the individual provisions.

The number of Collective Labour Agreements annually concluded in the National Labour Council, vary from 2 to 20. In 2005, 999 Collective Labour Agreements were concluded in joint (sub) committees. In 2001 and 2003, there were more than 1000 new Collective Labour Agreements. However, agreements concluded at enterprise level are rising significantly. In 1970, there were 38 Collective Labour Agreements concluded at enterprise level whereas in 2005, this rose to 4,517. Most Collective Labour Agreements at enterprise level are concluded in the food industry, the chemical industry and the metallurgic sector, and in sectors where there are no sectoral Collective Labour Agreements.

5, Collective disputes In most sectors the social partners have negotiated dispute resolution procedures. These are often outlined in collective labour agreements. The National Labour Council and the joint-committees are charged with the task of conciliation. The joint-committees set up a conciliation bureau, i.e. a place where employers' and unions can meet and confer at any time. Furthermore, the state appoints officials to mediate between conflicting parties. These “labour conciliators” can intervene in all industrial disputes at any time. In practice, however, they usually only intervene when negotiations have stalled or when there is no conciliation procedure.

Labour law disputes or conflicts are submitted to industrial tribunals or to industrial courts of appeal. A worker can go to court when his employer does not respect the wages and working conditions stipulated in a Collective Labour Agreement. The settlement of collective disputes as such can not be referred to the courts. This means that a judge can not prohibit workers from striking. If, however, "subjective" rights are violated as a result of an industrial conflict, then the courts are competent. The president of an industrial court of appeal can rule that picket lines should not prevent access to strike breakers.

Strikes According to the data of the Ministry of Economy, the total number of striking days varies. In 2002, there were only. 60,954 strike days. But the number is sometimes higher, when there has been a national strike, for example and in 2001, there were 460,177 strike days. More than 50% of strikes are held in industrial sectors. Other sectors, like agriculture and fishing, hardly experience any strikes. Most strikes are held in enterprises employing more than 100 workers (often more than 80%). Lock-outs are very rare.

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III. EMPLOYEES’ REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues Social dialogue has two aspects: consultation and cooperation on the one hand, and collective bargaining on the other. Whereas works councils (Ondernemingsraad/Conseil d’entreprise) and health and safety committees (Comité voor preventie en bescherming op het werk/Comité pour la prévention et la protection au travail) emphasise consultation and cooperation, trade union representatives (Vakbondsafvaardiging/Délégation syndicale) will defend the rights of the unionised workers and also formulate demands concerning wage levels and working conditions.

In some cases the employer is obliged to inform the workers, even when no trade unions are active in the company. Article 4 of the Act of 22 May 2001 regarding workers’ participation in the capital and profits of the company, rules that where there is no collective labour agreement, the workers should be informed of the form of the action plan. From then on they have 15 days to raise objections. If there are diverging points of view, officials from the Ministry’s Labour Inspectorate will try to conciliate the positions. If they fail, the case will be submitted to the joint committee. Similar regulations are also found in other legislation. For example, Collective Labour Agreements Nos. 6867 and 8168 provide that if there is no works council, health and safety committee or trade union delegation, the employer has to inform the workers directly about monitoring by video cameras and use of email and internet. It is highly doubtful whether a fundamental right (i.e. the right to privacy) can be restricted by means of an agreement between social partners, but the fact that non-unionised workers do not have any form of protection makes it unlikely that an employer needs to fear objections from them.

The deadline for implementation of Directive 2002/14/EC was 23 March 2005, but it was not met. It was politically impossible to agree as employers’ organisations and unions were unable to find common ground. Trade unions consider this directive as a means of making an old dream come true, i.e. to be represented in companies employing 20 to 50 workers. The employers’ organisations, however, fear that an unreasonably high number of workers would be protected against dismissal. For a company employing 21 (white collar) workers with a mini-works council of 2 members, this could mean protection against dismissal for 12 workers. Each trade union can nominate 2 effective members and two substitutes, and there are three organisations. Needless to say, this is a tricky issue which led to diverging advice within the National Labour Council.

Unions believe that they must be represented in companies employing at least 20 workers in order to comply with the directive. Employers’ organisations believe that Belgian law already conforms to the directive because companies organise social elections for the health and safety committee in companies employing 50 workers.

Some academics are in favour of the trade union’s point of view and feel there should at least be a health and safety committee where there are at least 20 workers and that it should have competence regarding information and consultation. This view is grounded in the fact that even Article 23 of the Belgian Constitution guarantees the right of information and consultation to workers. In respect of that article, a labour court in Brussels found against an employer who had neglected to inform workers about a restructuring of a company employing less than 50 workers, even though there was no works council and thus no obligation to provide that information.

However, the majority of lawyers do not share this point of view. There are also less radical solutions Such as giving these rights to trade union representatives where committees already have to be set up in many sectors where there are at least 20 workers. In companies where there is no trade union organisation, roving representatives covering a whole sector could be established with information and consulting facilities.

67 CAO no. 68 of 16 June 1998 concerning the safeguarding of the personal privacy of workers regarding camera control on working sites, generally binding by Royal Decree 20 September 1998, B.S. 2 October 1998. 68 CAO no. 81 of 26 April 2002 concerning the safeguarding of personal privacy of workers regarding the control of electronic and online communication data, generally binding by Royal Decree 12 June 2002.

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2. Legal basis and scope The legal framework for setting up a works council within the enterprise was established by the Act of 20 September 1948 (i.e. the Organisation of the Economy Act).

Before the Second World War, trade unions were informally represented. On 16 June 1947, an agreement was reached that confirmed and generalised that practice. Trade unions, however, obtained legal status only in 1971. On 24 May 1971, Collective Labour Agreement No. 5 was concluded in the National Labour Council. As this collective labour agreement is not generally binding, it does not apply to employers who do not belong to the signatory organisations. Consequently, all employers have to set up works councils and health and safety committees, but not trade union delegations. As Collective Labour Agreement No. 5 is formulated in general terms, more specific rules are agreed at the sectoral or company level. This means that there is no uniform settlement.

3. Capacity for representation All workers of an enterprise are represented by the representatives in the Works Council and in the Health and Safety Committee. This is not the case for workers employed by temporary employment agencies and for employees of subcontractors.

There is discussion about which employees are represented by the Trade Union Delegation. Article 6 of Collective Labour Agreement No. 5 is somewhat unclear: “Employers recognise that their unionised personnel are represented by trade union representatives who are appointed or elected from amongst the employees of the enterprise”. This could mean that the trade union representatives also represent non- union members, but this point of view is rather controversial.

4. Composition Every enterprise69 employing an average of 10070 workers has to set up a works council. The council is presided over by the head of the enterprise and a number of senior executives designated by him or her. The workers have their own elected representatives. Blue and white-collar workers have separate election bodies. In enterprises employing at least 25 young workers (i.e. under the age of 25), these young workers are also entitled to separate representation. Social elections are held every 4 years (the last one was held in 2004)71. Only unions that meet the conditions of the Collective Labour Agreement Act can nominate candidates. This means that ABVV, ACLVB and ACV have had a monopoly for a long time. A legal amendment in 1985 enabled low-ranking managerial personnel (cadres) to participate in works council elections. Specific representation criteria72 were formulated for the managers’ trade unions. The National Confederation of Managers was acknowledged as a representative union. In addition, junior managers who do not belong to a union are also entitled to stand for election. They have to collect at least 10% of the signatures of junior managers and at least 5 signatures if less than 50 staff members are active, and not less than 10 if the total amount of staff members is between 50 and 100 (article 20 of Organisation of the Economy Act).

Social elections are held in a period defined by the Crown. Procedures are more or less comparable to national elections, except that voting is not compulsory. Voters are called to vote (electronically, if possible). Social elections are not held on any particular day, like national elections, but over a period of several weeks during which the employer can set an election day. All the company’s employees can vote, but to run as candidate a worker has to fulfil certain conditions. All workers engaged by an employment or apprenticeship contract – except managerial staff – can vote if they have worked for at least three months in the enterprise. To be elected, a worker must be at least 18 years old; may not belong to the management; must have been employed for at least six months consecutively or nine months non-

69 Enterprise is not synonymous to corporate body. An enterprise can be part of a legal body that has some degree of autonomy. A corporate body can comprise many dozens of works councils or heath and safety committees. 70 The figure can be adapted by the Crown. The target figure is 50 workers. 71 The procedure is laid down by Royal Decree. See Royal Decree 15 May 2003. 72 These organisations need 10,000 members (instead of 50,000) and are active for the whole country (Article 14 § 1, 5° Organisation of the Economy Act).

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consecutively in the year before the election; and must be under 65. The number of members in the works council is subject to the number of workers employed when social elections are being held. This varies between 6 and 22.

Only representative organisations that have signed Collective Labour Agreement No. 5 and that sit on the joint committees are entitled to have a trade union delegation. This implies that the National Confederation of Managers is not allowed to appoint delegates, as it did not sign this collective labour agreement. However, a representative organisation that does not have a seat on a joint committee can claim a representation if at least one mandate was obtained during the previous social elections or if it can testify to the support of 10% of the employed workers (which is actually quite difficult), under article 7 of Collective Labour Agreement No.5.

In sectoral collective labour agreements, rules regarding the establishment of trade union delegations are quite explicit. Generally a certain threshold is required to set up a trade union delegation. Many sectors allow the establishment of a trade union delegation when employing 20 workers. Sometimes trade unions have to prove that a quota of workers is affiliated. Sectoral collective labour agreements determine the number of mandates, and also how trade unions can appoint the delegates. In most cases a letter will be sent to the employer mentioning the delegate’s name. A trade union delegate is appointed for a maximum period of four years (Article 16 of Collective Labour Agreement No. 5). Exceptionally, shorter mandates can be negotiated. In order to avoid social conflict, delegates are often appointed during the election period for members of the works council and the health and safety committee.

5. Protection granted to the members Acting and deputy employees' representatives, but also non-elected candidates who participated in the elections for the first time or the non-elected candidates who sat on the previous committee are protected against dismissal73. They can only be dismissed for just cause subject to prior approval by the labour court or for economical or technical reasons recognised by the competent joint committee or the National Labour Council. They are protected from the thirtieth day prior to the election’s notification until the instatement of the next council or health and safety committee, i.e. a period of more than four years. If the employer terminates the agreement of an employees' representative and fails to respect the statutory procedures, the employee or his union can request his reinstatement. If reinstatement has not been requested, the employer has to pay an amount equal to the salary for a duration of two years if the employee has less than 10 years service, three years if he has between 10 and 20 years service and four years if he has more than 20 years service. If the requested reinstatement is refused the employer will have to pay an amount equal to the salary of the remaining mandate in addition to the flat-rate amount of 2, 3 or 4 years’ salary.

Under article 18 of Collective Labour Agreement No. 5, members of the trade union delegation cannot be dismissed on the grounds of their mandate. To prevent abuse a dismissal procedure has been established. When dismissing for reasons other than just cause, the employer has to inform the trade union. If the latter objects to the dismissal, it has to be presented to the joint committee’s conciliation bureau. The parties concerned will accept its decision. However, if no decision is reached within 30 days as a result of conflicting opinion, a labour court can rule on the legitimacy of the dismissal. If the dismissal is not accepted because it is motivated by the delegate’s unionist activities, the employer cannot dismiss. However, if he abides by his decision to dismiss, he will have to pay damages. The amount is set out in the sectoral collective labour agreement. In certain sectors this compensation is equal to the amount paid for dismissing members of the works council and the health and safety committee.

6. Internal operation and decision-making The works council meets at the workplace and is chaired by the head of the enterprise or his or her representative. A member of the workers’ delegation acts as secretary. The works council meets at least once a month at the request of the head of the enterprise or at least one third of its members. Meetings are

73 Law of 19 March on special provisions relating to dismissal of workers’ delegates in works councils, workplace health and safety committees, and candidate workers delegates.

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regarded as working time and paid accordingly. The venue and materials are provided for by the employer. The joint committees set up work rules that can be used by the works council in different companies: e.g. procedural time limits for convening meetings.

Means The venue of Works Councils and Health and Safety Committees meetings are provided by the employer. Meetings are regarded as working time and paid accordingly. The employer also provides facilities (offices, computers, etc.) for the trade union representatives. There is no legislation on time-off, training facilities, experts, etc. but the employer and the unions negotiate on these matters.

7. Capacity and Rights The works council has competence at four levels: right to information; advisory competence; decision making; and managerial competence. Article 11 of Collective Labour Agreement No. 5 gives a non- exhaustive list of the trade union representatives’ areas of competence. It refers amongst others to the negotiation of collective labour agreements and control over the application of social legislation in the company. Trade union representatives often have authority over other matters. This is provided for in special laws and collective labour agreements.

Information The provisions of Collective Labour Agreement No. 9 of 9 March 1972 and the Royal Decree of 27 November 1973 state that employers are obliged to provide four different types of economic and financial information:

– general information on the works council’s establishment or mandate renewals;

– annual information to give an insight into the enterprise’s financial situation;

– periodical information to enable the work’s council to monitor the evolution of the enterprise’s business performance;

– occasionally information is needed to permit workers to keep abreast of new events. When the information is related to a management decision, the works council has to be informed before the decision is taken.

When providing financial and economic information, the employer has to give information about social topics at the same time (e.g. the number of temporary workers).

The Law of 22 December 1995 rendered a “social report” obligatory. Its implementation is set out in the Royal Decree of 4 August 1996. The social plan is annexed to the annual financial statement for the Belgian National Bank and contains information about employment issues.

As the employees’ representatives often lack the necessary expertise to interpret the information, the law made it compulsory in 1985 to designate one or more auditors in order to:

– provide the works council with a complete run-down of the annual accounts;

– certify that the information given is complete and correct;

– analyse and explain figures about the financial structure and developments.

The auditor may attend works council meetings. He or she has to be present if requested by the majority of the employees’ representatives. The works’ council recommends a candidate-auditor to the shareholders. A double majority is required from both the members of the works council and the workers’ representatives. The auditor’s mandate expires in the event of a decision of the works council by double majority.

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Consultation The works council may (or must be) consulted on certain issues. Collective Labour Agreement Act No. 9 lays down the scope of its advisory competence. The works council can grant advisory opinions on issues such as vocational training and the organisation of work.

Bargaining Although Collective Labour Agreement No. 5 stipulates that workers are generally expected to recognise the “legal authority” of the employer (Article 2), the employer and union have competing interests. Whereas the employer presides over the works council and the health and safety committee, he will not be seen among the trade union representatives.

The description in Collective Labour Agreement No. 5 of the competence of the trade union representatives also suggests that potential clashes with the employer may occur. After all, one of its functions is to monitor whether the employer respects legislation (Article 11.3º). In addition, it has to negotiate collective labour agreements. Collective labour agreements can be concluded at national level (in the National Labour Council), at sectoral level (in the joint committees) or at company or enterprise level. At company level, negotiations are held between the employer and the trade union representatives. However, trade union representatives cannot conclude a legally valid collective labour agreement, as stipulated in the Collective Labour Agreements Act. Trade union representatives will therefore mainly negotiate, but a high-ranking member of the representative organisation will sign the collective labour agreement. In most cases this is a regional secretary.

In some sectors, union representatives symbolically sign the collective labour agreement. This is not really wise because it is taken for granted that the signatory parties commit themselves to not striking against the collective labour agreement during its term. Union representatives violating this peace obligation risk dismissal for just cause.

8. Other representation bodies Health and Safety Committees became obligatory immediately after Wold War II. A law on health and safety was adopted in 1952 and later replaced by the Workers’ Health and Safety Act in 1996. A health and safety committee is compulsory when employing 50 workers. If no committee has been established, its tasks are carried out by the union representatives. Like the works council, the health and safety committee has a bipartite composition. The employers’ side is composed of acting and deputy members designated by the management. The committee is presided over by the head of the enterprise. The workers’ side is composed of a number of active and deputy members, elected at the same time as the employees’ representatives in the works council, following the same procedure and formalities. However, managerial staff are not represented separately. A health and safety advisor and an industrial medical officer, both prevention officers, sit on the committee and attend its meetings. The health and safety committee plays an advisory role and is also closely involved in the recruitment of prevention officers. The committee meets monthly and at the request of at least one third of the workers’ delegation. The employer or his representative acts as chairman. He sets the items on the agenda. The secretariat is assured by a representative of the Internal Service for Workplace Health and Safety. Meetings are regarded as working time and paid accordingly. The meetings’ venue and materials are provided for by the employer. In 2000, 5,653 companies (employing 1,376,881 workers) held elections to establish a health and safety committee and 3,185 companies (1,203,047 workers) for a works council. 67,650 workers ran as candidates for 31,665 positions.

Sometimes the employer consults by means other than the legal framework described. In some cases, it will concern an improvement of production and will therefore not compete with the works council, the health and safety committee or trade union representatives. A group of workers will then meet on a regular basis, discuss problems and present solutions to the management. Another possibility is participation management. Sometimes it appears that such parallel consultation is only designed to keep representative unions outside the company. It is actually a copy of the works council and called “personnel council” or “workers’ committee” or some similar term. In such companies the lack of structural participation (by workers’ organisations) is often compensated for financially.

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European Works Councils The provisions of the Directive 94/45/EC were transposed into Belgian law by Collective Labour Agreement No. 62 of 6 February 1996, made generally binding by way of the Royal Decree of 22 March, 1996. Two additional laws of 23 April 1998 deal with protection against dismissal of employees' representatives and the confidential nature of information communicated by the enterprise.

The national legislation is a copy of the stipulations of the directive. There are, of course, certain elements which are not determined by the directive, such as the appointment of the employees' representatives. The members of the Special Negotiating Body and of the European Works Council are appointed from the employees' representatives working in Belgium who sit on the works council. If there’s no unanimity, the members are appointed by majority. If there is no Works Council, the same procedure is applied to members of the Health and Safety Committee. If there is neither a Works Council nor a Health and Safety Committee, the joint committee can delegate the union to appoint members. If this scenario is also impossible the representatives can be elected directly by the employees. Members of the European Works Council enjoy similar protection as members of the national Works Council.

9. Protection of rights Inspectors of the Ministry of Employment are charged with ensuring compliance with the laws on the Works Council, Health and Safety Committee and trade union representatives. Employers who do not respect the law or the collective bargaining agreements (such as those who do not hold social elections or prevent union representatives exercising their mandate) can be fined or sent to prison.

10. Codetermination rights The works council has decisive competence in a number of cases defined by law, e.g.:

– drafting and changing the work rules;

– setting the dates of annual holidays if necessary;

– jointly establishing with the employer how to use the proceeds of disciplinary penalties, for example

If not specially entrusted to employees, the works council has to manage programmes set up by the employer for the welfare of its personnel, e.g. company pension schemes.

IV. EMPLOYEES’ REPRESENTATION IN THE BOARD OF DIRECTORS, SUPERVISORY BOARDS OR OTHER CORPORATE BODIES

In Belgium, employees do not participate in the corporate supervisory board, except when it concerns a European company. There are, however, a handful of state-owned companies such as the Brussels transport company STIB and the Flemish bus company De Lijn, where employee representatives are present at board meetings.

Council Directive 2001/86/EC was transposed into Belgian law by the National Labour Council on 6 October 2005 by way of Collective Labour Agreement No. 84. Simultaneously, Collective Labour Agreement No. 62ter incorporated Article 3bis of the Directive. When a company complies with the conditions of Collective Labour Agreement No. 84, a European Works Council no longer has to be set up separately.

The national legislation is a copy of the stipulations of the directive. There are, of course, elements which were not laid down in the directive requiring specific regulations, such as the rules concerning the appointment of the workers' representatives. The members of the Special Negotiating Body and of the representative body are appointed from the employees' representatives working in Belgium who sit on the

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Works Council. If there is no unanimity, the members are appointed by majority. If there’s no Works Council, the same procedure is applied to members of the Health and Safety Committee. If there is neither a Works Council nor a Health and Safety Committee, the joint committee can delegate the union to appoint members. If this scenario is also impossible the representatives can be elected directly by the employees. Employees' representatives enjoy similar protection as the members of the National Works Councils (Law 10 August 2005). Specific legislation is designed to protect the confidentiality of information.

V. INVOLVEMENT AND EMPLOYEES’ PARTICIPATION IN DECISIONS THAT AFFECT THEM IN THE UNDERTAKING

Procedures to prevent difficulties There is no specific procedure, but the Works Council or the trade union representatives have to be informed about payment delays (Collective Labour Agreement No. 27 of 27 September 1975), the economic situation of the enterprise’s business performance and in cases of collective redundancy (according to Collective Labour Agreement No. 24 of 2 October 1975.

Insolvency or bankruptcy procedures The employer is bound to inform the Works Council or the Trade Union Delegation in case of solvency problems, according to Collective Labour Agreement No. 27, declared generally binding by Royal Decree 17 February 1976.

It may be that the activities of an enterprise continue after a declaration of bankruptcy. This is only possible when the employees' representatives of the Works Council, the Health and Safety Committee, the trade union representatives or the employers' representatives have been heard (Law 8 August 1997).

Judicial settlement (gerechtelijk akkoord) When establishing a "social restructuring plan", the members of the Works Council, the Health and Safety Committee or the trade union representatives are heard on the revision of the debt, and if necessary on the transfer of the enterprise (Article 29 and 32 Law 17 July 1997).

Operations affecting shareholders The employer must periodically supply economic and social information to the works council. This implies that the works council should be informed beforehand in the event of closure, collective redundancy or transfer of undertakings (such as mergers). Employers who do not respect these provisions can be fined or sent to prison.

Although convictions used to be rare, this has recently changed. When the Renault plant in Vilvoorde was closed, a senior executive of the Renault group was convicted in 1998 for failing to respect Article 11 of Collective labour Agreement No. 9. In addition, the parent company (Renault France) was held liable.

Certain laws explicitly mention this obligation to provide information. In this context, Article 15 of the Royal Decree of 8 November 1989 stipulates that a possible take-over should be discussed with the employees. Some situations have to be settled separately and even compel the employer to do more than merely inform, for example, in the case of a collective redundancy.

When implementing the European regulations, there are certain obligations when dealing with a collective redundancy (Collective Labour Agreement No. 24, declared generally binding by Royal Decree 2 October 1975). In this case, the employer is bound to inform and consult the workers. He can start redundancy procedure only when this condition has been met. When this procedure is not correctly

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applied, the employer’s notice period can be suspended or he may even be forced to reinstate the worker (Articles 62-69 Law 13 February 1998).

State aid Managers of companies who receive government support have to communicate this to the works council (Royal Decree 25 September 1972, B.S. 7 October 1972 and Ministerial Order 26 April 1973).

Information and consultation in connection with other decisions The works council will also intervene for a number of other events. They concern mainly trivial matters, except for Collective Labour Agreement No 39. If an employer wishes to invest in new technologies which could affect employment, he has to inform the works council of the possible social consequences. If he neglects to do so, he will not be allowed to terminate labour contracts for reasons related to the introduction of the new technology. If this prohibition is ignored, he will have to pay compensation equal to three months' gross income on top of the standard redundancy fees.

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BULGARIA

After the communist takeover, on September 15th 1946, Bulgaria was declared The People’s Republic of Bulgaria (Narodna Republika Balgaria – NRB). The communist regime collapsed in November 1989, but the Bulgarian communist party, renamed the Bulgarian socialist party (Balgarska sotsialisticheska partia - BSP), won the country’s first free elections. On November 15th, 1990, after a referendum, NRB was renamed Republic of Bulgaria (Republika Balgaria). In the spring of 2004, Bulgaria joined NATO and on 1 January 2007 it joined the European Union.

Bulgaria has one legislative chamber. The 240-member National Assembly (Narodno sabranie – NS) is constitutionally the highest state authority. A new Constitution was passed in July 1991 and was amended in September 2003, February 2005 and March 2006. The Head of State is a directly elected non-executive president, who has the power to delay legislation, but not to block it.

In 2005, about 70% of the population (7.5 million people) lived in urban areas, with 1.2 million living in the largest and capital city, Sofia.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Under communism, Bulgaria’s traditionally strong agricultural sector was replaced with an impressive, but to large extent, artificial industry, concentrated in branches. The change turned out to be inadequate for competing in a post-communist environment, and led to a steep decline in output in the early and mid 1990s. The recovery since 1997/8 has been slow and partial in industry, and almost non-existent in agriculture. The growing services sector is not so much a reflection of a move towards a modern service- oriented economy, but rather of a declining Bulgarian industry.

In 2006, the Bulgarian economy registered real growth of 5.6%, with services the main driver. As opposed to services, the business climate index for industry and construction was down from the previous year’s levels. A slowdown in industrial production and sales is the reason for the lower growth in industry, compared with the previous year. The slowdown in private sector growth (down from 10.8% in 2005 to 8.7% in 2006) is attributable to a slowdown in agriculture (2.7%). GDP growth has remained stable in the last 5 years, from 4 to 6 %, (in 2006 it marked a record of 6.3%) mainly supported by capital spending. Forecasts point to GDP growth stabilising at a value of 6% in the period 2009-2010. The breakdown for 2005 was: agriculture (9.3%), industry (30.4%) and services (60.3%). From January to June of 2006, consumer prices increased by 2.9%, and food prices continued to represent a significant chunk of the consumer basket.

After Bulgaria’s accession to the EU, consumer prices rose sharply and, in August 2007, inflation exceeded the 12% mark. Since July 1st, electricity prices have risen by 7.5% for households and 17.3% for businesses. Since mid July, the price of bread has increased by 70%. The rest of the main foods (cheese, vegetables, fruit, oil, etc.) rose by 60 to 80%. Waves of strikes and protests organised by workers such as public transport drivers and hospital doctors demanding higher salaries, are currently sweeping the country. The 2007 academic year began with a 40-day delay because of the national primary and secondary school teachers’ strike.

Efforts to harmonize the Bulgarian legislation with the rest of Europe are continuing. A law amending and supplementing the small and medium sized enterprises (SME) Act was passed. New definitions of micro, small and medium-sized enterprises were introduced in line with the respective European definitions. SMEs make up more than 90% of the total number of companies in Bulgaria and are the biggest employer, as well as the biggest potential investor in the country. They generate more than 50% of exports and more than 30% of GDP. A predominant share of GDP (74% in 2006) is generated by the private sector (almost half of the assets of the Bulgarian economy are owned by private companies).

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However, efforts to improve the business environment remain ineffective. Business expectations of optimal regulatory regimes have not been realised. Work on the analysis of regimes administered at central and municipal level has been postponed, and privatisation processes are advancing at a slow pace.

A survey of labour productivity growth and wage increases from January 1st 2000 to December 1st 2005, based on data from official statistics, shows that the growth in labour productivity was 2 percentage points higher that wage increases. But this trend has reversed in the past two years, with wages rising nine percentage points more than productivity. Labour productivity grew faster than GDP until 2002, but the placement of around 100,000 long-term unemployed people under the active labour market program “From Social Assistance to Employment” contributed to the decline in labour productivity growth, which fell below the rate of GDP growth. Productivity growth (measured by value added per employed person) fell from 4.4% in 2005 to 3.1% in 2006.

Labour market The main problems of the Bulgarian labour market are:

• increasingly unfavourable demographic indicators;

• a falling rate of economic activity;

• a low employment rate (in the last quarter of 2006, the relative proportion of people in employment in the 15 to 64 age group was 47.4%, down from 55.8% in 2005;

• high youth unemployment and long-term unemployment;

• a large proportion of the labour force working in the “grey economy”;

• increasing numbers of people with higher and secondary school education becoming unemployed; and

• regional disparities in employment and unemployment rates.

Despite these problems, the unemployment rate dropped to 7.4 % in August 2007 from an average of 9.6 % in 2006.

Nearly 8% of the workforce is based in agriculture and forestry; industry makes up 35.3%; and services 57.1% (2nd quarter of 2006).

Three quarters of unemployed people hold low academic qualifications and have no profession; while 72.5% of the Bulgarian working population has secondary and higher education (2000-2004). At the end of 2004, the government approved a national scheme to encourage equality between men and women encouraging institutions to implement a policy of equal opportunities for women and men in all areas of social and economic life. It involved action in several areas: promoting equality in access to healthcare and education; wider involvement in decision-making; improving public information and eliminating male and female role stereotypes.

The recruitment of workers without an employment contract has been a major problem in Bulgarian industrial relations. Workers without contracts were paid in cash, with employers failing to make social security contributions or keep records on workers’ length of service leaving both the employer and the employee susceptible to problems, particularly in the event of an accident. In order to reduce these cases involving major violations of labour legislation, since the beginning of 2003, employers have been obliged to register any employment contract concluded, amended or terminated with in the National Statistics Institute. Without this procedure, no worker may start a job.

Part-time work is relatively rare in Bulgaria. In 2005, only 2.3% of the workforce worked on a part-time basis. It is not an attractive option due to the low salaries paid. Instead of reducing working hours, there is a tendency towards workers voluntarily increasing them in order to earn more. Since January 1st 2007, the minimum salary is 92 Euros and the average medium salary is 160 Euros. Although wages are quickly

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rising, they are still low by East European standards (the lowest of all EU-27 countries according to the latest Eurostat data).

The last two or three years have witnessed an increase in the phenomena of “triangular contracts” between workers, employers and third parties. These employment arrangements are often made in order to help employers avoid the obligations contained in collective agreements. The third party benefits from these arrangements because it is only obliged to comply with the provisions of a collective agreement in the case of workers with employment contracts.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues Bulgaria’s process of economic and political transition has had a major impact on industrial relations in the country, particularly on the situation of the social partners. The transition from centralised and state- governed labour relations to modern social dialogue with all the institutions involved is, undoubtedly, one of the major achievements of democratic development. The changes in trade unions took place simultaneously with the transformation of the economic and political systems.

The fast disintegration of the unified trade union system also had an impact on trade union density. Membership, which stood at almost 100%, decreased significantly over a few years and many members began to join new alternative trade unions. In 1993, trade union density was 82.5% but fell to 37.3% in 1998. According the latest trade union census, in 2003 trade union density was 24.8%. In Bulgaria, the rate of trade unionism is considerable, reaching 67.5%. The largest representative Confederation has 74.5% of the country’s trade union members, the second biggest 21.4% and the rest, which are not representative, 4.1%.

The establishment of trade union pluralism in Bulgaria is seen as having contributed to the recognition of the key role of trade unions in the process of reforms, especially in the years when tripartite cooperation and collective bargaining were prepared and initiated. According to some commentators, a policy of support for reforms at an acceptable 'social price' and a new consensual culture of labour relations based on social dialogue also created the climate for trade unions to play a leading role in the creation of Bulgaria's new system of industrial relations.

2. Social partners The association of workers and employers is enshrined in the Constitution (Konstitutsia), art.44 (1), and in the Labour Code (Kodeks na truda - KT), which establish the right of free association of all Bulgarian citizens.

The first version of the present KT entered into force in 1986, with different amendments made in the last years, the latest in 200774. Despite the amendments to the KT, Bulgarian labour market regulation still requires further modernisation. Substantial changes to the country’s labour laws have taken place, but some parts of the KT remain archaic.

After discussions in the National Council for Tripartite Cooperation, an agreement between the social partners was reached in February 2007 and the Parliament adopted amendments to the KT concerning the representativeness of trade union and employers’ organisations, which were published in May 2007. In the amended articles, quantitative criteria were enhanced and new criteria for the number of employers and employees within an organisation claiming representativeness were introduced to ensure the participation of employers of small and medium-sized enterprises. The KT sets four requirements to be met by trade union organisations (art. 34) and employers’ organisations (art.35), to be eligible for a

74 All references to the KT in the present report concern its last version which is currently in force.

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representative status, participating in the tripartite dialogue and managing funds in line with the tripartite principle75.

A four-year mandate of representativeness of worker and employer organisations has been introduced. Employee and employer organisations are recognised by the Council of Ministers on request (KT, art.36 (2)). The Council of Ministers carries out a procedure to verify compliance with representativeness criteria once every 4 years (KT, art.36 (2)).

Trade Unions

At the end of 1989, the Bulgarian Trade Union embarked on a radical reorganisation geared towards organisational and political independence, making the protection of employee interests its main objective. In February 1990, its extraordinary congress gave rise to the formation of the KNSB Konfederatsia na nezavisimite sindikati v Balgaria (Confederation of Independent Trade Unions in Bulgaria). Since then, it has made considerable progress, managing to transform itself by strengthening its positions and gaining recognition as the largest trade union organisation in the country with a dominant position and role. Nowadays it has 31 regional coordination councils, 234 municipal coordination councils and 7000 organizations which are members of 24 branch federations

The KT Konfederatsia na truda Podkepa (Confederation of Labour Podkrepa) was established in 1989, prior to Bulgaria's socio-political changes, as a semi-legal opposition organisation. Its initial purpose was to protect the civil rights of employees. It is Bulgaria's second largest trade union structure. Podkrepa is a voluntary union based on the principles of free confederation of trade union organisations established at regional level. It holds 35 regional units and (at national sectoral level) 26 branch federations.

In 1996, a united trade union association “Promiana” was established and, in 2004, the government granted it representative rights. The recognition of this additional trade union organisation proved controversial among both the previously established confederations. According to the most recent census data (2003), KNSB reported 393,843 members, Podkrepa 106,309, and Promiana 58,613.

Employers´ organisations

By 2004, six employers´ organisations met the representativeness criteria of the Labour Code in force at the time.

- The BTPP Balgarska targovsko promishlena palata (Bulgarian Chamber of Commerce and Industry) is the largest national business organisation in the country. It has 46,000 members, generating 33.4% of the GDP and representing 41% of the entire workforce under individual employment contracts. It has 70 sectoral organisations

- The BSK Balgarska stopanska kamara (Bulgarian Industrial Association) is made up of more than 14,000 industrial, trade and service companies from the private, public, cooperative and municipal sectors, as well as banks, universities, economic and scientific bodies, insurance and leasing companies, pension and health insurance funds and other organisations and establishments. It incorporates 81 regional organisations, municipal associations and chambers, as well as local bodies corresponding to the administrative divisions of Bulgaria. It also incorporates 73 branch organisations representing all sectors of the Bulgarian economy. BSK estimates that it represents in the region of 15,000 to 18,000 member enterprises.

- The SCHP Sauz na chastnite predpriemachi vazrajdane (Union of Private Entrepreneurs Vazrajdane) has 2,.000 members, local (based in municipalities) and sectoral or branch organisations. The SCHSI Sauz za chastna stopanska initsiativa (Union for Private Economic Initiative) has almost 4,000 member companies and 50 regional and branch offices.

In 2004, the Bulgarian government conferred national representative status to two new employer organisations.

75 The four criteria for trade union organisations are: a) The organisation must have at least 50 000 members; b) The organisation must have more than 50 organisations, with more than five members and be established in more than one third of the industries, determined in accordance with the National Classification of Economic Activities

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- The KRIB Konfederatsia na rabotodatelite i industrialzite v Balgaria (Confederation of employers and industrialists of Bulgaria), currently has 828 affiliated employers, according to census data. The KRIB is an umbrella organisation for Bulgaria’s major private companies employing more than 100 workers. It currently claims more than 3,000 member companies, some of which are direct members (or part of a member holding group) and others are members through branch organisations. The combined annual turnover of member companies exceeds USD 2.8 billion. Together they employ more than 200,000 workers and are present in virtually all sectors of the Bulgarian economy.

- The AICB Asotsiatsia na industrialnia capital v Balgaria (Bulgarian Industrial Capital Association), has 862 affiliated employers, according to the latest census data. AICB affirms that its member enterprises (often part of holdings and investment companies) employ a total of more than 70,000 workers, with a combined annual revenue of more than USD 900 million in 2003. AICB has a well-developed network of regional structures, covering more than 50 municipalities.

In May 2006, these two organisations merged to form a new organisation called KRIB, GBB Konfederatsia na rabotodatelite i industrialzite v Balgaria, Glasat na Balgarskia biznes (Confederation of employers and industrialists of Bulgaria, the Voice of Bulgarian business). The new employers’ organisation embraces large and medium-sized businesses, covering more than 400,000 workers, producing two thirds of the GDP and generating three quarters of the country’s exports. The merger of both organisations was a major step towards creating a new centre of representativeness in Bulgarian business and a powerful instrument through which the voice of business may be heard in Europe.

Bulgarian legislation does not establish clear criteria with regard to defining the national representativeness of branch employer organisations. According to current legislation, it is enough for a branch organisation to be a member of one of the six nationally representative employers’ organisations. However, it is often the case that a branch organisation is a member of several employers’ organisations simultaneously. The establishment of sectoral councils is a new idea under consideration. Branch employer organisations would be able to discuss any issue at these councils, including the legislation on the relevant sectors, together with representatives of the respective state institutions. However, some opposition to this idea has already been raised.

Employers’ organisations Unions

Number of membe Details of Membersh rs Name Name membership ip (2003 Census data)

BTPP 70 sectoral 46,000 KNSB 393,843 organisations BSK Private, public, cooperative 14,000 KT 106,309 and municipal SCHSI 4,000 Promiana 58,613 SCHP 2,000 KRIB, Major private GB companies, B holdings and 1,690 investment companies

On September 26th 2006, the Bulgarian government, the two main trade union confederations (Confederation of Independent Trade Unions in Bulgaria and the Confederation of Labour Podkrepa) as well as the six national representative employers’ organisations signed the first “Pact on economic and social development”, effective for the period 2007–2009. This process will probably lead to further partnerships or mergers of employers’ associations representing small business interests. Bulgarian industrial relations development analysts believe that, in time, employers’ organisations will unite under two conglomerates – of large and small companies – similar to the practice in other EU member states.

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3. Joint bodies In 1993, the NSTS Natsionalen savet za tristanno satrudnichestvo (National Council for Tripartite Partnership) was established. It is a consultative body for labour, social insurance and living standards issues. It is consulted on the government's law-making decisions in spheres regulated by the Labour Code. It consists of an equal number of government representatives and representatives of employer and trade union organisations.

The ISS Iconomicheski i sotsialen savet (Economic and social council) was established in 2000, although it has only been operating since the end of 2003. It is an independent consultative body that represents civil society organisations on economic and social development. Its task is to draft positions, on the request of the President of the Republic, the Prime Minister, the Chairman of the Parliament or on its own initiative. Trade unions and employers are represented here, but not the Government. The third party is a representative of a broad spectrum of non-governmental organisations (NGOs).

Several other bodies are in place for the areas of social affairs, social insurance funds and institutions, such as the Supervisory Board of the National Social Security Institute, the Assembly of Representatives, the Management and Control Boards of the National Insurance Fund, the National Employment Promotional Council, the National Council on Working Conditions, the Managing Board on the “Working Conditions” Fund, the Supervisory Board of the fund to guarantee employee’s pay claims in the event of employer’s insolvency, the Managing Board of the Social Investment Fund, the Managing Board of the National Agency for Vocational Education and Training, the Advisory Board of the National Institute for Conciliation and Arbitration (made up of equal representation of the government) and the National Council for Gender Equality.

The efficiency of the different tripartite structures varies. Employers and trade union organisations have different opinions on their level of success in the social dialogue. There is a shared belief that certain structures are designed to be advantageous to one organisation and disadvantageous to others. The overall assessment however should be based on the above-mentioned tripartite structure. According to everyone’s opinion, the National Council on Working Conditions is an example of successful social dialogue. According to trade unions, another successful example is the Economic and social Council, where the State is not represented.

4. Collective bargaining

Legal basis and key issues Collective bargaining is regulated by the KT and exists at three levels: branch or sector, municipal and enterprise.

After lengthy negotiations, representative trade unions and employers' organisations drew up a National Framework Agreement on sector and branch-level collective bargaining procedures and mechanisms. However, a number of employers' organisations have refused to sign it. The gradual separation of the State from active participation in economic life has been reflected in the various degrees of centralisation of collective bargaining. This has led to decentralisation towards company-level collective bargaining. Employers and trade unions express the common opinion that there is still much to be done for collective bargaining at sector and branch level to achieve an efficient dialogue. Regional bargaining is not well developed and practically non-existent. Both representative trade unions are in negotiations with the Association of Municipalities to join efforts in the bargaining process. All the mayors in the country are members of this Association.

There are no legal provisions as regards the relationship between collective bargaining agreements and other forms of labour regulation. An agreement regulates issues on the labour and social security relations of employees that are not regulated by mandatory provisions of the law (KT, art. 50).

Under article 58 of the KT, the employer is obliged to inform all employees of all the collective bargaining agreements concluded in the undertaking which the employees are bound to and make copies available to employees. In the event of breach, (KT, art.59) the parties to the agreement, as well as every employee concerned, may file a claim in a court of law.

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Main features The validity term of a collective bargaining agreement is established at one year, unless otherwise specified in the agreement, but never more than two years. The parties may agree to shorter validity terms applicable to individual clauses of the agreement (KT, art.54).

Collective bargaining agreements must be registered, according to their level, in a special register held at the local or central Labour Inspectorate. They only cover employees who are members of the trade union organisation which has signed the agreement. Employees who are not members of the trade union can gain access to it by applying in writing to the employer or to the leadership of the trade union (KT, art.57, paragraph 2).

No accurate information is available on the degree of coverage of collective bargaining agreements. Experts at KNSB estimate that in 2003, 38-40% of all employees were covered by a branch or enterprise- level collective agreement. This can be attributed to the lack of representative trade unions in a number of branches. There is no precise data on the extent of collective bargaining.

This has decreased in the last five years, due to a large extent to privatisation. Most private enterprise owners refuse to bargain and even break the law by banning union organisations, the only bodies entitled to conclude a collective bargaining agreement.

At sectoral and branch level, some 70 agreements were concluded and are currently in force, of which 11 are branch agreements. At enterprise level, there are about 5000. At municipal level, 105 agreements were concluded and are in force.

Unionisation in small and medium-sized companies is very weak. Only trade unions have the right to participate in the social dialogue, which means that 98% of Bulgarian enterprises and more than 45% of the workforce are excluded. The only avenues open to them to participate directly in the dialogue is to create Work Councils (in cases of companies with 11 to 50 employees) or to have strong trade unionisation at branch level.

5. Collective disputes In 2001, a law amending the Labour Code established the NIPA Natsionalen institute za pomirenie i arbitraj (National Institute for Conciliation and Arbitration) on the basis of a proposal made by the social partners, which was set up in 2003. It is Bulgaria's first institution for out-of-court collective labour disputes resolution. The new Institute provides mediation and arbitration and it is generally believed that it has filled a major gap in the country's industrial relations system.

The Institute also created and administers a national database of:

• collective agreements; • collective labour disputes and their reasons; • methods and deadlines for the settlement of collective labour disputes; • the number of people involved in collective labour disputes; and • data on conciliators and arbitrators, their qualifications and the disputes they have intervened in. Trade unions and employers hope that the new regulations on mediation and arbitration will be increasingly put into practice as a reliable mechanism for the professional and durable resolution of industrial conflicts.

On October 12th 2006, Bulgaria’s Parliament adopted a new law that establishes a mediation and arbitration procedure, thus ensuring that the mechanisms for the fair resolution of collective labour disputes, with respect to the interests of both employers and workers, are implemented.

Strikes In 1991, the right to strike was recognised and guaranteed in the newly adopted Constitution. Article 50 states “Workers and employees have the right to go on strike to defend their collective economic and social interests”.

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Article 11 of the Law on settlement of collective labour disputes Zakon za urejdane na kolektivnite trudovi sporove ZUKTS) states “should an agreement on a collective labour dispute be impossible to reach, or the employer does not fulfil his duties as regards voluntary arbitration, the workers may go on strike. In the event of a strike, employers and trade unions must sign a written agreement guaranteeing minimal services to the population.

Despite this constitutional right, a ban on strike action in three sectors (health, communication and energy) was continued without any alternative mechanism for settling labour disputes until early 2007 when the ban on strike action in those three sectors was abolished. However, securing civil servants’ right to strike action still remains high on the agenda. Going on strike is not a frequent form of protest in Bulgaria, even though there are persistent spots of social tension at micro-level.

Article 20 of the ZUKTS states that:”after announcing a strike and during it, employers do not have the right to cancel the activity of the enterprise or to dismiss employees” and Article 21 goes on to say “During a legal strike, employers do not have the right to hire new employees to replace those taking strike action”.

III. EMPLOYEE REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues and types of representation and bodies In general, the functions of employee representation can be performed via two channels: by trade unions or by persons elected in the General Meeting of Employees (Obshto sabranie - OS). as representatives.

Before the amendment to the KT in 2001, only trade unions were recognised as representatives of employees. According to article 6 of the amended KT, an OS of all employees can be established. Employees can elect the OS representatives to represent their common interests before the employer on issues associated with labour and social security relations. According to article 7 of the KT, the OS elects representatives of employees to carry out information and consultation activities.

Employee rights to information and consultation via their representatives is a new phenomenon for employees, and an implementation system needs to be developed. As it stands, the KT makes a provision for a dual system of employee representation in undertakings:

- Trade union representatives, elected by trade union members.

- Authorised employee representatives elected by the OS.

There is no system in place which establishes rules for interaction between employee representatives and trade unions within an enterprise.

Under article 7 (2) of the KT, the OS can assign the functions of information and consultation to representatives of the leadership of the trade union organisation in the respective undertaking.

2. Legal basis and scope The amendment to the Labour Code, the amendments to the law on guaranteed employees’ claims in the event of employer insolvency, and the law on employment promotion, all dating back to 2006, have been adopted. Thus, the full transposition of the EU Directives, within the framework of labour law, has been completed.

The Labour Code (KT) is the major piece of legislation in the labour field. However, it only contains minimum requirements as regards representation, labour protection, rights of employees and working conditions. Many avenues remain open for negotiation in the social dialogue at different levels.

The KT regulates labour relationships between employees and employers through provisions related to:

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- principles of the social dialogue and the social partnership (arts. 2-3), - rules for employee association (art.4) - rules for employer association (art.5), - functions of the OS (art.6), - rules for electing employee representatives for information and consultations tasks (art.7), - fulfilment of labour rights and obligations (art.8), - formation and rights of trade union and employer organisations (arts. 33-49), - collective labour agreement (arts. 50-60), - individual work agreements and work regulations ( arts. 61-356), - the settlement of labour disputes (arts. 357-398); and - control of adherence to labour legislation and penalties (arts. 399-416).

3. Capacity for representation In an undertaking, a trade union group may be created with a minimum of 3 members. The group decides which Federation and which of both representative Confederations to participate in.

Trade unions are mainly involved in collective bargaining, the composition of the collective bargaining agreement and representing employees before state institutions. Trade union organisations may, on the request of employees, represent them in court. /KT, art.45/.

Employee representatives elected at the OS have the following functions:

- to adopt the social program; - to select the collective bargaining agreement, if there is more than one negotiated by the different trade unions in the undertaking; and - to carry out information and consultation activities ( KT, art. 7):

a. to request from the employer (or the employer’s representative) the necessary information, if the employer has not provided it within the established time frames; b. to participate in consultation procedures with the employer and to express their opinion on the measures envisaged by the competent body, which should be taken into consideration in decision making; c. to request meetings with the employer whenever necessary in order to communicate to the employer issues posed by the employees; d. to participate in training initiatives, in order to guarantee the effective exercise of their information and consultation functions.

There is no special provision in the KT authorising them to represent the employees in court in the event of a labour dispute.

Trade union organisations and their divisions are entitled, on the request of employees, to represent them in court. They are not entitled to conclude agreements, recognise claims, resign, withdraw, reduce the claims of employees or collect amounts on behalf of the represented employees unless expressly authorised to do so. Trade unions have the right to represent their members before state authorities and other institutions in the area of labour relations, compensation for damage to health, housing and other social and economic interests, the adjudication of individual and collective disputes and to apply to a court for protection of the rights and interests of trade union members, (KT, art.45).

4. Composition The structure of the trade union generally follows the hierarchical structure of an undertaking. It consists of primary trade union organisations (trade union groups) created by employees in the workplace (provided the group is made up of more than 3 persons), and they elect a leading body (a committee). In

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the case of a multi-level hierarchical structure in the enterprise, the committees elect their representatives for the trade union council. The council elects representatives for the central leading body of the trade union. In general, having selected the Federation (which are different for each industrial sector) and the Confederation to which to be affiliated, the trade union composes its structure according to the statutes of the respective Confederation. The committees, councils and the central leading body of the trade unions elect their chairmen, vice-chairmen and secretaries.

The employee representatives are elected by the OS (KT art. 7). The number of representatives is determined beforehand by the OS, according to the following: - for undertakings/establishments with 50 to 250 employees – from 3 to 5; - for undertakings/establishments with more than 250 employees – from 5 to 9; - for organisationally and economically differentiated branches – from 1 to 3. As regards establishing an information and consultation system which does not restrict the opportunity for trade union action, the opinion of both national representative trade unions is that the most appropriate system is the British model – through election of employee representatives and not through institutionalising a chosen permanent body. To date, no system has been really consolidated in enterprises.

5. Protection granted to the members In accordance with article 333, paragraph 5, of the KT, employees elected as representatives are protected against dismissal in the following instances: staff cuts, reduction of work, lack of the necessary capabilities or qualifications.

This states that, in the above cases, employees who are members of the enterprise’s trade union leadership cannot be dismissed by the employer during, and within 6 months of the end of, their term in office, without the consent of the trade union body, on the decision of the central leadership of the respective trade union organisation. The employer must obtain the written consent of the leadership of the trade union organisation before terminating the labour contracts of the chairman and the secretaries of the trade union organisations of the specialised divisions, and to terminate the labour contract of the members of the leadership body of the trade union organisations, the employer must obtain the written consent of the boards (Executive boards of the Federations).

6. Working of the body and decision-making There are no provisions in the KT concerning the work of employee representatives. Employee representatives are entitled to define the rules of their working procedure themselves.

Means The KT does not contain any provisions on the financing of the elected employee representatives. According to article 7c of the KT, reduced working time, additional leave, etc. may be agreed, if necessary, through a collective bargaining agreement or a separate agreement with the employer.

The financial resources of trade unions come from sources including membership fees, subsidies from the undertaking and donations. In the majority of trade unions in Bulgaria, the membership fee is 1% of gross monthly salary.

According to article 159 of the KT, to perform the trade union’s activities the unpaid members of the trade union leadership in the enterprise have the right to paid leave for a period specified in the collective agreement, but no less than 25 hours per calendar year. The leave is paid and may not be compensated in cash. The trade union representative chooses when to use the leave and will notify the employer in a timely manner. The time and duration of the leave used is recorded in a special register held by the employer. Under article 161 of the KT, in the absence of another provision in a collective agreement, paid elected trade union officials are on unpaid leave during the period in which they hold the respective trade union position.

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Under article 406 of the KT, in performing their functions, representatives of trade union organisations may, at any time, visit the enterprises and other locations where work is done, as well as the premises used by employees; demand from the employer explanations and provision on the required information and documents; and obtain information directly from employees on all issues concerning compliance with labour legislation.

Under paragraphs 1 and 2, art. 46 of the KT, in performing the trade union activities, the employer has to provide the conditions and his or her co-operation to the trade unions, including, the free use of premises and any other tangible assets required for performing trade union functions, as well as transportation means, requested in advance and for limited period of time. In practice, collective bargaining agreements include provisions establishing that the employer, on the request of trade union organisations, will provide the necessary technical equipment, computers with Internet, modem and printer, photocopying machine, fax, etc. Within a certain limit, the employer also pays for telex, phone and fax services.

There are no provisions in the KT concerning the provision of facilities for the work of employee representatives.

Article 7c of the KT establishes the right of employee representatives to training associated with the performance of their duties. The rights of employee representatives are generally established in the collective bargaining agreement, if the enterprise has one.

According to the KT, there is no obligation for the employer to cover any expenses related to external assistance from experts provided to the employee representatives. Employee representatives and trade unions may use such experts provided that they are able to cover their fees themselves.

7. Capacities and rights Under the amended KT, the employer is not required to take any steps to establish an information and consultation system. This system is established on the initiative of the employees. With the transposition of Directive 2002/14/EC into Bulgarian labour legislation, the employer has the following new obligations (KT, art.130):

• Assist and provide the necessary conditions to the representatives for performing their functions, as per the agreement signed with the employer. All employee representatives elected or chosen by the trade union organisations participate in the preparation of the agreement; • Provide the trade union organisations and the employee representatives in the establishment with the information required by law, and consult them; • Provide information, consult and coordinate, in the cases stipulated by law, only with trade union organisations or only with representatives when there are no trade union organisations or no elected representatives in the establishment, or when one of them refuses to participate in the information and/or consultation procedure.

8. Information and consultation Under article 7a of the KT, the employer and the employee representatives will determine through an agreement:

• The contents of the information and the terms of its presentation;

• The terms in which the employee representatives will present their opinion on the presented information;

• The terms and the subject of the consultation; and

• The representatives of the employer appointed to preset the information and to carry out consultations.

According to article 7c of the amended KT, elected employee representatives have the right to be informed by the employer or by a person appointed by him in a way that allows them to assess the

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eventual impact of intended measures, and to request the necessary information from the employer, if the employer has failed to provide it within the established time frame. They can also participate in consultation procedures with the employer and express their opinion on intended measures which must be taken into consideration when taking a decision, or may request meetings with the employer when necessary to inform him of issues posed by employees. Finally, they can participate in training, in order to guarantee the effective exercise of their information and consultation functions.

Trade unions may be authorised by the OS to fulfil the functions of employee representatives, in which case, they will have the above-mentioned rights. If not, they have the right to request information from the employer before drafting the collective bargaining agreement. Partnership with the employer is carried out in the various Councils (Council for social partnership, Council for interests, conciliation, etc) made up of representatives of the leadership body of the trade union (normally the chairman, the general secretary etc. of the Federation) and on the side of the employer (the human resources director, the head of personnel training and qualification, the chief accountant etc.). In the Council, there are representatives of all the trade unions acting in the undertaking. On developing the enterprise’s business plan, the Council discusses the annual income policy. The employer is also obliged to submit to the Council annually information about measures to provide healthy and safe working conditions. The employer provides timely information to the trade unions as regards training courses, qualifications, and further qualifications, both at home and abroad.

The employer provides information, consults and coordinates activities with the trade unions only if there are no elected employees or with the employee representatives when there is no trade union in the respective undertaking. Employee representatives have the right to request and receive timely, correct and comprehensive information on the economic and financial situation of the employer affecting employees’ labour rights and obligations. Employee representatives may agree other pragmatic methods of information and consultation with the employer through a collective bargaining agreement or a separate agreement.

It is important to note that the people receiving information do so under the explicit requirement of confidentiality and they are responsible for damages caused to the employer if there is a breach (KT art.7d.) Art. 130 of the KT establishes the right of employee representatives and trade unions to information and consultation in the event of collective redundancies as well as:

- defines the terms of information and consultation. Information related to forthcoming transformations must be presented one month prior to such transformations. Information related to the implementation of measures affecting employment must be presented one month prior to the implementation of such measures.

- defines the information and consultation obligations in the event of a change of employer.

- defines the right of employee representatives to receive information in the event of transformations in the undertaking related to the undertaking’s activity, economic status and work organisation.

Through the Councils, the employer provides the trade union organisations with timely and correct information on the economic and financial situation, in line with the provisions of the KT. The trade union organisations provide the employer timely and correct information on the structures and the number of trade union bodies, the number of trade union members, as well as any other information concerning the social partnership.

The trade union organisations within the divisions must update the lists of their members on an annual basis.

Bargaining Under article 52 of the KT, the employer must negotiate with employee representatives to conclude a collective agreement. The employer must make available to the employee representatives the concluded agreement binding the parties as well as timely, authentic and comprehensive information on the employer’s economic and financial position which is relevant for the conclusion of the collective agreement. The provision of information may be granted or refused by the employer depending on

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whether the disclosure of such information could cause damages to the employer. The employer may decide to grant such information under a confidentiality agreement.

In an enterprise, the collective bargaining agreement is concluded between the employer and a trade union organisation (KT, art.51 a). The trade union organisation prepares and submits a draft of the collective bargaining agreement. Where more than one trade union organisation exists in one enterprise, the trade unions submit a common draft. If the trade union organisations fail to submit a common draft, the employer concludes the agreement with the trade union organisation whose draft has been approved by more than one half of the OS. The collective agreement regulates issues of the labour and social security relations of employees not regulated by mandatory provisions of the law (KT’, art. 50).

9. Other functions and responsibilities According to article 7, paragraph 2 of the KT, employee representatives are obliged to inform workers of the information received and the results of the consultations carried out. There are no other specific requirements regarding the terms and the procedures of the provision of information.

The management of the trade union organisation (this is a standard text in the provisions of the collective bargaining agreement and there is no example of this being subject to collective bargaining), assumes the obligation to assist the employer in preparing the corporate strategy and achieving the corporation’s approved objectives and tasks; assist the employer in complying with the approved annual budget; assist the employer in increasing labour productivity and enhancing labour discipline; assist and demand from all its members adherence to the labour and technological discipline as well as to the internal labour regulations of the corporation; assist and demand from all its members adherence to the provisions and standards on health and safety; and inform all its members of any significant events related to the company in a timely manner.

10. Other representation bodies Under Art 27 of ZBUT Zakon za bezopasni uslovia na trud (Law on Safe Working Conditions), a working conditions committee must be established in all enterprises with more than 50 employees. The committee will consist of an equal number of employee and employer representatives although no more than ten members. Employee representatives will be elected according to the rules established in article 6 of the KT. They are elected for a term of 4 years, which may be suspended if so requested by at least one- third of all employees in the undertaking and if voted by a qualified majority of those attending the OS. The employer is the chairman of the committee and an employee representative is its vice-chairman. The working conditions committee will also include, as representatives of the employer, civil servants assigned to deal with safety at work, and a physician from the occupational health service. The committee may invite ad hoc external experts and representatives of the inspection authorities.

Working conditions groups will be established in other undertakings with less than 50 employees as well as in the structural units of undertakings. The working conditions groups will consist of the employer or the manager of the respective structural unit and one employee representative. The working conditions committees and groups will:

• discuss the whole range of activities related to the health and safety of employees once every quarter, and adopt measures to improve it; • discuss the results of the occupational risk assessment and the analyses of the health of employees, the reports of specialised occupation health and safety services and other issues concerning the health and safety protection of employees; • discuss the planning and introduction of new technologies, work organisation and equipping workplaces as well as propose solutions to ensure the health and safety protection of employees; • carry out inspections to ensure that occupational health and safety provisions are in place; • monitor work accidents and occupational illnesses in the undertaking; and • participate in drawing up information and training programmes on issues concerning healthy and safe working conditions.

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European Works Council From January 1st, 2007 the law on information and consultation with employees of multinational (Community-scale) undertakings, groups of undertakings and companies entered into force. The Law transposes the EU Directive on the European Works Councils. This law regulates the terms and procedures for the establishment and operation of a European Works Council or another procedure for employee information and consultation in multinational (Community-scale) undertakings and groups of undertakings.

The law also establishes that a special negotiating body consisting of at least three members will represent the employees. Central management will determine the number of its members so that each Member State, where a transnational undertaking has one or more branches, is represented by at least one member. The negotiating body will have the task of determining, with central management and by written agreement, the scope, composition, functions and term of office of the EWC, or the arrangements for implementing another procedure for employee information and consultation. There are more than 100 multinational companies and approximately 40 of them fall under the requirements of the Directive.

11. Protection of rights Trade union organisations have the power to notify the controlling bodies about violations of labour legislation and to demand enforcement of administrative sanctions against the offenders. The controlling bodies will be obliged to inform the trade union organisations within one month of the measures being undertaken.

If the employer does not provide the information within the established period, the trade unions and the employee representatives have the right to request it in writing and, in case of refusal, to notify the Executive Agency – the Main Labour Inspection, KT, art.130 a.

12. Codetermination rights Strictly speaking, employees and trade unions have no codetermination rights in the case of substantial changes in the undertaking. Their rights are restricted to the information and consultation sphere.

The employer offers representatives of trade union organisations the opportunity to participate in the work of the company’s management bodies on problems concerning the social partnership so that they may present their views and proposals.

IV. EMPLOYEE REPRESENTATION IN CORPORATE BODIES

Bulgaria still has no legislation or practice on the employee representative participation at board level.

However, in public limited companies with 50 employees or more, employees can participate in shareholders’ meetings on a consultative basis. In private limited companies, they can participate in meetings of the shareholders regardless of the number employed, but only on social issues.

Also, it can be mentioned that employee representatives participate in the board of the directors’ meeting to present the position of the employees as regards the amount of funds for social expenses to be discussed. The programme for the distribution and expenditure of the funds for social expenses is issued on an annual basis by a joint work group with representatives of the employer, the employees and the trade union organisations.

Only the law on employee information and consultation in multinational undertakings and groups of undertakings (Community-scale) regulates employee information and consultation and the participation of employees in the undertaking’s decision-making processes when European companies and European cooperative societies are established. It also sets out obligations concerning the provision of information, the election of employee representatives to the special negotiating body and the rules of procedure.

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V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

There is no system for direct involvement and employee participation in decisions and operations taken outside the undertaking which affect employees in some way.

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CROATIA

After free democratic elections held in 1990 and the referendum on Croatia's independence in 1991 (following the break up of the former Yugoslavia), on 15 January 1992 the Republic of Croatia became a sovereign state recognised by international community. Since then, the country has pursued an independent economic and social development policy.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data The data reflect two predominant features of the Croatian economy:

• Relatively slow economic growth.

• Relatively low inflation rate.

2000 2001 2002 2003 2004 2005 2006

GDP mil USD 18,427.3 19,862.8 23,020.8 29,595.6 35,645.1 38,882.5 42,915,3 current prices 4,152.6 4,476.6 5,181.4 6,662.7 8,030.0 8,753.4 9.664,1 GDP per capita

GDP real growth rate 2.9 4.4 5.6 5.3 4.3 4.3 4.8

Export, mil USD 4,431.6 4,665.9 4,903.6 6,186.6 8,022.5 8,772.6 10.376,3

Import, mil USD 7,886.5 9,147.1 10,722.0 14,209.0 16,583.2 18,560.4 21.488,3

Total persons in 1,340,958 1,348,308 1,359,015 1,392,510 1,409,634 1,420,574 1.467.876 employment

Unemployment rate 21.1 22.0 22.3 19.2 18.0 17.9

Sources: Croatian Bureau of Statistics/ Državni zavod za statitsiku & Croatian Chamber of Commerce/ Hrvatska Gospodarska Komora

These indicators highlight stability as a priority of economic policy implemented in the observed period, rather than achieving accelerated growth.

However, it should be noted that there is considerable disparity in the level of economic development in different regions of Croatia. According to the recent data76 GDP per capita in the richest area of the City of Zagreb and the Zagreb county was Eur 9,597 which is three times higher than GDP per capita in the poorest county Vukovar-Srijem in the north-eastern part of the country (Eur 3,158).

Growth and dynamics of economic development have direct impact on conditions and movements in the labour market.

76 2006 Report on Social Development in Croatia, UNDP

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Labour market In 2004 the average unemployment rate was 13.8% (12.4% of men and 15.4% of women). Although the unemployment rate has recently declined, the relatively slow economic growth will not be enough of a boost to create new jobs and curb unemployment to an acceptable level in the short term.

Around a fifth (22%) of employed people only have elementary school education, and 81.2% of the population has completed secondary school education. Only around 18% of total population has a university degree, including masters’ degrees and doctorates, which is certainly not sufficient for the development of a knowledge-based economy.

There is pronounced economic inequality – about the wealthiest 10% have an income fourteen times higher than the poorest 10%, with consequent tensions between rich and poor. According to a United Nations Development Programme (UNDP) programme: “Economic inequality in Croatia reached the levels that surpass those recorded in successful countries in transition with market-oriented economies”.

Furthermore, two other main features of the social situation are the following:

• Low level of social capital. Indicators assessing social capital point to low level of trust (G. Bežovan’s study77), tensions between management and employees78, and other types of distorted behaviour (as for example nepotism, free riding, etc.) which contribute to low level of social capital.

• Poverty. Average net salary in October 2006 was HRK 4,370.00 (app. 600 Eur), and it covered 77.05% of “trade union basket”79 – minimum costs of living of a four-member family calculated according to the methodology prepared by the Union of Autonomous Trade Unions of Croatia (SSSH).

II. INDUSTRIAL RELATIONS

According to the Constitution of the Republic of Croatia (Ustav Republike Hrvatske) (Articles 43 and 59), both employees and employers have the right to self-organise, recognised as a basic human right. Employees’ right to organise in trade unions and employers right to set up employers’ associations is set out in the Labour Act (Zakon o radu) (Article 167).

Although labour legislation sets high standards of industrial relations and employee representation, the reality is quite different. During the transition period, large industrial complexes were closed down or privatised and restructured. The number of SME is constantly growing, and private businesses are under competitive pressures and so have other priorities.

This context is very unfavourable for real social dialogue.

1. Social partners

Unions

The trade union movement is fragmented, and consequently unions are in a weak negotiating position with little influence on economic and social policy. The lack of trade union political and social influence in turn means that social rights of Croation workers have been degraded, and there is declining interest on the part of employees in joining trade unions. The decline in union density has resulted in increasing rivalry between the trade unions manifested in a permanent high competition. One of the main features of

77 Gojko Bežovan: Indicators of development of civil society in Croatia, 2002 78 60% of interviewed persons claimed there are tensions between management and employees. Comparisons show that in EU such attitude was expressed by 35% of the sample, in Bulgaria 37%, in Romania 49% and in Turkey 48% of interviewed persons. 79 Calculation of «trade union basket» for the Republic of Croatia in December 2006, SSSH

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trade union movement in Croatia is the “vicious circle” of weakening trade unions and worsening of social rights.

At national level there are 254 trade unions, 251 of which are organised in representative associations – there are 24 associations or co-federations of several trade union organisations. Most unions are gathered into six representative associations.

The Act defining the representation of higher level trade union associations in tripartite bodies on national level (Official Gazette/narodne Novine 19/99) prescribes that an association can be represented in tripartite bodies on national level if it fulfils the following conditions:

• it is registered with the Ministry of Labour; • it has minimum of 15,000 members who pay dues to associated trade unions; • that associates at least five trade unions at national level (from the same industry or profession or companies) which allocate a portion of their dues for financing the association; • it operates in a minimum of 11 counties • it acts according to its constitution, principles of democratic representation and free will of its members expressed in democratic way; and • it is a party to a minimum of three collective agreements in different industries at national level, concluded by the association itself, or the trade unions belonging to it.

Union density is 40.5%, compared with 60-70% ten years ago.

Trade unios in Croatia

- The Union of Autonomous Trade Unions of Croatia (SSSH) is the oldest and the largest trade union organisations. It was established in 1990 when some former reformed trade union organisations merged with new organisations. The Union currently comprises 23 branch trade unions with a total number of 211,205 members (2004). It has a well developed infrastructure with offices in each of the 21 counties of Croatia; sections dealing with specific interest groups like women, young people, disabled people and the unemployed; and with areas including multinational companies, the council for European integration and others. Despite strong organisation and human resources however, it has recorded a considerable drop in membership.

- The Council of Croatian Trade Unions of Public Workers (Matica sindikata javnih poduzeća) was established in 1993 and its branches include trade union organisations such as the autonomous trade union of scientists, the union of teachers, and the union of nurses;. According to available official sources, the Council has 49,875 members, but it lacks infrastructure – there are only two part-time permanently-employed persons and no regional offices.

- The Independent Croatian Trade Unions (Nezavisni Hrvatski Sindkati -NHS) was established in 1999 and represents employees in public companies and state administrations, as well as some large utility companies (part of the oil industry, the electricity supply company, post, telecom, and financial services). According to available official sources NHS has 87,313 members and 4 regional offices.

- The Croatian Union of Trade Unions (Hrvatska Udruga Sindikata -HUS) was established in 1990 and it comprises several branch trade unions and company trade unions. According to available official data it has 53,000 members and 10 regional offices.

- The Association of Workers Trade Unions of Croatia (Udruga Radničkih Sindikata URHS) was established in 1994 and it comprises 48 branch and company trade union organisations with a total membership of 50,000.

Employers´organisaton

Because they are not difficult to form there are 43 registered employers’ organisations. Also, there are three registered higher level employers’ associations.

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The Croatian Employers’ Association (Hrvatska Udruga poslodavaca - HUP) was registered in 1994. HUP has about 5,000 members organised in 21 sectoral associations (comprising over 400,000 employees). Members include small, medium-sized and large companies. Apart from its headquarters in Zagreb, HUP has three regional offices in large towns and industrial areas such as Osijek, Rijeka and Split. HUP has 25 employees in Zagreb and two employees in each regional office.

There are two smaller organisations, the Confederation of Croatian Industry and Entrepreneurs (Konfederacija Hrvatske industrije I poduzetnika), comprising 7 sectoral associations, and the Union of Autonomous Employers’ Associations (Konfederacija Udruga samostalnih poslodavaca), comprising 5 sectoral associations.

There are no set criteria for employers’ associations to participate in tripartite bodies at national level. The lack of evidence concerning the legality of the HUP’s representation in the decision-making process in tripartite bodies is a source of numerous misunderstandings and conflicts among the social partners. Trade unions call for this issue to be resolved through legislation.

2. Joint bodies The Labour Act provides the legal framework for the establishment of the Economic and Social Council (Ekonomsko Socijalno Vijeće), a tripartite body whose role is to establish and promote collaboration between the government, trade unions and employers’ associations in solving key economic and social problems. The main areas in which it is intended that the parties work together are:

• coordinating economic and social policy, and

• providing incentives for the conclusion and implementation of collective agreements and their adjustment to economic, social and development policy goals, including the resolution of disputes.

The representative trade union associations concluded an agreement on participation in the work of Economic and Social Council and other forms of social partnership with the government and the Croatian Employers’ Association.

In line with this agreement governments and self-government bodies in local communities can establish local economic and social councils. These are established by administrative county bodies, with representation from trade unions and higher level employers’ associations. Among other issues, local councils monitor, analyse and assess economic, tax, social, infrastructural and other policies and measures that have an impact on stability, development and the living standards of the population of the local community. Since May 2002, tripartite councils have been established in 20 out of the 21 counties.

The social partners are also represented on the boards of various institutions, including the Croatian Employment Bureau (Hrvatski zavod za zapošljavanje), the Croatian Health Insurance Bureau (Hrvatski zavod za zdravstveno osiguranje), the Croatian Pension Insurance Bureau (Hrvatski zavod za mirovinsko osiguranje) and the National Council for Occupational Safety (Nacionalno vijeće za zaštitu na radu). Changes in Rules of Procedure of the Parliament have also opened up opportunities for representatives of the social partners to participate in the work of the Parliamentary Committee for Labour, Health care and Social Policy (Odbor za rad, zdravstvo I socijalnu politiku); Committee for Economic Development (Odbor za ekonomski razvoj), Committee for State Budget and Finance (Odbor za državnu proračun I financije) and the legislative committee (Odbor za zakonodavstvo).

3. Collective bargaining

Legal basis and key issues The Labour Act does not prescribe representation requirements for trade unions for concluding collective agreements. This causes numerous problems in practice due to the large number of small trade union organisations and rivalry among trade union associations, particularly. in relation to the number and composition of the negotiating team, the assessment of the validity of collective agreements (when for example a minority trade union challenges the validity of collective agreement concluded by majority trade union).

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The Labour Act does not oblige the parties to negotiate the terms of collective agreement. However, when parties enter into negotiations they are obliged to conduct them “in good faith” (Article 198). Once concluded, collective agreement impose obligations on all those who participated in concluding the collective agreement and those who were, or later became, members of the trade union association which concluded the collective agreement (Article 199). In the “public interest” the Act foresees an expansion of the application of agreements to people who did not participate in their conclusion (Article 211).

Main features

There are currently about 100 collective agreements at national level. About ten of them are sector level agreements while all the others are company agreements, demonstrating the main characteristics of collective bargaining in Croatia: strong decentralisation and low coverage of employees by collective agreements.

Dissatisfied with this situation, trade unions increasingly tend to extend application of sectoral agreements to other companies within the sector (according to Article 211 of Labour Act). Employers object, claiming that such practice inhibits the free market, puts into question the voluntary nature of membership in trade unions, and contributes to legal insecurity.

As for content, collective agreements predominantly comprise general legal provisions, but frequently lack industry specific provisions. The key issues regulated by collective agreements are salaries (which is a problem area because of the lack of a general collective agreement), other benefits, working hours and occupational safety (collective agreements generally tackle this area superficially).

In some analysts' opinion the fundamental deficiency of collective agreements results from the fact that very little attention is paid to incentives for further development of specific sector or industry-based collective bargaining. A good example of social dialogue is an initiative in the textiles and leather industry where the trade union and employers’ association are committed to promote programmes aimed at the repositioning of the industry, preservation of jobs and creation of new ones and strengthening social responsibility.

4. Collective disputes According to the Labour Act (article 214), in the case of a dispute in the process of concluding, amending or renewing a collective agreement, or in case of any similar dispute that can lead to a strike or any other form of industrial action, or non-payment of salaries or compensation by employers, if parties in the dispute do not agree another way of settling the dispute the parties have to go through a conciliation process. The Social Partnership Office at national level oversees the conciliation process and provides logistical support. Since this conciliation provision is relatively new, it is difficult to draw conclusions about its effect.

Strikes According to Labour Act article 213, trade unions or their higher level associations have a right to call for a strike and to strike in order to protect and promote the economic and social interests of their members, or because of non payment of salaries. A strike has to be notified to the employer, or to the employer’s association against which it is directed, while a solidarity strike has to be announced to the employer where the strike has been organised. A strike must not begin prior to the conclusion of any mediation or other dispute settlement procedures agreed upon by the parties. A solidarity strike can begin prior to the conclusion of the dispute settlement procedure, but only after two days from the beginning of the strike in support of which it is organised. A strike has to be announced by a letter stating the reasons for the strike, and the place, day and time of its commencement.

Under article 221, employers may engage in a lockout only as a response to a strike already in progress. A lockout may not start until after eight days from the start of a strike. Only up to half of employees who are on strike can be locked out from work, and employers must pay contributions prescribed by specific

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regulations, based on the lowest salary, to employees who are locked out. There is no systematic survey or records on strikes or lock-outs in Croatia.

III. EMPLOYEES’ REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues Under Article 55, paragraph 1 of the Constitution of the Republic of Croatia, workers are entitled to participate in the decision-making process in companies. According to the Labour Act (Zakon o radu) (article 139), workers employed in companies with a minimum of 20 employees, except those employed in government institutions and administrations, have the right to participate in decision-making on issues related to their economic and social rights and interests. Employees are vested with active and passive voting rights, except members of management and supervisory boards and workers with powers to represent the employer.

In practice, works councils have been established in around 1,300 companies. A survey of the performance of works council representatives indicated that the most frequent topics discussed at works council meetings, regardless of whether employer representatives are present or not, are related to work conditions, salaries, incentives, output quotas, working hours, particularly the distribution of overtime (working Saturdays), redundancies, individual termination of employment, holidays, holiday pay, Christmas bonus, solidarity aid, infringement of collective agreement rights, problems in production and organisation of work, health and safety of employees and the appointment of employee representatives in company supervisory boards.

The quality of workers’ participation or social dialogue depends largely on the quality of communication. A survey showed that frequently employers neglect employees’ participation rights under Article 144 of the Labour Act. Only 27% of interviewees responded that their employer regularly informs workers representatives without being reminded or asked to do so. Works councils are better informed (31%) than trade unions (18%). This finding supports some attitudes about higher quality participation through works councils. Nevertheless, the quality of communication does not appear to be satisfactory considering the fact that 53% of interviewees confirmed that they could only obtain information they are entitled to by law only with difficulty.

The quality or culture of employers’ communication with works council representatives indicates that there are still a number of autocratic employers not willing to reinforce the social dialogue. Frequently a lack of time or other pressing priorities is blamed. When communication is established, 83% of interviewees said that their employers attitude and tone was “arrogant”. Only 48% of respondents said that employers always provide explanations for their decisions, regardless of whether they accept or refuse works council proposals.

Participation in decision-making is exercised through workers’ councils (WC) and the appointment of employees’ representative on supervisory boards (article 147 of the Labour Act).

Works councils protect and promote the interests of workers employed by certain employers by advising, joint decision-making or negotiations with the employer or a person authorised by him, on issues relevant for the position of employees (article 150 of the Labour Act).

2. Capacity for representation According to Article 158, the work council may sue and be sued only in relation to issues within its scope of activity (protecting and promoting interests of workers employed by a certain employer) or issues covered by the Labour Act or another regulation or collective agreement. The works council may not acquire assets and neither it nor its members incur civil liability for its decisions.

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3. Composition All employees of an employer have the right to vote and to be electect. A list of candidates for participation in a works council can be proposed by a trade union or group of workers whose proposal has the support of a minimum of 10% of employees (article 144). Election of works council members is carried out and monitored by an election committee (article 145). The term of office of a works council member is three years, with elections usually taking place in March. Until now there have been four elections (1996, 1999, 2002 and 2005).

4. Protection granted to members An employer must not favour or disfavour members of the works council (article 160). There is no provision for granting special protection.

5. Working of the body and decision-making According to Article 156, works councils of three or more members must work in sessions. The works council adopts its own rules of procedure. Trade union members whose members are employed by the employer concerned may attend sessions of the works council but they do not have voting rights.

Means Employer shall ensure work premises, assets and human resources for the normal functioning of works councils. All expenses related to the works councils’ activities are borne by the employer. All such technical issues are regulated in an agreement between the works council and the employer (Article 156).

The works council may consult experts regarding issues falling within its competence (article 156.4)

6. Capacities and rights The works council is obliged to inform employees regularly and accept their proposals (article 154 of the Labour Act). During its work the works council is obliged to cooperate with trade unions active in a company and trade union representatives can participate in works council meetings (article 155). The works council must organise meetings with employees at company level or in organisational units, at least twice a year, and on this matter should consult with the employer. However, the law concedes that the employer can also arrange employees meetings, without limiting the works councils’ rights in this respect, pending prior consultation (article 157).

Information and consultation The employer must inform the works council regularly during the year (every three months) about the status of operations of the company and its performance, development plans and their impact on economic and social position of employees, salaries (changes and trends), the amount and reasons for overtime work, health and safety at work, and other issues important for employees (Article 151 of the Labour Act).

The employer is obliged to consult with the works council on issues important for the position of workers. It provides an opinion, which is not obligatory for the employer, but nevertheless a decision made without consultation is considered null and void. Important decisions are the passing of company labour relations bylaws; the recruitment plan, transfers to other job positions and lay offs; expected legal, social and economic consequences of transferring employment contracts to a new employer; measures related to health and safety at work; the introducing of new technology, changes in organisation and methods of work; the annual holiday plan; the working hours schedule; night work; compensation for innovation and technical advancements; and programmes for resolving redundancies (Article 152 of the Labour Act).

Failure to meet this obligation by employer is subject to a penalty.

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7. Other representation bodies Under the Occupational Safety Act, an occupational safety committee must be set up as an advisory body to the employer if the employer employs at least 50 employees. The appointment of members of the occupational safety committee is regulated by internal company rules (article 66). Under article 67, members of the Committee shall be:

• the employer or his authorised representative (who chairs the committee);

• the manager of occupational safety department or an occupational safety expert;

• an industrial medicine specialist; and

• an employees’ representative or their coordinator.

The committee meets at least once every three months. The chair is obliged to invite to the committee meeting an occupational safety inspector, and the inspector decides in each case whether his or her attendance is necessary or not. Employees’ representative and works council members have a right to promote the work of the occupational safety committee. The committee plans and monitors occupational safety rules, reporting and training in occupational safety, designs and implements measures for prevention of injuries and occupational diseases and continualy promotes improvements in occupational safety.

8. Protection of rights Labour courts do not exist in Croatia and labour disputes are resolved in civil courts. Works council members do not have any special protection and consequently, there are no sanctions for the infringement of works council members’ rights. The Labour Inspectorate functions at national and regional level and its activities are regulated by the Law on State Inspectorate for labour and occupational safety. It enforces regulations on labour relations and occupational safety. Labour inspectors verify whether employers have registered employees at the relevant health care and pension institutions, and regulate working time (overtime), the employment of children, women, pregnant women, disabled people, and migrant workers, for example. Works council members do not have any special treatment in this regard.

9. Codetermination rights The Employer, under article 153 of the Labour Act, can make decisions on the following issues only with the consent of the works council:

• termination of the employment of a works council member, a candidate for membership of the works council; a disabled employee; a male worker above 60 years of age; a female worker over 55 years of age; a worker who is a representative on the supervisory board; a pregnant employee; or an employee exercising any right stemming from motherhood protection;

• gathering, processing and disclosing data about employees to a third person; and

• the appointment of a person to monitor gather, process and disclose data about employees to third parties.

An agreement between the works council and the employer or a collective agreement can stipulate additional issues requiring consent.

If the works council does not give its consent, the employer can refer to a relevant court. In cases where the employer infringes co-decision obligations, the decision shall be null and void.

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III. EMPLOYEES’ REPRESENTATION IN CORPORATE BODIES

Employees are entitled to elect their representative in supervisory board of a company, in a company with over 25% state ownership, or if a company is owned by the first buyer of shares or stake from state portfolio who acquired shares or stake at a price lower than 50% of nominal value. Employees’ representative in supervisory board is appointed and recalled by WC, or if WC is not established, then directly by employees (Article 166).

There is no research (and consequently no available data) about employee representation in board of directors, supervisory boards or other corporate bodies. In one illustrative case, in a large Croatian company, for more than two years employee representative had not been elected for participation in the work of the supervisory board. Formal reason for this lack of employee representation is disagreement between three trade union organisations in this company on the election of representative.

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CYPRUS

A former British colony, Cyprus became independent in 1960 following years of resistance to British rule. Tensions between the Greek Cypriot majority and the Turkish Cypriot minority came to a head in December 1963, when violence broke out in the capital Nicosia. Despite the deployment of UN peacekeepers in 1964, sporadic violence continued to force most Turkish Cypriots into enclaves throughout the island. Hostilities in 1974 divided the island into two autonomous entities: an area in the south ruled by the internationally-recognised Cypriot government and a Turkish-Cypriot community (north Cyprus). The UN Peacekeeping Force has continued to serve in Cyprus since 1964 and maintains the buffer zone between north and south. In 1983, the Turkish-held area declared itself the Turkish Republic of Northern Cyprus (TRNC), but it is recognised only by Turkey. The latest two-year round of UN-brokered direct talks – between the leaders of the Greek Cypriot and Turkish Cypriot communities to reach an agreement to reunite the divided island – ended when the Greek Cypriots rejected the UN settlement plan in an April 2004 referendum. On 1 May 2004, Cyprus entered the European Union still divided, with the EU's body of legislation and standards (acquis communitaire) suspended in the north. Cyprus has a population of 784,000 people.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data The Greek Cypriot economy is prosperous but very susceptible to external shocks. The service sector, mainly tourism and financial services, dominates the economy. The Turkish Cypriot economy has roughly one-third the per capita GDP of the South and economic growth tends to be volatile, given North Cyprus's relative isolation, bloated public sector, reliance on the Turkish lira, and small market. Turkish Cypriots are heavily dependent on subsidies from the Turkish government. Agriculture and government services together employ almost half the work force, and the potential for tourism is promising, especially with the easing of border restrictions by the Greek Cypriots in April 2003.

The Cypriot economy is a small, robust and fairly flexible economy, which has proved able to adapt to rapidly changing circumstances. The economy is currently characterised by a very satisfactory rate of growth (the average annual rate of growth of GDP amounted to 5.1%, in real terms, over the period 1961 to 2004), full employment conditions and internal and external macroeconomic stability.

As a result, Cyprus has achieved an enviable level of real convergence with the advanced economies, with a per capita GDP in 2004, expressed in purchasing power standards, standing at about 75% of the EU 15 average, according to the latest Eurostat estimates. The rate of inflation as reflected by the consumer price index, reached 4.1% in 2003, compared with 2.8% in 2002, 2.2% in 1998 and 4.9% in 1993.

The main characteristics of Cypriot economy are:

• The small size of its enterprises – according to the Census of Establishments of 2000, enterprises employed only 4.4 people on average per unit in 2000, compared to 4.3 in 1995. More than half of the total number of enterprises, 58%, employed only one person. “Micro enterprises”, that isenterprises employing less than 10 people constituted 95% of the total.

• The small size of the labour force, given the small population base and quantitative and qualitative imbalances in the labour market which are are evident both at sectoral and occupational level, although these have been partly ameliorated by the employment of, to a large extent foreign, labour. At sectoral level, the imbalances are more evident in the sectors of private households employing people, hotels and restaurants, wholesale and retail trade, construction, agriculture and manufacturing, whereas at occupational level, the shortages are observed in technical and low-skilled occupations. Foreign labour now accounts for almost 16% of the workforce.

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• The openness of the economy, with total imports and exports of goods and services accounting for around 98% of GDP in 2004 as compared to an EU average of 66.9%.

• The predominance and increasing importance of the services sectors, which accounted for 76.3% of GDP and 71.1% of employment in 2004. This development reflects the gradual restructuring of the Cypriot economy from an exporter of minerals and agricultural products, mainly copper, asbestos and citrus fruits in the period from 1961 to 1973 and an exporter of manufactured goods, mainly clothing and footwear, in the latter part of the 1970s and the early part of the 1980s, to an international tourist, business and services centre during the 1980s and 1990s.

• Partial dependence on the tourism sector, whose total contribution, derived from the value added created, either directly through the purchases of goods and services or indirectly, through intersectoral linkages, amounted roughly to 15-20% of GDP in the period 1990-2004.

Average gross annual earnings were much lower than the EU average in 2001. They rose from 12,980 euros in 1996 to 19,290 euros in 2004. The average monthly labour costs were much higher in the EU than in Cyprus (1,903 euros in 2004). Labour costs in Cyprus rose from 1,252 euros in 1996 to about 650 euros (in 2004).

The predominant and continuously expanding share of the services sectors (55.1% of GDP in 1980, 65.7% in 1990 and 76.3% in 2004) at the cost of both the primary sectors of economic activity, agriculture and mining and quarrying; and the secondary sectors of manufacturing and construction, reflects the comparative advantages which Cyprus enjoys in the service sectors.

Labour market The slowdown in the rate of economic growth in 2003, mainly as a result of the decline in tourism for a second consecutive year, has impacted on the labour market. The working population showed a small increase of 4,100 persons, mainly as a result of the expansion of the tertiary sector80. The rate of pay increased by 6.2% in nominal terms and by 2.0% in real terms.

Registered unemployment rose by 13.3% during 2003 to 11,961 people or 3.5% of the labour force. The unemployment rate for men increased from 2.3% in 2002 to 2.5% in 2003 and for females it rose from 4.3% in 2002 to 4.9% in 2003. The corresponding rates for 1998 were 2.9% for males and 4.1% for females.

The change in the structure of production in favour of the tertiary sectors implied a similar change in the structure of employment. The contribution of the tertiary sectors to employment increased from 45.8% in 1980, to 57.1% in 1990 and around 72.8 % in 2004, which was accompanied by a fall in the shares of both the primary and secondary sectors. Since the beginning of the 1960s there has been a decrease in absolute terms of employment in the primary sectors, while a similar trend can be observed in the secondary sectors from the beginning of the 1990s, a development which implies that the additional posts are being created exclusively in the tertiary sectors of services.

Based on the results of the Labour Force Survey (LFS) for the second quarter of 2003, the number of employees was 249,630, representing 76.3% of total employment, the number of employers was 18,746 representing 5.7% of total employment, 47,302 or 14.5% were self-employed and 11,416 or 3.5% were unpaid family workers.

Part-time work in Cyprus is more frequent for women than it is for men. In the second quarter of 2003, 29,153 persons were employed part-time, representing 8.9% of total employment. Of these, 10,010 were men and 19,143 or women. The main reason for part-time working, for 59.8% or 17,420 people was “because they did not want a full-time job” and the second reason for 21.1% or 6,165 was that “they could not find a full-time job”. Part-time employment in the second quarter of 1999 comprised 6.5% of total employment or 18,169 people. Of these, 5,586 were men and 12,583 were women.

80 The number of foreign workers in Cyprus continued its upward trend rising to 40,656, or by 15.8%.

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The following table demonstrates the growth of atypical working:

Atypical labour in Cyprus

1999 2000 2001 2002 2003 2004 2005 Self-employed (% total employment) 25,2 25,8 25,2 23,6 23,6 23,6 23,6 Part-time employment (% total employment) 6,5 8,4 8,4 7,2 8,9 8,6 8,9 Fixed term contracts (% total employment) 10,3 10,7 10,8 9,1 12,5 12,9 14,0 Source: Employment in Europe

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues The Industrial Relations system is based on the democratic principles of voluntarism, free speech and tripartite cooperation. The term "tripartite cooperation" essentially refers to constructive cooperation between the social partners, and the government. The liberal and voluntary nature of the industrial relations system means that to a large extent terms and conditions of employment are determined freely, through collective bargaining between the two sides (employers and employees), with a view to the signing of collective agreements. There is no national minimum wage set by law or by collective bargaining but an Order is issued annually, providing for a minimum wage for certain occupations (£345 for newly recruited employees and £367 for employees with more than 6 months service). The current legislation sets minimum salaries and wages for six occupations: clerks, sales staff, nurses, school assistants, baby minders, and child minders. For those, pay increases were decided in 2004 to gradually raise the minimum wage to 50% of the national median wage by 2008.

Despite collective labour agreements not being legally binding, collective bargaining has traditionally played a leading role in regulating minimum standards, whereas legislation has played a secondary role and in fact there is a substantial lack of statutory regulation

Even though the determination of terms and conditions of employment has been based, to a large extent, on the provisions of collective agreements, either at sectoral or enterprise level, the need to harmonise legislation with that in the rest of Europe has led to a number of terms and conditions of employment being legally enforced. This has not affected in any way the importance and significance of collective agreements, but has assisted in providing for minimum terms and conditions of employment for non- unionised employees, and employees in enterprises that do not have signed collective agreements.

Where specific provisions of collective agreements provide for less favourable terms than those provided for by the new labour laws, these provisions are amended to reach the legislative minimum.

Collective agreements are not legally enforceable documents and as such disputes arising from a breach cannot be settled in the Labour Disputes Court and are instead dealt with according to the provisions laid out in the Industrial Relations Code. However, when cases are examined in the Labour Disputes Court, the provisions of collective agreements in the employer's company, plus any other existing practices concerning terms and conditions of employment, are taken into consideration by the Court.

The Industrial Relations Code is a gentlemen's agreement, signed by the Social Partners in 1977, that remains at the centre of the voluntary industrial relations system. It lays down in detail the procedures to be followed for conflict resolution in labour disputes. Even though the Code is a voluntary agreement, it is highly respected by the social partners, and they very rarely fail to adhere to its provisions. Apart from the procedural provisions agreed upon in the Code, the Code also re-affirms the participating parties' willingness to respect the four fundamental rights/principles clearly set out in the Code:

• the right to organise,

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• the right to Collective Bargaining, Collective Agreements and Joint Consultation;

• the definition of relevant issues for collective bargaining, joint consultation, and management prerogatives; and

• the affirmation of strict adherence to the provisions of International Labour Conventions which the Government of Cyprus has ratified.

The social partners in Cyprus are very much responsible for the system's success, since it relies on this high level of responsibility and respect shown by both employers' and employees' organisations. Strict adherance (with very few exceptions) to the provisions of the Industrial Relations Code has assisted in the maintenance of industrial peace. Furthermore, the existence of various bodies of social dialogue, through which social partners express their views, has assisted in the development of a system that has tripartite cooperation deeply embedded within its functions. This tripartite cooperation has been central to the promotion of public interest and the healthy development of the island's economy.

2. Social partners Unions

Cyprus has a high level of trade union organisation – about 70% of employees according to figures compiled by the European Foundation for the Improvement of Living and Working Conditions in 2006 – with two major trade union confederations, the PEO and the SEK, as well as important autonomous unions representing public sector workers, bank employees and teachers representing around 180,000 trade unionists.

The main national trade unions are the Pancyprian Federation of Labour (PEO, 2001: 63,871 members), the Cyprus Employees Confederation (SEK, 2001: 64,733 members), the Democratic Labour Federation of Cyprus (DEOK), and the Independent Trade Unions (POAS).

At sectoral level, in the banking sector, the Union of Cyprus Banking Employees (ETYK) is the dominant and actually sole trade union in the sector, and is extremely strong in all aspects: membership, collective bargaining coverage and bargaining power.

In the public sector four unions bargain more or less without coordination or cooperation with the government. These are the Pancyprian Union of Public Servants (PASYDY, 2001: 26,498 members), representing civil servants and by far the biggest and strongest trade union in membership and power in the public sector; Pancyprian Organisation of Greek teachers (POED), representing the elementary school teachers; the Organisation of Greek Secondary Education Teachers (OELMEK); and the Organisation of Greek Technical Education Teachers (OLTEK).

The two major confederations (PEO and SEK) are both of similar size. Both have around 70,000 members. The PEO is the oldest union in Cyprus, tracing its history back to 1941, although it changed its name in 1946, when the original organisation was declared illegal by the then British colonial regime. It maintains its position on the left of the political spectrum and it is of particular importance for blue-collar workers, the semi-skilled, and skilled workers. The SEK was founded in 1943 and is closer to the parties of the right and centre. The third confederation DEOK has around 7,500 members and has links to the socialist party. The two main confederations are organised broadly along industry lines, with federations for construction workers, hotel workers and government employees, for example. There are eight federations in the PEO and seven in the SEK. Of the two, PEO has a stronger base among manual workers.

There is a tradition of pluralism in unionism as well as strong ideological links between unions and political parties. Nevertheless, despite ideological and political differences or different affiliations, the trade unions in the private and the semi-public sector work together and have been particularly effective in jointly promoting the rights and interests of their members.

Cyprus’s union confederations have the formal power to conclude collective agreements on behalf of their affiliates. They share in the dues collected by the affiliates, have their own strike fund and

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participate in demand formulation and bargaining of affiliates. The affiliates’ formal power includes the right to conclude collective agreements on behalf of their members and to organise strikes. Moreover, the affiliates have their own strike funds and they can veto collective agreements signed by lower-level bargaining units. In addition, affiliates participate in demand formulation and in the bargaining of lower- level units. Union representatives at company and local level are entitled to conclude collective agreements, but they are not allowed to organise strikes or to control their own strike fund. They are not entitled to be represented in union bodies charged with collective bargaining at higher levels.

Employers

As far as employers’ organisations are concerned the two most representative employers’ associations that work as umbrella organisations representing the whole spectrum of enterprises, in all sectors of economic activity( industry, construction, services, trade, agriculture and private education) are:

- the Employers’ and Industrialists’ Federation (OEB, 2002: 51 professional associations, 4,500 enterprises)

- the Cyprus Chamber of Commerce and Industry (CCCI) which are regarded as the main national employers’ associations

Other large employer organisations are

- the Employers’ and Industrialists’ Federation,

- the Cyprus Federation of the Associations of Building Contractors,

- the Cyprus Association of Bank Employers and the Pancyprian Association of Hoteliers (PASYXE).

The OEB is the dominant employers’ group, representing nearly all employer organisations. It has to a large extent undertaken the role of coordinating body for employers and is the key coordinating body for most. Its members employ about 57% of the labour force. Both CCCI and OEB try to represent employers’ interests but in terms of bargaining power, OEB is far more influential, taking part in all negotiations with SEK and PEO. Every enterprise can become a direct member of both organisations or can be affiliated to them through membership in professional associations.

Unions Details of membership Number of members

Largest trade union confederation on the political left and stronger manual PEO worker base. Eight industry federations for construction workers, hotel 63,871 workers, and government employees, … Trade union confederation on the political centre to right. Seven industry SEK federations for construction workers, hotel workers, and government 64,733 employees, … DEOK Trade union confederation with links to the socialist party 7,500 ETYK Banking sector PASYDY Public sector 26,498 POED Primary school teachers OELMEK Secondary school teachers OLTEK Technical education teachers Employers’ Details of membership Number of members organisation 51 professional Largest and most influential employer organisation and one of the main OEB associations and 4,500 umbrella organisations enterprises CCCI Main umbrella organisation EIF Employers and industrialists CFABC Building contractors

PASYXE Banks and hotels OELMEK Secondary school teachers OLTEK Technical education teachers

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3. Joint bodies The role of the state is advisory with the government not directly involved in collective bargaining. As described, tripartite social dialogue is seen as desirable in Cyprus. The government intervenes, as laid down in the Industrial Relations Code through the Mediation Service of the Ministry of Labour, in cases where difficulty is encountered in achieving agreement in the direct bipartite bargaining between the employer organisations and the unions. However, there are exceptions where the state regulates by legislating minimum standards of basic terms and conditions of employment, such as minimum wage and working time for specific occupations.

On a practical level, the cooperation between the three parties is achieved through technical committees and other bodies of tripartite representation, but mainly through representation of the stakeholders in the Labour Advisory Body. Currently more than 50 tripartite technical committees and councils function in the context of initiatives and action taken by the different ministries. Social dialogue is regarded by the social partners as very positive. Tripartite social dialogue in Cyprus is seen as a model.

4. Collective bargaining

Legal basis and key issues The basic framework for negotiations is provided by the Industrial Relations Code. This includes a procedure for the settlement of disputes and some key mutual commitments, such as acceptance of the right to organise and the right to bargain. The document is not legally binding but its terms have been effectively observed by both sides. The code was agreed at national level and there have been other national agreements between the confederations and employers, such as a 1992 agreement on overall reductions in working time and an agreement on disputes in essential services signed in 2004.

There are currently discussions in Cyprus on whether collective agreements should be given legal force. This is supported by the SEK but the PEO fears that this could reduce trade union influence. However, both confederations have agreed a joint policy calling for the industrial relations system to be modernised, particularly through giving unions an effective right to organise.

There is no system of direct extension of collective agreements. In 2004, the PEO demanded that enterprises that are not unionised, but are in principle governed by a Pancyprian sector agreement, should automatically be bound to it.

Main features The coverage rate of collective bargaining in 2002 was about 68%, a little above EU25 average of 66%. The regulatory part of the collective agreements is not directly and necessarily applicable to workers, so collective agreements can be seen as gentlemen’s agreements rather than as legal institutions creating legal rights and obligations. In November 2003, the SEK called for collective agreements to be made legally binding, arguing that their unenforceable status would cause problems after joining the EU in 2004.

All collective agreements, both at sectoral and company level, incorporate the provision of a cost of living allowance (ATA) calculated on the basis of the variation in the consumer price index.

Collective bargaining as a whole is decentralised and there are no national agreements. The two bargaining levels are the sector and the company. The usual term of the agreements is two years. According to the data from the Industrial Relations Service of the Ministry of Labour, there were 13 sectoral labour agreements in 2003 in the private sector. Those agreements covered 26.7% of employees and 41.4% of union members in 2001. Although industry level bargaining continues to be important, many companies outside the coverage of the industry level agreements negotiate at company level. The unions estimate that there are 450 company level agreements covering 60% of those not covered at industry level. In addition, there is widespread collective bargaining in the public and semi-public sector. Overall around three-quarters of all employees are covered by collective bargaining in some form. Acording to Visser’s wage bargaining centralisation index, Cypriot wage bargaining is much more decentralised than the EU25 average. The degree of bargaining centralisation is about 26% (EU25 average: 34%). The low index ranking is a result of the low level of national and sectoral levels as well as

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the large number of trade unions. There is no macro-coordination of bargaining on wages. In the Turkish Cypriot community wage levels are reviewed several times a year for both private sector and public sector workers and a corresponding cost-of-living adjustment mechanism is established.

Agreements cover pay, working time, holidays, travelling and other allowances, as well procedural issues such as trade union facilities and dismissal procedures. Many collective agreements also include a cost of living allowance, which is uprated in line with inflation twice a year, and take account of this when setting pay rises.

Despite the fact that collective bargaining has traditionally played a primary role in regulating terms and conditions of employment, with the law playing a secondary role, the content of collective agreements is fairly limited. The regulation of terms and conditions of employment does not take into account factors such as gender, age, training and/or retraining, mobility, stress at work, etc. Generally, the negotiations agenda includes purely economic issues and traditional bargaining on conditions such as working hours and annual leave. There have been no provisions for lifelong learning, health and safety, or work environments in collective agreements.

5. Collective disputes The Department of Labour Relations is responsible for mediating in labour disputes in the private and semi-government sector. All collective conflicts are dealt with by the Ministry of Labour and the main procedure for conflict resolution is mediation. Arbitration exists but is not dominant And there is no conciliation system. The procedures followed during mediation in a labour dispute and the types of labour disputes for which the Department may be called upon to mediate are laid out in the Industrial Relations Code. Conflicts are heard by the Labour Dispute Tribunal, which can determine further compensation.

Strikes Strike activity is higher than the EU average. There were peaks in strike activity in 1994 and a smaller one in 1999. Data provided by the Industrial Relations Division show that in the five years from 1999 to 2003, 43% of strikes occurred in the private sector (excluding strikes in companies covered by sectoral collective agreements) and 23% in state and semi-state companies.

A tripartite agreement was signed on 16 March 2004 concerning the right to strike, setting out a settlement procedure for labour disputes in essential services. The fundamental element of this accord is that it does not prohibit the right to strike in essential services (EIRO 2004).

III. EMPLOYEES’ REPRESENTATION IN THE UNDERTAKING

1. General issues Workplace representation takes place through the union structure. The numbers involved depend on the union and the particular circumstances. They will generally work through joint meetings with management. There are no works councils. The 2005 legislation implementing the EU directive on information and consultation has not changed this, as it requires management and the existing employee representatives in the workplace (the unions) to negotiate the appropriate practical arrangements for informing and consulting employees. It does not set up any new structures.

It is estimated that at the current stage of implementation, fewer than 200 enterprises island-wide are actually affected by the new law’s provisions, which explains why employers perceive implementation to have been relatively easy, while trade unions generally quoted lack of experience in implementation, since it is a new law. It is interesting to note in its reply to this specific question, the ETYK mentioned that the law has yet to be applied even though the majority, if not all, of the enterprises of which their employees are members are included in the first wave of implementation. The OEB and SEK are of the opinion that the implementation of the EU Directive on information and consultation will not increase

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information and consultation in the workplace very much, while DEOK is of the opinion that it will be very helpful.

In those companies where collective bargaining is carried out at company level the workplace committee may be involved in this, although more often a full-time official will play the key role. Arrangements at workplace level depend on the particular circumstances that apply in each workplace. Fifty percent of Cypriot enterprises have workplace representation.

2. Legal basis and scope Workplace representation is also, in line with the rest of the Cypriot industrial relations system, not closely regulated by legislation. However, the Industrial Relations Code makes specific reference to consultation, stating that the employer should “engage in joint consultation” in any case where the union or employees believe that “a decision … may adversely affect them [the employees] or may have a repercussion on their relations with their employer”. In addition, legislation introduced in 2005, Law 78(I)/2005 to implement the EU directive on information and consultation, has strengthened the legal framework for workplace representation. In practical terms local workplace bodies deal with grievances brought to them by employees, the employer’s proposals and the day-to-day concerns of the workplace. The 2005 legislation applied to companies with 100 or more employees from July 2005 and 50 or more from March 2007 and will apply to companies with 30 or more employees from March 2008.

3. Capacity for representation Trade unions represent not only their members but also claim to represent workers’ interests in general. This lacks any legal base, but arises from common practice.

4. Composition Trade union representatives at the workplace are elected by a meeting of the members. Typically the term of office is one year. There are no legal rules for these elections and instead internal rules apply

5. Protection granted to the members There is no specific legal protection against dismissal for workplace trade union representatives but discrimination on grounds of trade union activity is unlawful. Article 8 of Law 78(I)/2005 states that representatives of the employees enjoy, in the exercise of their duties, adequate protection and guarantees and shall not be subject to any negative consequences from the employer as a result of their activities.Unfortunately, it does not define in any detail what is meant exactly by the term “adequate protection”. Therefore, it may not always be clear whether a certain pattern of behaviour by the employer or the management of an undertaking is in breach of the provisions of Article 8 of the Law.

However, protection for employee representatives is provided by other laws. For example, the creation and/or participation in trade unions is protected by Article 21(2) of the Constitution and as regards the issue of dismissals, this is regulated by Termination of Employment Law of 1967 which places the onus or burden of proof on the employer to show that the dismissal was lawful. The grounds for lawful dismissal are provided in the Termination of Employment Law of 1967. These statutory protections arguably constitute adequate safeguards for the employee representatives.

6. Working of the body and decision-making Trade union internal rules govern its working, and no legal previsions exist. Employee representatives and the experts that assist them, in the framework of the procedure for information and consultation, are not allowed to divulge to employees or third parties information which has been expressly stated to be confidential for the sake of protecting the legitimate interests of the undertaking. This obligation continues to exist irrespective of where the employee representatives and experts may find themselves, and continues even after the expiration of their term of office.

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7. Means Trade union representatives have general rights to enable them to carry out their duties and in larger workplaces the union will have access to a room and limited time-off. In the banks and some public utilities the main trade union representative is completely released from normal duties.

8. Role and responsibilities Union workplace committees will typically deal with issues such as health and safety, work organisation, discipline and the implementation of the collective agreement. The Industrial Relations Code says that in the specific area of large-scale redundancies the employer should notify the union as soon as possible and begin consultations. The committee also provides the link to the union structures, encouraging employees to join the union, getting support and advice from the full-time officials where necessary.

9. Information and consultation Prior to the transposition of Directive 2002/14/EC into national law by Law 78 (I)/2005, there were hardly any laws or regulations in Cyprus for the information and consultation of employees in the workplace. However, this transposition has not been as smooth as it should have been. It does not go any further than the Directive in defining what is exactly required by the term “appropriate information”, although the term “information” is defined in the Law as being the transmission of data from the employer to the representatives of the employees in order that they are informed of any relevant issue and have the opportunity to examine it. In the same way, the Cypriot government has failed to further define or describe in any detail what is meant by “appropriate” consultation.

In spite of this, the Law is not expected to have a significant impact in the areas of economic activity which are governed by collective agreements. The OEB considers that these agreements play an important role in labour relations and that it is in their interest to inform and consult with employee representatives, who are the trade unions in practice, on matters which may be of concern to workers in general. The PEO considers that the Law in practice simply complements or supplements collective agreements rather than the other way round, due to the large number of collective agreements which were already in place prior to the national law coming into effect. Such collective agreements still apply and are actively renewed by the trade unions. They appear in principle to conform to Article 5 of the Directive. Also, because the Law itself encourages and allows the creation of private agreements between the employers and the employee representatives to deal with issues of information and consultation of employees in the workplace, these agreements are or will be realised in practice in the form of collective agreements.

10. Other representation bodies A health & safety committee has to be elected by all employees where more than 10 are employed.

European Works Councils

Council Directive 94/45/EC has been fully transposed into Cyprus Law by Law 68(I)/2002 which came into force on 1st May 2004. It has very little practical application in Cyprus given that most businesses in Cyprus do not qualify as Community scale undertakings due to their small size. This has meant that the social partners have not given the issue of the Law’s implementation a very high priority. The method used for the transposition of the Directive into national law may not have been the best possible option to employ. The Cypriot authorities simply copied the provisions of the Directive directly into national law both in terms of content and structure. The only issues which the Cypriot authorities were forced to deal with concerned the provisions of the Directive which allowed for room for discretion in the national transposition. As a result of the method employed by the Cypriot authorities for the transposition of the Directive into national law, “grey areas” with regard to definitions and the implementation of the provisions of the national law are likely to arise.

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11. Protection of rights Article 10 of Law 78(I)/2005 states that the Minister of Labour and Social Insurance shall appoint inspectors and other officials to enforce the Law. Article 11 of the Law provides for judicial measures for the protection of rights under the Law. It states that in the event of any civil dispute arising from the application of the provisions of the Law, the appropriate forum or court for the settlement of any such dispute shall be the Court for Labour Disputes.

Any person who breaches any of the provisions of the Law shall be guilty of a criminal offence and if convicted shall be liable to pay a fine not exceeding two thousand Cypriot pounds (approximately Euros 3,559), under Article 13 of the 2005 legislation. Where the criminal offence is committed by a legal person or organisation, the managing director, president, director, company secretary or other such official of the legal person or organisation concerned shall be deemed to be guilty of the criminal offence, if it can be shown that it was committed with their consent, assistance or forbearance. Under such circumstances, the official may be liable to the payment of a fine not exceeding two thousand Cypriot pounds, while the legal person or organisation itself may be liable to pay a fine not exceeding five thousand Cypriot pounds (approximately Euros 88,980).

IV. EMPLOYEES’ REPRESENTATION IN CORPORATE BODIES

There is no legal right in Cyprus for employees to be represented at board level. However, union pressure has led to the appointment of trade unionists on the boards of two major banks. These are Marfin Popular Bank and the Bank of Cyprus. In both cases the union involved is the bank employees union ETYK. The appointments were made in late 2006 (Marfin Popular Bank) and early 2007 (Bank of Cyprus).

Representation of employees in the boards of European Companies Council Directive 2001/86/EC has been fully transposed into Cypriot Law by Law 277(I)/2004. The method employed by the Cypriot authorities for transposing Directive 2001/86/EC into national law was to copy the provisions of the Directive directly into the national law. Only where the Directive contained either optional provisions or allowed the member state to choose its own solution for the attainment of a certain objective does the national law diverge from the provisions of the Directive.

Representatives at European level are in the first instance chosen by the union. Special negotiating body members from Cyprus are elected from existing trade union organisations which represent employees or by direct elections if there are no unions. The situation is the same for members of the SE representative body (works council), as set up under the annex to the directive. The mechanism for choosing employee representatives at board level is left to the SE representative body.

The fact that the scope of application of the national Law, by its very nature, is limited to a relatively small number of undertakings and in any event, with the exception of one SE (“RPG Industries SE”) which has recently been registered in Cyprus, the provisions of the national Law do not have any significant practical application.

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CZECH REPUBLIC

At the time of the 1948 communist takeover, Czechoslovakia had a balanced economy and one of the highest levels of industrialisation in Europe. In 1948, however, the government began to prioritise heavy industry over agriculture and consumer goods and services. All basic industry and foreign trade, as well as domestic wholesale trade, was nationalised after the communists had taken power. The “Velvet Revolution” in 1989 offered a chance for profound and sustained economic and social reforms. The transformation of a centrally-planned economy to a free market economy had begun. Along with the privatisation of economy, the tertiary or services sector has started to develop and exports to former communist economic bloc markets have shifted to Western Europe.

The Czech Republic now has one national central government, after separating from the Slovak Republic in 1993. In order to decentralise, at the turn of the century thirteen regions and the Prague region were established as municipalities. At local level, public matters are handled and controlled by towns and communities.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Of the former communist countries in Central and Eastern Europe, the Czech Republic has one of the most developed and industrialised economy. It has a well-educated population and well-developed infrastructure. The country’s strategic location in Europe, low-cost structure, and skilled workforce has attracted foreign investment which is rapidly modernising its industrial base and increasing productivity.

After the economic crisis of late nineties, economic growth greatly increased in 2004 and 2005, moving the Czech Republic towards the European average. In 2005 and 2006 it reached 6%, exceeding the growth of the so-called “Visegrad countries” (except for the Slovak Republic). Structural reforms and EU entry contributed to the further development of exports supported by direct foreign investment. However reaching the level of advanced EU economies is still to be achieved, and reforms need to continue.

On a long term basis, inflation and interest rates remain low. In 2000, the growth of the consumer price index was lower than the target set by the Czech National Bank (the central bank). Thereafter inflation has slightly increased, and throughout 2006 was around three percent, plus or minus one percent. Low inflation is reflected in low interest rates which are similar to the Euro zone.

Increasing labour productivity is considered to be the strongest long-term influence on economic growth. General labour productivity increased by 4.1% in 2005 from 2004, and significantly contributed to GDP growth (84.2%). Wages and salaries increased more quickly than labour productivity. The future growth of labour productivity will be closely linked to level of education. Although the education system generally efficient it needs further reforms to challenge the rapidly increasing demand for higher education.

The transformation of Czech economy, which is not yet complete, involved many fundamental changes in structure of the national economy. From the beginning of the nineties, the share of the primary sector in total GDP and employment dropped sharply. The current share is less than 3% in GDP and 4% in total employment. The share of the secondary sector also decreased in the nineties, although it still represents one third of total GDP and employment. Continued growth is achieved in the tertiary sector which now has the highest share in GDP and employment.

In 2002, more than 2 million companies operated on the Czech labour market. Small and medium-sized enterprises (SMEs) had the most important and dynamic effect on employment growth. In 2003, SMEs were employing 62.2% of all employees, had 32.7% of GDP, and were responsible for 34% of in exports and 49.8% of imports. The development of the representation of SMEs in particular sectors of the

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economy reflects general trends in sector employment structure. These companies have been transferring from agriculture and industry sector to the services sector.

Labour market The real labour market was established after 1989 when unemployment began to slowly rise. It stayed low until the mid nineties, but had increased to 8% by 1999. Action to regulate labour law and industrial relations has been taken and the social security system was established.

From 2000 to 2003 employment rates slightly decreased, but since 2004, the employment rate has finally started to grow. In 2005 the size of the workforce was around 4,764,000, which exceeds the previous year by 39,400. The total employment rate was 64.8%, 0.6% higher than in 2004.

Major structural changes occurred in the nineties, but after 2000, the scope of further changes was limited. Although the employment decrease in the primary sector continued, the decline in the secondary sector came to a halt; and in 2005 employment growth in the industrial sector was even higher than in services. Employment in the primary sector was 4% in 2005.. In 2005, the share of the industrial sector in total employment was 39.4%. As for the tertiary sector, the growth in the late nineties was remarkable, but has grown only slightly since 2000. In 2005 it accounted for 56.5% of employees.

From 2000 to 2004, economic activity decreased, but in 2005, the number of economically active individuals jumped up by 41,700 to 5,174,200, 27,900 men, and 13,800 women, while the economic activity rate was 70.4% higher than in 2004 by 0.3%. In terms of age, the economic activity rate of men exceeded the rate of women.

Over the period 2000 to 2004 the number of employees fell, while the number of self-employed people increased (particularly freelancers). Employees made up 82.3% of the workforce in 2003; self- employed12.3%; helping dependents 0.7%; and members of production cooperatives 0.6%.

In 2002, 95% of employees worked full time, an increase of 0.4% since 2000 (almost all on permanent contracts). From 1996 to 2004, unemployment has been slightly increasing, from 3.9% to 8.3%. This increase resulted from structural reforms which were postponed until 1997, with low employment being artificially maintained. Another reason was the rigidity of Czech labour market. In 2004 the unemployment rate started to decline thanks to the rapid economic growth in previous years. In 2005 the rate dropped to 7.9%. Despite rapid economic development efforts to dramatically reduce unemployment has not yet been successful. This can be also explained by current changes in the structure of the economy and increasing redeployment.

Turning to gender, the unemployment rate of men is lower than that of women. Mens’ unemployment decreased from 7.3% to 6.5% between 2000 and 2005; compared with 10.6% and 9.8% for women.

The proportion of employees with less than secondary level education was 60% in 1993 and 48.2% in 2005. In 1993, the number of employees with elementary education (13.4%) exceeded the number of university graduates (10.6%); while the situation was reversed in 2005. The number of employed university graduates exceeded the number of employees with elementary education more than two and half times (5.7% of employees with elementary education and 14.6% of employed university graduates).

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues Along with the economic reforms, the institutional framework for social dialogue was formed at national and company level throughout the 90’s. At central (national) level, shaping of political and legislative measures related to the labour market is a tripartite responsibility of government and the social partners. All essential political and legislative measures influencing the labour market are shaped at this central level. As well as county councils, regional centres of trade unions also operate at regional level allowing

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the cooperation of two social partners – representatives of the region (Krajský úad) and trade unions (Odborový svaz zamstnanc). At local level, municipalities and local authorities (Obecní úad) cooperate with labour offices (Úad práce) who implement public employment services. Relations between labour offices, educational institutions and local social partners should be very close, the goal of their mutual cooperation being to harmonise supply and demand in the labour market, to increase employment and to decrease unemployment in particular localities.

Social dialogue at the highest, national, level is closely tied up with social dialogue at the lower levels – collective bargaining (kolektivní vyjednávání) at branch level of employers and trade unions. Discussions are held between social partners, with the government not participating. Unlike that at national level, social dialogue at lower levels is legally regulated.

At the level of companies, social dialogue takes place between employers and employees’ representatives (– trade unions (Odborový svaz zamstnanc ) , works councils (Rada zamstnanc) or representatives in the area of health and safety at work (Zástupce pro oblast bezpečnosti a zdraví pi práci)). Collective bargaining is carried out by two partners – employer and trade union – even where there is union plurality. Union organisations operating in parallel within one company can negotiate the collective contract only together and in mutual agreement if not stated otherwise.

2. Social partners Unions

In 1989, union organisations (Odborové svazy zamstnanc) started from scratch, breaking with their past and becoming independent bodies defending employees’ interests. Union activities are regulated by means of several pieces of law including obligatory labour law regulations.

Union membership has declined in recent years as a result of the transformation and restructuring of the economy and enterprises; and barriers from employers’ side. Another factor contributing to decline of union membership is the fact that union activity influences non-union employees. As a result of membership decline, the number of employers with operating union organisations is decreasing, along with the number of collective agreements (kolektivní smlouva). In 2005 the number of union members was 1.17 million employees, about 30% of all employees, which represents a decline of 60% on 2000 figures.

After the disintegration of the communist Revolutionary labour movement in the 1990’s, several independent union confederations were established:

• Czech-Moravian Confederation of Trade Unions (Českomoravská konfederace odborových svaz - ČMKOS) with at least 850,000 members in 2003. Basic union organisations are established at the level of companies; • Confederation of Art and Culture (Konfederace pracovník v umní a kultue - CAC) 90,000 members in 2001; • Association of independent unions (Asociace nezávislých odbor - ASO) –200,000 members in 2001; • Christian union coalition (Kesanská odborová koalice - KOK) – around 5,000 members in 2001. Along with these union confederations, there are a few independent union organisations co-existing, 14 organisations which have been independent since their foundation or isolated from ČMKOS. These organisations have a local or company organisation; and are structured by departments and professions.

As for the participation of employees’ representatives in central bodies, unions are engaged in activities of the Chamber of Deputies’ commissions (poslanecké komise) and Senate subcommittees (senátní subkomise); for example concerning questions of retirement reform. Employees’ representatives have the right to participate in public conferences and discussions; and despite their different positions they have the right to “ask for the floor”. Other union representatives are engaged in activities of particular

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departmental commissions dealing with the implementation of European law and regulations. Union organisations have the right to discuss bills and drafts of legal regulations referring to employees’ interests. Central authorities implementing labour law regulations are obliged to inform and allow discussion with particular union organisations.

Employers’ organisations

Employers’ organisations were founded after 1989, and were structured by departments, branches of activities and form of ownership. The number of such organisations has never been high; and has not changed since their foundation. Changes which are being applied reflect regroupings of organisations and associating to federations. In 2001, such organisations associated about 10,000 – 12,000 enterprises and self-employed individuals. Employers in CR are not very well represented at national level, there are no associations operating at sector level; and other organisations (e.g. at the branch level) are rather ad hoc.

The situation at lower – regional/local level including SMEs is even worse. Employers are practically represented only by the Chamber of Commerce (Hospodáská komora - HK); including tradesmen. The associations and organisations focus particularly on protection of equal business conditions, on the harmonisation of business conditions with EU regulations, on providing business contacts, maintenance, consultancy and education. Associations also help their members gain ground on both national and international markets and assure equal business conditions in comparison with competition.

Employers organisations

The biggest entrepreneurs and employers organisations and employers’ representatives in tripartite bodies are the Confederation of employers’ and entrepreneurs’ association of CR (Konfederace zamstnavatelských a podnikatelských svaz ČR - KZPS) and the Confederation of industry of CR (Svaz prmyslu a dopravy ČR - SPD). Other examples are:

- the Association of textile-clothing-boot industry (Asociace textilního-odvního-kožedlného prmyslu - ATOK); - the Association of enterprises of building industries (Asociace podnikatel ve stavebnictví); - the Association of business in the Czech Republic (Svaz obchodu ČR); - the Agricultural Association of the Czech Republic (Zemdlský svaz ČR); - the Cooperative Association of the Czech Republic (Družstevní asociace ČR); - the Federation of enterprises (Sdružení podnikatel ČR) - the Union of employers’ corporations in Czech Republic (Unie zamstnavatelských svaz ČR).

In addition entrepreneur’s interests are also represented by chambers and professional corporations as institutions of professional and business autonomy. The most important one is the Chamber of Commerce (Hospodáská komora ČR) which supports business activities and represents members in accordance with legislative authorities, government and other administrative authorities. The Chamber of Commerce provides members with information and consultancy services, education and re-qualification. The Chamber of Commerce is the only representative of employers and enterprises at local and regional levels. Towns and districts therefore suffer from a lack of communication and representation of interests in the future development of the particular district. The current issue is the question of who will become the social partners of public administration institutions at regional and local levels.

As for the participation of employers’ representatives in central bodies, employers also are engaged in activities of the Chamber of Deputies’ commissions and Senate subcommittees; e.g. in questions of retirement reform. Employers’ representatives have right to participate in public conferences and discussions; and despite their different position they have the right to “ask for the floor”. Other employers’ representatives are engaged in activities of particular departmental commissions dealing with the implementation of European law and regulations. As with the new Labour Code, employers have the right to discuss bills and drafts of legal regulations referring to important employees’ interests, particularly industrial, manufacturing, wage, cultural and social conditions. Central authorities issuing implementing labour law regulations are obliged to inform and allow discussion with particular employers’ organisations.

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The following table shows the main Union and Employers’ Organisations

Name of union Details of membership

CMKOS 33 union organisations with 850,000 members ASO Association of independent unions with 200,000 members CAC Art and cultural union with 90,000 members KOK Christian union coalition with <5,000 members Name of employers’ organisation Details of membership CR - KZPS Largest employers’ organisation CR - SPD Largest employers’ organisation ATOK Textiles, clothing and boot industry Asociace podnikatel ve stavebnictví Association of enterprises of building industries Asociace podnikatel ve stavebnictví Association of business Zemdlský svaz ČR Agricultural association Družstevní asociace ČR Cooperative association Sdružení podnikatel ČR Federation of enterprises Unie zamstnavatelských svaz ČR Union of employers’ corporations

3. Joint bodies Social partnership is represented at its highest level by the tripartite body – the Council of industrial and social agreement (Rada hospodáské a sociální dohody - RHSD). The major goal of tripartite negotiations is to reach an agreement or take a stand on fundamental economic, social and wage issues, and issues of labour relations and employment. The work teams of the Council of economic and social agreement - groups of experts preparing and providing professional stand-points and supporting documents for other Council bodies are very important as they participate in the shaping of legal measures.

The contributions of the Council of economic and social agreement are the following:

• relative stability of the whole process; • well functioning organisational structure thanks to which the social dialogue was institutionalised; • the function of working groups covering spheres of activities of the council; • development of the social partners; and • improved culture of social negotiations. Another important feature influencing the operation of social dialogue at national level has always been the relationship between social partners and political parties. Despite the initial and declared political independence, social dialogue at the national level is very dependent on who is in power; unlike the situation in other EU member states where the dialogue is less dependent on the political interests of their governments.

4. Collective bargaining

Legal basis and key issues The basis for developing mechanisms and procedures for social dialogue and collective bargaining originated in the constitutional Act No. 23/1991 Coll., Declaration of Basic Rights (Listina základních práv a svobod). The most important law regulating individual employment relations until the end of 2006 was Act No. 65/1965 Coll., Labour Code (Zákoník práce) which provides the legal basis for collective bargaining – in companies and at higher levels. The law states that any part of a collective agreement shall not be in contradiction with the Labour Code.

The legal regulation of collective bargaining is included in Act No. 2/1992 Coll., (zákon o kolektivním vyjednávání). Bargaining begins with a written proposal for a collective agreement by one of the social partners to the other, who is then obliged to answer in writing and express an opinion about parts which

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are not acceptable. The rejection of the entire proposal is not allowed under law. Contractual partners are obliged to cooperate, negotiate and interact.

The law distinguishes between company level collective agreements (Kolektivní smlouvy podnikové “ELCA“), concluded between a particular union body and employer; and high level collective agreements (Kolektivní smlouvy vyššího typu “HLCA“), concluded for a higher number of employees between a particular union organisation and employers’ organisation/s. The Czech legal regulation therefore does not recognise so-called sectoral or regional collective agreements.

ELCA are subordinate to HLCA. The first does not apply if the regulation of employees’ entitlements is not in compliance with the second. To conclude a HLCA the employer is obliged to give the closed collective agreement to Ministry of Labour and Social Affairs (Ministerstvo práce a sociálních vcí) for archiving. The Ministry of Labour and Social Affairs shall archive the contract and notify the action in Collection of Law of the Czech Republic (Sbírka zákon ČR).

Main features Under the law, issues whose limited scope (set by the law) could be extended by collective bargaining/agreement include the following: reducing working hours below the range set by the Labour Code, reduction of standby (on call), extension of holidays, increase or extension of entitlement to time off or wage compensation for actions for the public interest; extension of compensation and financial security while participating in training and study, increase of compensation and determination of further conditions under which employees have right to increased compensation.

The old Labour Code was in this sense unsatisfactory, since the main principle was “all that is not allowed is prohibited” and vice versa. That meant that anything not specified expressed in the Labour Code, could not be bargained over by the social partners. This significant failure was adjusted by the new Act No. 262/2006 Coll., Labour Code (Zákoník práce). It is effective as of 2007 and is based on the principle of “all that is not prohibited is allowed”.

The law also determines further rules of collective bargaining for the purpose of concluding collective agreements as a bipartite agreement between employers and unions for a period of time expressly specified. If the period is not specified, the agreement is valid for one year.

The law of collective bargaining also regulates the so-called collective disagreement/controversy, such as a dispute about conclusion of collective agreement, or the performance of obligations arising from the collective agreement. In case of such controversy, the relevant actors proceed at first in front of a “middle-man” who is selected mutually or is assigned by Ministry of Labour and Social Affairs. If these proceedings are not effective, further discussions are held in front of an arbitrator. In case of another failure, the disagreement can be solved by strike (or exclusion).

The main reason for concluding a HLCA is the need to establish minimal standards of conditions for a wide range of issues. However there are problems concerning the legitimacy of employers, and the resistance of particular employers’ organisations to collective bargaining. Employers’ organisations are either not filed as associations or are not authorised by relevant regulations to bargain on behalf of their members. This situation leads to a limited number of employees affected by HLCA. At the end of 2001, HLCA contracted by unions of ČMKOS covered only 19% of all employees in the public sector (as opposed to business collective agreements covering at that time almost 26% of employees in the public sector.

The approach of employers to the conclusion of collective agreements is influenced by current restructuring and related business uncertainty; along with subjective factors based on negative ideas of the influence of social dialogue on business effectiveness – such as a negative approach to human resources.

The validity period of collective agreements has been extending. One year operation, dominating in the mid- nineties, is being replaced by multi-annual operation of two or three years. Particular branches of collective agreements, especially wage agreements, are still concluded for one year; if no further changes have been requested.

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The legal regulation does not determine the scope of collective agreements, but it does, however, set certain limitations. The selection of objectives is governed by the economic possibilities of a particular company and by valid labour law and tax conventions. Collective agreements concluded between various contractual partners differ but with regard to general content, the structures of collective agreements of higher level are rather similar covering: means of cooperation of social partners, commitments to operating security of union organisations, employers’ engagements to employment, etc?; remuneration issues (the most extensive area); employment security, health and safety?; social issues such as: the specification of employment preferences to employment for an indefinite period?, the arrangement of longer breaks for food and rest, the extension of holiday entitlement; the specification of conditions and scope of the claim to paid time off. This part also covers issues such as education and training; health cover, the questions of company canteens, and lump-sum compensation to surviving relatives in case of death of en employee.

Specific rules of ELCA apply, as union pluralism exists at business level. Under the law, particular bodies of union organisations operating in parallel within one company can negotiate the collective agreement only together and in mutual agreement if not stated otherwise. The collective bargaining at the level of companies in CR represents the most important form of social dialogue with thousands of business collective agreements, exceeding the number of HLCA. The availability/accessibility of concluded ELCAs is minimal, as there is no legally determined evidence of business collective agreements. Union organisations in companies are not inclined to disclose concluded agreements and employers’ organisations do not preserve collective agreements, and even union organisations do not file all collective agreements. There is no institution dealing systematically with business collective agreements. More collective bargaining takes place at company level in SMEs. The growth of the number of ELCA in 1999 and 2000 was significant as a result of an increasing number of SME employers.

5. Collective Disputes The law of collective bargaining regulates collective disputes concerning agreement conclusion and fulfilment of agreement obligations. In these cases institutes of negotiators and arbiters are sought. Based on the law of collective bargaining, the Ministry of Labour and Social Affairs amended the terms for proceedings in front of negotiators and arbiters.

If an argument concerning the conclusion of particular collective agreement occurs, social partners negotiate in front of a negotiator (who is either voted or assigned by Ministry of Labour and Social Affairs). In cases where this is not effective, the case is taken to an arbiter. If the parties cannot agree, the argument can be solved by a strike (or lock-out). Disputes concerning the performance of a particular collective agreement are taken in front of a negotiator. In cases where this is not effective, the case is taken in front of the arbiter whose statement can be reviewed by the court. In case of a dispute where strikes are prohibited, the only eligible proceeding is discussion before the arbiter whose decision is final and cannot be reviewed by court.

Strikes Strikes are a legitimate part of employment relations, regulated by the law of collective bargaining. The law regulates only strikes concerning the conclusion of a collective agreement.

A strike concerning the fulfilment of obligations in collective agreement is not allowed - in the case of a dispute, the parties would proceed in front of a negotiator (see 2.5 above).

Other kinds of strikes, outside of the field of strikes of collective bargaining are possible. The current legislative condition in this area reflects the fact that strikes are rather rare and are not recorded. All data and information covering various protest actions, meetings and demonstrations organised by unions are available only from the union organisations themselves.

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III. EMPLOYEES’ REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues The rights of Czech employees’ representatives at enterprize level are contained in Act No. 262/2006 Coll., the Labour Code (Zákoník práce). The law defines various forms of employees’ representation (dual system) at company level and related conditions of their operation. Procedures and opportunities for contracting collective agreements falling within the competence of only one employee’s representative – union organisations are regulated by Act No. 2/1991 Coll., on collective bargaining (zákon o kolektivním vyjednávání). In the Czech Republic there are two forms of representation of employees’ interests at company level: trade unions (odborový svaz zamstnanc) and works councils (rada zamstnanc).

Only trade unions, and their representatives, have the right to conclude a collective (bargaining) agreement on behalf of employees. The Labour Code also excludes the mutual operation of unions and works councils (or health and safety representatives (zástupce pro oblast bezpečnosti a zdraví pi práci)) within one company. Thus if the trade union organisation is newly founded in a company (where works council or health and safety representatives have already operated) the works council will have to stop operating after the new collective agreement is concluded. Trade unions also have, under the right to information and consultation (works councils and representatives for health and safety also have these rights to a lesser extent, the right to control health and safety conditions and the right to codetermination at company level.

2. Legal basis and scope Before 2001, the Act No. 65/1965 Coll., Labour Code allowed only one employees’ representative at company level – union organisations. If there was no union representative, employees could not be represented by anybody else. The bill of Labour Code in 2000, effective from 2001, states that if no union body exists at the company, employees can be represented by the works councils or the health and safety representatives, through which the employer can fulfil the obligation of information and consultation. As opposed to union organisations, these bodies do not have legal identities and their operation within the company is rather limited. This statement is also included in the new Labour Code, Act No. 262/2006 Coll., (articles 278 and 281), which reflects the dual system of representatives of employees’ interests at the level of companies.

3. Capacity for representation Under Article 286 of Labour Code, the union organisation represents all employees including those who are not union members (they are represented by the strongest union organisation operating at the particular company); and is the only employees’ legitimate representative within the framework of collective bargaining. Unions enter relationships with employers, act on behalf of all employees, conclude collective agreements and have the right to make decisions, codetermination and control; and the right to information and consultation (along with health and safety representatives).

Several union organisations can operate within one company – which means the possibility of union plurality. The new Labour Code from 2006 formulates conditions of union plurality of collective bargaining (article 286). It is stated that all union organisations shall act in mutual agreement affecting all employees. In case of a disagreement, an employer can conclude an enterprising collective agreement (ELCA) with a union organisation which has the highest number of members at the particular company.

If no union organisation exists within particular a company, employees can be represented by Works Councils (article 286). If a union organization is later established, the two bodies – union organization and works council (or representatives for working and health security) shall coexist only until the day of conclusion of ELCA (article 282/LC). With the concluded collective agreement, the works council (or representatives for working and health security) shall discontinue their activities. The labour law therefore excludes the mutual operation of unions and works council within one company.

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4. Composition According to the Labour Code (article 281), the works council has three to 15 members. The council can be established in a particular company with no other union organisation. The number of member is determined by an employer after the discussion with election committee. The administration period takes up to 3 years. In case of transition of employees from one employer to another (with different employees’ representative), the employer is obliged to inform and discuss relevant questions with both representatives.

All employees employed by a particular employer have the right to vote and the right to be elected in elections to works council or as health and safety representatives (article 283/LC). The regulations of elections of employees’ representatives are included in articles 283 and 284 of the Labour Code. The elections of members of works council (or health and safety representatives) are declared by employers based on a request signed by at least one third of employees. The elections must be declared within 3 months of the request submission.

All employees employed by particular employer have the right to vote and the right to be elected. Candidates with the highest number of gained votes become members of works council. Candidates in other places are substitutes. In case of a tie, the electing committee establishes the succession by a draw. The protocol of election return is archived by employer for the period of 5 years from the date of elections.

5. Protection granted to the members Under article 276 of the Labour Code, employees’ representatives (also trade union representatives) must be neither discriminated against or disadvantaged for their activities, or given advantage. In the case of dismissals of employees’ representatives, the employers have to inform the representative body in an undertaking and this body has to agree with their decision. If this body does not agree the employer cannot dismiss employees’ representatives.

6. Working of the body and decision-making At the first sitting, the works council selects a chair and informs employees and employers (article 281). The Labour Code does not determine any other criteria regarding the organisational structure of the council. It only requires the total number of members of employees’ representatives to be odd (article 281) which means that the works’ council can (but is not obliged to) accept decisions by absolute majority. Further procedures covering the actual operation can be discussed and arranged by representatives themselves during their meetings.

7. Means As per the Labour Code (article 277), employers are obliged to create appropriate conditions for operation of employees’ representatives (at employers’ own expenses); and to provide accordingly premises with required equipment; to cover expenses for maintenance and technical operation and expenses for necessary records/documentation. The employer is obliged to provide members of works’ council appropriate time off with wage refund in the amount of the average salary. External experts play advising role in the frame of working of the bodies if representation. There is no specific provision on expert appointment, in the Czech Law. As per the Labour Code (article 267), employer is not obliged to cover the expenses regarding expert assistance to employees’ representatives (This obligation just holds for the European works councils (Evropská podniková rada))

8. Information and consultation The works council is, as negotiator between employees and employers, obliged to inform employees about their activities, the scope and results of information and consultation with the employer in the appropriate manner (article 276/LC). The Labour Code does not define the exact form.

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The scope of information and matters to be discussed by employers and employees’ representatives are different from that of works councils and union organisations. For the first two representatives, the scope is rather narrow. The scope of rights and opportunties in this area is much wider for union organisations.

Rights of information (article 279/LC): Works Councils and health and safety representatives have the right to be informed about the following: the economic and financial situation of their employer and its probable development; their activities and the consequences on the living environment; particular ecological/environmental arrangements; the employer’s legal capacity and any changes; structure; authorised people to act on behalf of the employer in industrial relations; and changes regarding objectives of employer’s activities.

Concerning trade unions, their right of information is regulated in articles 279 and 287/LC. Information must be complete and provided on time. It concerns information regarding development of the employer, and their economic and financial situation. The employer is also obliged to inform the union organisation about further matters included in particular agreements of Labour Code.

Right of consultation (article 280/LC): the employer is entitled to discuss with works councils and health and safety representatives the following: probable economic development, intended structural changes, rationalisation/efficiency or organisational measures; measures regarding employment (mass redundancies); current position and structure of employees; probable development of employment at the company; basic questions regarding working conditions and their changes; questions regarding transfers; and matters regarding European council of employees.

The right of consultation (article 280 and 287/LC) of trade unions concerns the following areas: the economic situation of employer, the workload and pace of work, changes in work organisation, the evaluation and compensation system, the training and education system, conditions of employment for particular individuals – young workers, individuals looking after children under the age of 15, and disabled people, including important matters of employment care, improvements in the working environment and occupational hygiene, organisation of social, cultural and physical needs of employees and staff increases. If the employer does not fulfil his obligation to consult with the relevant union organisation, his decision is still valid. However the labour inspectorate may impose a fine for a breach of legal duties.

The Labour Code (article 276) determines the obligation of employees’ representatives to be discrete about confidential information, and other facts which if revealed can lead to disclosure of secret information or breach of interests of employers and employees. This obligation lasts one year after the expiration of the term of office of employees’ representatives. The same applies for experts assisting employees’ representatives. Confidential information is defined as information which if supplied can endanger or damage/affect employer’s activities. Under the Act on security of secret information No. 148/1998 Coll. (Zákon o ochran utajovaných skutečností), the employer is not obliged to discuss protected information with employees’ representatives.

9. Other representation bodies Union organisations have the right to control health and safety at work. Employers must allow regular inspections of the workplace and personal protective equipment, verification that work injuries are being properly investigated and unions have the right to participate in the process of identifying the causes of accidents and occupational diseases. Unions can participate in discussions regarding health and safety, and can request the removal of defects, and in case of immediate risk to health and life of employees, unions can prohibit further work. Union organisations have the right to prohibit overtime and night work endangering the health and safety of employees.

Under the Labour Code (article 281), health and safety representatives can be voted in companies employing more than 10 employees with no other operating union organisation. The final number of representatives depends on total number of employees and the health and safety risks– the maximum is 1 representative for 10 employees. Their administration period is three years. In case of transition of employees from one employer to another (with different employees’ representative), the employer is obliged to inform and discuss relevant questions with both representatives.

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There are no other supra-workplace level bodies in the Czech Republic.

European Works Council The co-existence of the Works Council and union organisation within one workplace is impossible and impacts on employees’ representatives within the European Works Council (EWC) (Evropská podniková rada). It is up to either the union organisation or the Works Council to choose employee representatives within the EWC.

There are two ways in which the employees´ right on transnational information and consultation in the Czech Republic applies. The first one is the negotiated procedure for transnational information and consultation. The second one is through the EWC. The regulation of these procedures is included in Articles 288 – 299 of the Labour Code. Information and consultation refers to employers with its seats in Member State, if the wider extent is not negotiated. The EWC is constituted on the basis of the arrangement of the special negotiating body (SNB) with central management or is founded ex lege.

According to the Czech Labour Code, the duty to provide supranational information and consultation apply to: – an EU-scale (actually EEA-scale) employer or an EEA-scale group of employers with its seat in the Czech Republic; Under the new Labour Code every person is ”employed“ when they perform dependent work for their employer in the frame of labour relations. They are in employment relationship with their employer; – establishments of an EU-scale employer located in the Czech Republic; – representatives of an EU-scale employer or an EU-scale group of employers if such representatives have their seat in the Czech Republic, unless the Labour Code provides otherwise.

10. Protection of rights Under the law of labour inspection (Act No. 251/2005 Coll.) (Zákon o inpekci práce), local inspectorates headed by the State office of labour inspection (Státní úad inspekce práce), control the activities of unions, works councils and health and safety representatives; and employees’ rights of information, consultation and representation. Breach of duty on the part of employer or employees’ representatives in the area of information and consultation can be punished with a fine of up to 200 000 - Kc (approximately 6.500 EUR). Any employer preventing union organisation can be prosecuted for breaking the law of freedom of meeting/assembly; and can be sentenced to two years in prison.

11. Codetermination rights As opposed to information and consultation (when the final decision is up to the employer), codetermination results in a mutual decision of the employer and union organisation. If an employer does not request the approval prior to action, the action is in conflict with legal regulation. Certain actions/decisions of an employer without previous approval of a particular union organisation are illegal – such as notice of employment cancellation or immediate employment cancellation to union leader, or the amending of working regulations.

The right to co-determinate, which is the strongest entitlement of unions, is covered by the Labour Code. Codetermination is defined as employer action after previous agreement with a particular union organisation (although employers try to minimise codetermination). The areas of codetermination include amending working regulations; examination of unexcused absence of an employee; immediate termination of employment of union officials; issues relating to holidays.

The independent action and decision-making of union organisations in industrial relations are strictly defined by the Labour Code and are allowed only in the area of health and safety.

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IV. EMPLOYEES’ PARTICIPATION IN CORPORATE BODIES

The Czech legal regulation of operating management is based on the German-Austrian prototype of two- step system under which the board of management (Pedstavenstvo) and supervisory board (Dozorčí rada) participate in the process of decision-making.

1. Legal basis and scope The legal regulation of employees´ representation at company level via membership in the supervisory board is covered by Act No. 513/1991 Coll., Business Code (Obchodní zákoník). Other regulations of the Act No. 262/2006 Coll., Labour Code, relating to employees’ representatives, also apply to employees’ representatives elected to supervisory board.

Employees of state and private companies have the right to send their representatives to supervisory boards. Regarding state-owned corporations, employees’ representation in the supervisory board is obligatory regardless of the number of employees. In the private sector, the employees’ right to participate through membership in the supervisory board applies only to companies with more than 50 employees. Regarding the type of business, the obligation to establish a supervisory board applies only to joint-stock companies with more than 50 employees. Limited companies can also establish a supervisory board if it is required by the social contract. All members of supervisory boards are voted by general meeting (valné shromáždní) of the company (article 137/Business Code – BC).

A specific right to employee representation in the company management exists in banking sector. The law of banks states that besides the obligatory representation of employees in the supervisory board, employees must be represents in the board of management as well.

2. Composition The supervisory board of the joint-stock company must have at least three members; the final number of members must be dividable by three. Two thirds of members are voted by general meeting and one third is elected by employees of a company with more than 50 employees. The number of members elected by employees can be higher, but cannot exceed the number of employees voted by the general meeting. It is also possible to arrange that employees elect part of the members of the supervisory board even if the total number of employees is less than 50.

The term of office of a member of supervisory board may not exceed 5 years. The first term of office of supervisory board members is one year from the origination of the company. The member of supervisory board may not be at the same time the member of board, confidential clerk or a person authorised to act on behalf of the company. Only the individual who is, at the time of elections, employed by the particular company or is one of the employees’ representatives has the right to be elected. Only employees employed by relevant employer have the right to vote for supervisory board members – either directly or through electors as stated by electoral regulations.

The elections of supervisory board members elected by employees are organised by the board after discussions with the union organisation, or works council so that the highest number of employees can participate. The organisation of elections of electors is similar. The proposal of election of a supervisory board member may be submitted by the board, union organisation or works council operating within the company.

For corporations owned by the government, the election rules are determined by the employer after discussions with the local union organisation. The members of supervisory board can only be employees. There is not a formal relation between supervisory board members and the union organisation or works council. The direct contact occurs only if an employee elected to the supervisory board is also a union leader (article 200/BC).

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3. Functions The supervisory board and its members have general supervisory power in the company. They control the activities of executive heads; inspect trade and accounting books and other data; review the regular, special and consolidated final accounts, the proposal of profit distribution or payment of a loss; submit their statements to general meetings; and report to general meeting within the time defined by social contract (or once a year) (Article 197/BC).

The supervisory board members participate in general meetings and are obliged to inform the assembly about the results of their control activities (Article 201/BC). Decisions are based on the agreement of the majority of members (if not defined otherwise by regulations). Every member has one vote. The meeting minutes, written after each meeting, must be signed by the chair (Article 201/BC). The supervisory board convenes a general meeting, if required by the interests of the company, where the necessary arrangements are proposed and discussed (Article 199/BC). The supervisory board chooses one member who represents the company in court proceedings or in proceedings against other bodies (Article 199/BC).

The supervisory board members elected by employees have the same rights and obligations as other members of the board – elected by the general meeting (in joint-stock companies) or by the government (in government-owned corporations). The protection of employees’ representatives in general is covered by the article 276/Labour Code, according to which employees’ representatives must be neither discriminated against, disadvantaged, nor given advantage.

4. Employees participation in European Companies The Czech SE Act (art. 57-62) (Zákon o evropské akciové společnosti) regulates participation of employees in an SE in accordance with Council Directive provisions.

In the case of an SE established by transformation of a joint-stock company, its employees shall have the right to influence the composition of its organs to the same extent as in the joint-stock company.. In the case of an SE established in another way, its employees shall have the right to influence the composition of its organs to the extent that it best suits the scope of their exercise of such influence in any of the participating units at the date of establishment of the SE. If the employees did not have the right to influence the composition of the organs of any of the participating units, the employees of the SE shall have no such right, either.

The employees’ representative body shall decide on the allocation of seats within the administrative or supervisory body of the SE among the members representing employees from various Member States, or on the way in which the SE’s employees may recommend or oppose the election or appointment of the members of these bodies according to the proportion of the SE’s employees in each Member State. If the employees of one or more Member States are not covered by this proportional criterion, the employees’ representative body shall appoint a member from one of those Member States, in particular the Member State of the SE’s registered office where appropriate. Each Member State may determine the allocation of the seats it is given within the administrative or supervisory body.

The provisions of the Czech Business Code concerning the election or appointment of the representatives of SE employees employed in the administrative or supervisory body of a SE in the Czech Republic by the employees themselves shall be used without prejudice, unless the laws of the Member State of the SE’s registered office excludes the application of Czech laws. Unless otherwise stipulated by law, the members of the SE’s administrative and supervisory bodies appointed, elected or recommended by the employees or employees’ representatives of the SE shall have the same rights and obligations as the members of these bodies elected or appointed by the general meeting.

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V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

Recovery and bankruptcy procedures Employee representatives have rights to information and consultation in these matters. Czech employees have been protected in cases relating to financial insolvencies of their employers since 2000 under the Act on Protection of Employees in the Event of their Employer’s Insolvency (Zákon o ochran zamstnanc v pípad platební neschopnosti zamstnavatele). In 2006, a new act was passed – Act n. 153/2006 Coll., on the Protection of Employees in the Event of their Employer’s Insolvency.

Another new Act No. 182/2006 Coll. on bankruptcy and method of solutions – so called law of insolvency (Insolvenční zákon) is effective from July 1st, 2006. Regarding the rights of union organisations as employees’ representatives, the most important provision is article 67 regulating the participation of union organisations in creditors’ committee. This article states the following: any union organisation, operating within a company (employer) in debt, has the right to participate in meetings of creditors’ committee. In the case of multiple existences of union organisations in the particular company, the right to participate in meetings of creditors’ committee goes to the union organisation with the highest number of members if not agreed otherwise.

Operations affecting shareholders Under the Labour Code (article 280), union organisations, works councils or health and safety representatives operating at company level have the right to be informed about (among others) the legal position of employers and any changes. The employer is obliged to consult with these representatives about possible structural changes, rationalisation measures and issues regarding the transfer of employer.

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DENMARK

The Danish system of industrial relations is traditionally based on a high level of organisation and autonomy of the social partners combined with little interference of government and parliament in labour market issues. It might be said that concerning employment and industrial relations the social partners and collective bargaining play the first violin whereas the government takes the lead in active employment politics, although with strong participation of the social partners.

Denmark entered the European Union in 1973 as the first Scandinavian country. Although satisfying the convergence criteria, Denmark is not among the euro countries. Following Denmark’s “no” vote in the referendum on the Treaty of Maastricht in 1992, reflecting very different views on Europe and a desire to hold on to Danish sovereignty, final acceptance of the Treaty has in practice required a number of derogations, including that relating to the single currency. The Danish economy, however, is strongly connected to the single currency. Different newspaper surveys, although not officially representative, have shown a change in public attitude from a 'no' towards joining the euro. The fear of loosing sovereignty is not as prevalent as before.

The current Danish government is liberal-conservative and has been since 2001. New parliamentary elections will take place in early spring 2009 at the latest.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data At the beginning of 2007 the Danish economy peaked once more since the economic boom started four years ago. Ever since the beginning of the millennium the competitiveness of Danish companies has been generally good. A combination of a high level of employment, surplus on the balance of payments, a significant surplus in public finances, moderate wage increases and a moderate inflation place the Danish economy in a good position historically speaking, and compared with other EU countries. Denmark is among the EU Member States with the highest GDP per capita in PPS – 122.0 in 2006 (EUR 25 = 100; EU 15 = 107.8).

Economic indicators

GDP in PPS per capita (EU 25 = 100) 121.8 Real GDP growth rate – in % of previous period 3.2% (2006) 3.1% (2005) Labour productivity per person employed (EU-25 = 100) 104.7 Labour productivity per hour worked (EU-15 = 100) 102.2 Gross value added at basic prices - % of previous period 3.3% (2006) 2.6% (2005) Inflation rate - % of previous period 1.9% (2006) 1.7% (2005) Actual wage increase - % of previous period 3.8% (2006) 3.6% (2005) Source: Eurostat: Structural indicators,2005.

The public sector still accounts for a substantial proportion of total employment - 36% in 2006. This is only two percentage points less than in 1997 when the equivalent figure was 38%.

Services account for an increasing percentage of the employment. It is a growing sector on behalf of manufacturing industry, not the least because of a growing IT sector and a private service market. Industry initially geared to towards shipbuilding and food industry has diversified to include the pharmaceuticals, especially biochemical, industry and electronic industry. There are innovative companies within nanotechnology, and the closed shipyards have given way to windmill production.

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Gross value added and total employment in the private sector

Gross value added Total employment Sectors in % of all branches Number In % Agriculture including 1.6% 90 707 5.2% fishing and mining Industry including energy 20.3% 405 929 23.1% Construction 6.1% 179 456 10.2% Trade, transport and 21.5% 681 063 38.8% communication services Business activities and 24.0% 398 368 22.7% financial services Other services 26.5% - - Total 100.0% 1 755 519 100.0% Source: Eurostat: Long-term indicators; Statistics Denmark RAS and own calculation,2006.

Note: The sectors and the groos value added are taken from Eurostat. The employment figures includes 'other services' in the two service rows.

A substantial part of the Danish economy is based on a network of small and medium-sized companies (SMEs). Less than 2% of the companies have more than 50 employees. On the other hand medium-sized and large companies accounts for 69% of the employment. A special feature of the Danish system of companies is the high percentage of micro companies which are mainly found in agriculture and construction.

Labour market

The total labour force in Denmark stood at 2 862 380 as of 1 January 2006 (Danmarks Statistik, Statistikbanken, Arbejdsmarked, RAS). The workforce was divided between 2 754 646 employed and 107 734 unemployed. According to Eurostat the total employment rate was 75.9% in 2005, which was the highest rate within EU – 27. Also women's participation was the highest within EU in 2005: 71.9%. The unemployment rate during 2006 was 3.9% of the labour force; currently the lowest in EU. Unemployment has fallen steadily after peaking in 1993 at 10% and after the introduction in same year of the first of the active labour market reforms. The incidence of part-time work is 18% of total employment, which is the same as EU 15 level. Self-employment is less than 10% and belongs in the lower end of the OECD scale together with the other Scandinavian countries. The OECD total is 18%.

As a percentage of total female employment only 4% are self-employed, which is the lowest in EU. The OECD total is 12%. The self-employment rate for Danish men is 11% of total male employment. (Source: OECD Factbook 2007). Temporary agency work has increased significantly since 1998. There were 16,000 full-time equivalents in the sector in 2006 compared to 6,000 in 1998. The total turnover of temporary work agencies increased 400% from 1996 to 2003 and was € 0.5 billion in 2003. In 2005 there were 673 temporary work agencies, 600 more than in 1992. This development is partly a result of the abolition of legal restrictions on the right to set up a temporary work agency in 1990 and partly due to a shortage of labour, at least lasting recent years. In spite of the increase, however, temporary agency work only account for 1% of the total employment.

In 2006, 106,000 men and 122,000 women were employed on a fixed-term contract – 8.9% of total employment. In 2000 the share of fixed-term work was 9.8% (Danmarks Statistik, Statistikbanken, Arbejdsmarked, RAS). Since 2004 a special feature of Danish employment relations has been much debated, at domestic as well as at European level, i.e. the so-called flexicurity model. Flexicurity, which is a composition of the words flexibility and security, is in Denmark characterised by easy access to hire and fire combined with a high level of unemployment benefits and an active labour market policy. This model, or so-called ‘golden triangle’, has been the subject of several seminars and conferences at

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European level in recent years, aiming to analyse whether the flexicurity model is adaptable to other countries.

II. INDUSTRAL RELATIONS

1. Legal basis and key issues The Danish system of industrial relations is based on a high level of cooperation between mutually recognised social partners. There is no legal concept of representativeness. Legislation concerning labour market issues is more limited than in other European countries. Most issues, such as pay and working conditions are negotiated at repeated collective bargaining rounds every three to four years. This feature combined with a high membership density among organisations in the labour market is normally referred to as "The Danish Model".

Whereas the state plays the first violin vis-à-vis the active labour market policy, the state plays a very limited role concerning the regulation of the Danish labour market. This is almost entirely left to the social partners through collective bargaining. There are no joint or tripartite bodies as for instance economic or social councils that would have to approve of collective agreements. There is, however, a close cooperation between the government and the social partners in issues concerning the labour market, e.g. legal preparatory work in relation to labour market reforms and in policy areas such as further training and health and safety. But all in all legislation concerning the labour market is limited. The legislation that applies to both the private and the public sector basically covers: the right to organise (LBK 424 af 08/05/2006), the Statutory Civil Servants’ Act (LBK 531 af 11/06/2004), the Act on the Legal Relationship between Employers and Salaried Employees (Funktionærloven).

The Act applies (wholly or partly) to all white-collar workers (LBK 68 af 21/01/2005), the regulation of the unemployment insurance funds (LBK 708 af 13/08/2003), active employment effort (LBK 1074 af 07/09/2007), active labour market policy (LBK 207 af 17/03/2003), health and safety at the workplace ( LBK 268 af 18/03/2005), legal implementation of the EU Working time directive (LBK 896 af 24/08/2004), special rules on employees’ representation in boards (LOV 281 af 26/04/2004), transfer of undertakings (LBK 710 af 20/08/2002), collective redundancies (LOV 538 af 08/06/2006), the Holiday Act (LBK 407 af 28/05/2004) and the legal implementation of the EU directive on information and consultation (LOV 303 af 02/05/2005)

2. Social partners The history of Danish industrial relations systems from the first major multi-industry agreement in 1899 called the “September Compromise” under which the workers’ statute was adopted and which provided the basis for all the following agreements in the century to come. The 1947 "Cooperation Agreement" (Samarbejdsaftalen), signed in order to revive national production as rapidly as possible, established the cooperation committees (samarbejdsudvalg, SU) and was followed by further agreements of this type in 1964, 1970, 1986 and latest in 2006.

Trade union density is currently 78-79%. There has been a decline over the last ten years, which is mostly due to structural reasons, e.g. demographic changes. The affiliates of the employers' associations cover 77% of employees in the private sector (DA: Labour market report 2006). Density in the public sector is 100%. The total coverage of collective bargaining in Denmark is thus 85%. It should be added that Danish collective agreements are sectoral (or area) agreements. This means that if an employer is a member of a signatory employers' association to an agreement, the agreement cover all employees at the company no matter if they are members of a trade union or not. Thus the coverage rate is identical with the rate of employees covered by an employers' association. The total coverage of collective agreements at the Danish labour market has for the last decade been around 85% (DA: Labour Market Reports). Coverage in the public sector is 100% and in the private sector 77%.

The dominating confederations, which also were the parties behind the conclusion of the September Compromise are on the employees' side the Danish Confederation of Trade Unions

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(Landsorganisationen i Danmark, LO) and the Confederation of Danish Employers (Dansk Arbejdsgiverforening, DA).

Trade Unions Confederations81

LO: The Danish Trade Union Confederation (Landsorganisationen i Danmark), was established in 1898. The LO has 17 affiliated trade union members, which are also organised in 5 sectoral cartels. The largest is CO-industri consisting of unions in the industrial sector. Members of LO are mainly skilled and unskilled manual workers, but also artists and professional football players. Membership has decreased steadily the last decade, from 1.5 million members in 1996 to 1.3 million in 2006. Women still account for 50%. LO was traditionally linked to the Social democrats, but broke the last link to the party in 2003. LO is a member of the ETUC.

In January 2005 two of the largest member unions, SiD, a union of essentially male manual workers and KAD, the trade union for mainly female manual workers merged to form a new union: the United Federation of Danish Workers (Fagligt Fælles Forbund, 3F).

The merger was significant because the reason for the foundation of KAD a hundred years earlier was that women were not allowed as members in SiD. The men feared that the women would have a bad influence of the wage development.

The main affiliates of LO are:

- HK for white-collar clerical workers; 360,000 members; 73% women; - 3F for skilled and unskilled manual workers; 350,000 members; 35% women; - FOA for public sector employees; 205,000 members; 87% women; - Dansk Metal for metal workers; 138,000 members; 5% women.

FTF: The Confederation of Salaried Employees and Civil Servants (Funktionærernes og Tjenestemændenes Fællesråd), is also a member of the ETUC, and was set up in 1952 as an apolitical alternative to LO. FTF is mainly represented in the public sector and has 363,000 active members 68% of whom are women. This is an increase of 30,000 members since 1996. The three largest unions are the teachers, the nurses and the youth educators that all have a large percentage of women. Besides FTF is characterised by many small unions in the public sector, more than a hundred in total

All member organisations are divided between three sections:

- section K for local government sector; 227,000 members, in particular primary school teachers, nurses, youth educators and care workers; - section P for the private sector, 89,000 members; mainly in the financial sector; - section S for central state sector; 47,000 members; contractual staff and statutory civil servants.

AC: The Confederation of Professional Associations (Akademikernes Centralorganisation) was set up in 1972, bringing together the organisations for university level graduates, e.g. lawyers, economists, post gradulates, engineers, etc. AC has 21 member unions covering 166,000 members of which 41% are women. AC is also a member of the ETUC.

Membership of trade unions outside the confederations (e.g. journalists, maritime engineers, etc) totals 173,000, with 39% women. The largest within this group is the Christian Trade Union (Kristelig Fagforening, DKF) with 75,000 members of which 54% are women.

Employers' Confederations

DA: The Confederation of Danish Employers (Dansk Arbejdsgiverforening) was established in 1899. It is a member of UNICE (now BusinessEurope) and has approximately 30 000 member companies employing 650,000 employees within industry, trade, transport, construction and service. DA had 13 member associations in 2006 against 25 in 1996. The decline in numbers is due to a strategy of merging the member association into smaller

81 Source for data in this section: Statistisk Årbog 2006 and the labour market organisations

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more powerful mixed associations, i.e. they are both employers' associations and pure trade associations. The main counter organisation is LO.

The main member organisation, the Confederation of Danish Industries (Dansk Industri, DI) has an absolute majority (51%) in DA bodies and is also affiliated to BusinessEurope. The latest merger was the creation of a new powerful association, the Danish Chamber of Commerce (Dansk Erhverv) within the service sector. The merger took place in January 2007 between the Danish Commerce & Service and the former Danish Chamber of Commerce. The service sector is the fastest growing sector in Denmark, and one of the ambitions of the new service sector association is to reach the same, or a higher, level of influence as DI.

FA: The Danish Employers' Association for the Financial Sector (Finanssektorens Arbejdsgiverforening) has 225 member companies covering 65,000 employees or 90% of the employees in credit institutions, banks and insurance companies. FA' counterparts in the financial sector are members of FTF.

SALA: The Danish Confederation of Employers' Associations in Agriculture (Sammenslutningen af Landbrugets Arbejdsgiverorganisationer) has four member association within agriculture, horticulture, dairies, and forestry covering 37,000 employees from LO-related unions. SALA has concluded a basic agreement and a cooperation agreement with LO.

Both the employees' main organisation LO and the employers' DA, which are the dominating actors at the Danish Labour market, have experienced problems of influence over recent decades. It should be remembered in this connection that these organisations are the founders of the Danish Model and until 1987 conducted collective bargaining. After 1987 the negotiations have taken place at sectoral level, but with the confederations still in strong coordinating positions.

Since the foundation of DI, the large sector organisation in industry, the influence of the confederation, DA, has decreased. DI covers 50% of the board members in DA and has pushed the balance of power in the direction of the sector organisations. DA was about to be transformed into an enquiry office for the sector organisation. Since the mid-1990s, the staff of DA has been reduced from 300 to 135. The latest reduction of the influence of DA took place in December 2004 when its budget was cut by a third and its regional offices were closed. Not all of the affiliates of DA, however, have welcomed the influence of DI. The small associations do not have the capacity or resources to deal with all kinds of administrative and legal issues themselves and are dependant on the presence of DA in the regions.

LO has experienced a similar decline in influence to the cartels, which were created as a response to the mergers on the employers' side, but after the LO-Congress in 1999 and in 2003 the confederation has regained some of its power as a main organisation introducing a new set of values. At the 2003 Congress it was agreed to cut the last of the traditional bonds to the Socialdemocrats, i.e. economic support, as one means of creating a ‘New LO’. For the LO, the major problem has been a significant fall in membership over the last decade. Membership of the LO-unions peaked in 1994 with 1,509,698 members, covering more than 50% of the total workforce at that time. The latest figure (2005) shows 1,338,731 members, a decline of 11% since1995.

The reason is partly structural. The demographic change in recent decades towards more old people, or rather fewer young people, has meant less new members to replace old members who are resigning. During the same period, the educational structure of the population consists of more educated people. Subsequently the other employees' confederations FTF and AC gained new members. The increase in membership among FTF and AC, however, cannot explain the total decline in LO-members. The trade union movement as a whole has lost members. It seems to be the young people, the potential new members, are failing to join trade unions in their hour of need. Realising this, the LO-unions have launched a campaign that in the long term should arouse more interest among young people for the unions and especially for the Danish model of securing pay and working conditions through collective bargaining.

Coordination of collective barganining by LO and DA

In 1998 collective bargaining ran into stalemate because the sector organisations CO-industri and DI could not agree on the number of extra special holidays outside the legally based five-weeks of annual leave. The negotiations came to a standstill because the other sector organisations waited for Industry to sign first. The result was a compromise proposal made by the Public Conciliator, which was subsequently rejected by vote of the employees. The result was a general strike lasting eleven days and resulting in more than 3 million lost working days. The reason was that the sector organisations had not been sufficiently prepared; showed only little progress in the course of negotiations, and had not shown sufficient interest in avoiding a major conflict.

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This course of events brought LO/DA back in an active leading position. Up to the following bargaining round in 2000 LO/DA formulated a joint paper, called the 'Climate Agreement' (klimaaftalen), in which they obliged each other to monitor the course of negotiations closely and respect the deadlines for renewal of the sectoral agreements. In practice that meant that the preparations had to start earlier and that the sector organisation had a duty to put all efforts in reaching a compromise. LO and DA themselves cannot interfere directly, but it was agreed that they would put pressure on the organisations if they came into a stalemate. Furthermore they suggested that the Act on Public Conciliation was changed so that the final time-limit before a conflict can be effected after the result of the ballot was prolonged from three to five days. The 2000 collective bargaining round passed off without any delay or incidents. The climate-agreement was renewed by LO/DA in the 2004 collective bargaining round and the success was repeated.

The joint intervention of LO and DA thus put them in a stronger position to coordinate collective bargaining; and underlined that they were still needed.

3. Collective bargaining

Legal basis and key issues There is no law setting the agreements into effect, and there is no law enforcing extension procedures. Danish collective bargaining is based on voluntarism. Collective bargaining is controlled at confederation level but the confederations have not directly taken part in the negotiations since 1985 when this right was decentralised to the sectoral organisations. Collective agreements have direct effect. The culture of negotiations is marked by consensus and partnership rather than conflict. Strikes are infrequent and there are forms of employee participation at all decision-making levels in the companies.

Collective bargaining takes place at the following levels:

• National level, where the LO/DA axis plays a major role, covers general agreements such as those on participation, specific issues, such as redundancy and shift work, and lays down pay increase margins;

• Industry-wide or sectoral bargaining led by the cartels or federations covers working conditions, training, supplementary social welfare, working time and minimum pay increase rates; and

• Company level agreements are common and follow on from industry-wide agreements. At this level the actual pay increases are negotiated.

With occasional adjustments to the degree of centralisation of the collective bargaining process, this system has operated effectively for nearly a century. The risk of excessive rigidity and stagnation caused by centralisation has been mitigated by the operation of a minimum wage system in the metal trades, whereby collective bargaining on concrete wage issues is conducted at the individual workplace - within the framework of a (centralised) collective agreement. This mechanism has created a certain dynamic element in the area, which has served as "the key bargaining sector" in the overall Danish system of organisations and collective bargaining. Wage improvements and the adoption of rules to govern other terms of employment have thus been linked to the economic situation of what has become - as the share of agricultural exports has declined - Denmark's most important export sector.

Since the 1980s, the Danish system of organisations and collective bargaining has been marked by a tendency to refer decisions on wages and working conditions to workplace-level, thus adopting the solution applied by the metal trades. However, the collective agreements which provide the framework for this local bargaining are still concluded at central level. A structural development has taking place, whereby new major joint organisations - covering an entire sector, e.g. building and construction - are empowered to conclude these collective agreements.

As bargaining is still conducted at nationwide sectoral level, and as it is still conducted at the same time and can still draw upon the services of the Conciliator, the degree of centralisation is relatively high as compared with most other countries. The current process has thus been designated centralised decentralisation, as it reflects local bargaining within the framework of central agreements. That is, collective bargaining at sector level provides a framework agreement, which is followed up at company level. Negotiations in companies begin officially as soon as the agreements at sectoral level are signed.

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Main features High-level methods of conciliation and arbitration ensure that the bargaining system works. At the beginning of bargaining, the parties normally lay down bargaining rules and the date on which recourse will be made to conciliation (according to the Law on industrial disputes). The arbitrator has extensive powers: he may propose a settlement, require voting procedures, postpone the launch of any collective action or integrate a proposal into a wider framework. The work of the arbitrator plays an important part in preventing negotiations from breaking down as a result of the individual strategies of “lone rider” organisations. A proposal from the arbitrator can be rejected only by a majority of votes and 40% participation by the trade unionists in the field in question. In the event of failure, as in April 1998, the State may take legislative action.

After the millennium this tendency towards transferring bargaining competences to the company level has been strengthened. A major innovation in the new agreements which gives the social partners at local level room for manoeuvre is the introduction of a clause which makes it possible to deviate from a number of rules laid down in the agreements. These include those relating to management-employee cooperation, working time, telework and further and continuing training. The parties at local level now have a right to conclude local agreements which deviate from the central collective agreement. The parties to the central agreement must only be informed of such local agreements. From the point of view of the employers, this means a higher degree of flexibility as agreements can be tailor-made to the conditions in individual enterprises. From the point of view of the trade unions, this will give employee representatives a stronger role, as it is a condition that consensus is reached between the two sides at local level about such deviations and local agreements can be concluded only in enterprises which have elected employee representatives. At the bargaining round in early spring 2007 this originally experimental deviation clause was made permanent.

Collective agreements are binding at the moment they are signed, and there is a peace obligation as long as the agreement is in force. Collective agreements normally lasted two years and their bargaining was synchronised. In 1995, DA, at the initiative of DI, decided to desynchronise the system. In 2000 a four- year period was tried but was modified to three years in 2004 and again in 2007. In practice, coverage depends chiefly on the affiliation of employers. Initiatives have been taken jointly by the social partners to improve collective coverage, for instance in the hotel and catering trade. This raises the issue of legislative intervention or a system of extension of collective agreements, however, in order to provide the protection required by all employees in certain fields. The only extension of a multi-employer agreement that exists is the adoption agreement. This type of agreement, which follow the provisions of the sector agreement in force, is signed by the union and a single employer that is not a member of an employers association.

Concerning the implementation of EU-directives, however, a new dual method of regulation has been introduced. The reason was that EU commission did not accept that directives were implemented through collective agreements only. The Working Time Directives were implemented in the agreements as usual, but followed up by a law that covers where the agreements do not cover.

4. Collective disputes The resolution of conflicts in the collective labour law builds upon the distinction between disputes of rights and disputes of interests. A conflict of right arises where the matter in dispute is already covered by a collective agreement. In the event of a conflict of right, there is virtually never a right to resort to industrial action or to lock-out. The only exception from this peace obligation that is relevant for employers is cases of lawful sympathetic industrial action or lock-out.

If the case concerns a breach of the collective agreement it must be referred to the Labour Court. If, on the other hand, there is disagreement concerning the interpretation of the agreement, the dispute must be settled by an industrial arbitration tribunal (faglig voldgift). The legal regime for conflict resolution is the Standard Rules for Handling Industrial Disputes from 1910 (Danish abbreviation is “Normen” for ‘Regler for behandling af faglig strid’).

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Strikes Conflicts of interests occur in periods and areas, when and where there is no collective agreement in force, and industrial action, like strikes, lockouts or blockades, can be taken provided there is a reasonable degree of proportionality between the goal to be obtained and the means used to obtain it. The freedom applies both to workers and employers. Conflicts of interests may occur in connection with the renewal of a collective agreement. In this case an attempt at mediation is made by the Public Conciliator (Forligsmanden) in order to avoid further conflict, i.e. a general strike.

Conflicts of interests may arise between the trade unions and employers not covered by a collective agreement. During the period a collective agreement is in force, conflicts of interests can arise, if for instance new technology at the workplace creates new work not covered by the existing collective agreement. In both occasions the unions can take industrial action against the employer in order to obtain a collective agreement.

The collective labour law deals primarily with conflicts of rights. Conflicts of interests are mainly of a political-economical nature.

III. EMPLOYEES’ REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues There are three types of employee representation in Danish companies:

• workplace representatives, the shop stewards (tillidsrepræsentanten, TR), who form the core of representation;

• cooperation committees, (samarbejdsudvalg) which represent a parity of employers and employees representatives, in companies with over 35 employees; and

• minority board-level representation in companies with over 35 employees.

According to the collective agreements and cooperation agreements between the social partners, the shop steward must be informed and consulted about changes in the company, and about economic and financial issues. This process will normally take place in the cooperation committee where the shop steward is a member.

Cooperation committees are joint consultative bodies consisting of a parity of representatives of both sides. The management has an obligation to inform and consult the cooperation committee about the day- to-day performance of the company. Plans that in particular affect the conditions of the company, e.g. restructurings, must be informed in due time so that a process of consultation can take place. This implies that representatives of management and employees are under an obligation to try to reach agreement on these matters. The final decision is taken by management in accordance with the employers’ prerogative as laid down in the Basic Agreement between LO and DA. Thus the decisions taken do not rest on votes. The members are, according to agreement, obliged not to disclose confidential information.

LO conducted a major survey among a third of its 25 000 workplace union members’ representatives in 199882. There were a number of important findings:

• the role played by representatives in employer-employee relations;

• the role played by representatives in the employee-trade union relations;

• the recognition of representatives as important partners by employers;

82.LO, FAOS, Tillidsreproesentantundersogelsen 1998, September 1998

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• employees’ support for representatives, despite their limited interest in trade union matters, and the protection afforded by this support;

• the “welfare counselling” of employees by representatives;

• representatives’ lack of influence on the trade union outside the local level;

• the frequency of “unofficial” agreements signed at company level and the desire to negotiate pay, overtime and supplementary training in a decentralised way; and

• the ability of representatives to have some influence on economic and strategic matters and the need for better training on these matters.

The survey of 1998, which has not been repeated, shows that employees' representative play a double role. Even though he traditionally is the "workers' man" and represents their interests, the developments in the global economy and its effects in Denmark have created a sense of responsibility for the welfare of the company among the employees. They have shown a willingness to soften the traditional clean-cut barrier between the two interests in order to maintain the competitiveness of the company and thereby secure jobs. Thus the shop steward also became the trusted employee by the management. He is the link to the employees and he is increasingly consulted and heard on company issues.

The role of the employees' representative as revealed in the LO-survey has been further emphasised. Still more decisions concerning employment relations are decentralised to company level; the employees' representative must have a broader knowledge of the economy, human resource management, increasing understanding of company operation and the effects of globalisation. The role as 'social welfare worker' for employees has also increased.

2. Legal basis and scope The first agreement recognising the existence of workplace union members’ representatives (shop stewards) was signed in 1900 in heavy engineering. Their introduction was gradually extended to the other branches and sectors, in a similar form.

The introduction of the cooperation committees dates from the multi-industry cooperation agreement of 1947 which was intended to breathe new life into the production system and improve job satisfaction. Joint cooperation committees were to be set up in all companies with more than 25 employees, with workplace union members’ representatives as ex officio members, and other workers’ representatives being elected by personnel. Exchanges of information on working conditions and day-to-day production matters therefore became standard practice in the 1950s. The agreement was revised in 1964, raising the threshold to 50 employees, forming a national Cooperation Board (Samarbejdsnævnet) jointly responsible for advising committees and placing the emphasis on dialogue between the parties. This dialogue paved the way for the consultative tasks of these committees in areas such as production planning, work organisation, the financial situation and restructuring plans.

The 1970 agreement set out rights of “mutual influence” (consultation prior to the implementation of decisions, taking account of opinions, establishment of ad hoc committees on particular plans) and rights of “codetermination” of working conditions and personnel policy. The number of committees increased: from 700 in 1970 to 1000 in 1977, by which time all companies with over 200 employees, and 70% of those with between 100 and 200 employees, had set up a committee.(Source: Samarbejdsnævnet.dk) Training for the members of these committees was developed. The agreement of 1986 lowered the threshold to 35 employees and set out the role of committees, taking account of the 1981 agreement on the introduction of new technologies.

The latest change was made in October 2006. The most significant amendment was that the EU Directive on information and consultation was implemented in the Cooperation Agreement (Samarbejdsaftalen) between the LO and DA. The text of the directive has been incorporated in the agreement text and was not added in a protocol as is usual in collective agreements. It implies that companies under the DA apply to the Cooperation Agreement in this context and not to the Act on information and consultation (LOV

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303 af 02/05/2005), which was a result of the directive at national level. The Act therefore only covers sectors not committed to the LO/DA cooperation agreement or other sectoral cooperation agreements.

At present, when the employer or the majority of workers so propose, a cooperation committee is set up in companies employing 35 people in the same geographical area. A central or main committee may be set up when the same company has several local cooperation committees. The agreement applies to all branches of activity, with the exception of construction, for which a separate agreement was concluded in 2005. For groups of companies, the agreement recommends that group committees (koncernudvalg) should be set up.

In the central state sector, an agreement of 1972/1973 establishes the same system of cooperation committees (Aftale om samarbejde og samarbejdsudvalg i statens virksomheder og institutioner, as amended 29/04/2005). A similar agreement exists in the municipalities and regions, i.e. a framework agreement on participation and codetermination (Rammeaftale om medindflydelse og medbestemmelse 17/06/2005). Committees in the public sector generally have a higher degree of codetermination than those operating in the private sector. The codetermination of committees in the private sector is more limited since management can demand their right to manage and direct work, i.e. the managerial prerogative. In 2006 there were around 1,300 cooperation committees registered at the Cooperation Board (Samarbejdsnævnet) under LO/DA (Source: Samarbejdsnævnet.dk).

3. Capacity for representation The workplace representative or shop steward has twofold representation tasks in the company: He or she represents the trade union and all company employees in relation to the management - and is furthermore the link between the union members at the workplace and the trade union. The shop steward, the expression mostly used for workplace representative, therefore has an important role in daily cooperation in the company.

4. Composition Collective agreements regulate the status of the shop steward and the election procedures. Elections are generally at workplaces with five or six employees or more. Eligible to the position as shop steward are relevant union members at the workplace who have been employed for a minimum of nine months in the company within the last two years. The shop steward is elected by all work colleagues (whether or not they are union members), and the election must be approved by the trade union signatory to the collective agreement.

The cooperation committee consists of a parity of employers' and employees' representatives – in the cooperation agreement called the a-side and b-side. The most frequent is two members from each side. The employee representatives are elected (possibly with separate representation for manual and white- collar workers). Shop stewards are ex officio members of the committee. The committee has between four and 12 members, and may have more in companies with over 1000 employees.

5. Protection granted to the members Shop stewards enjoy special protection against dismissal and discriminatory treatment. This protection varies in different collective agreements, but normally includes priority retention of employment in cases of collective redundancy, a longer term of notice and the award of damages and interest in the event of unfair dismissal. Members of the cooperation commitees are, like the shop steward, are in a more exposed position in relation to management than employees on the shop floor. It is easier to be involved in heated discussions with management. Thus the cooperation agreements in general build on a principle of protection for the members of the cooperation committee, although not to the same extent as the shop steward, who also negotiates the collective agreement in the company. The level of protection of the cooperation committee members differs, especially between the private and the public sector. In the private sector the protection only consists of a prolonged notice of dismissal (e.g. para 4 in the DA/LO cooperation agreement). In the public sector the cooperation committee-members enjoy the same protection as the shop steward, which imply that there must be a serious reason for the dismissal of a committee member

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6. Working of the body and decision-making The chairman of the cooperation committee is appointed by the employer, and the vice-chairman represents employees. The committee normally meets six times a year, and the time spent by employees is considered as paid working time. The committee has no budget and its costs are in principle split equally between the employer and the trade union confederations.

7. Means Shop stewards generally receive training organised by the trade union (in labour law, collective agreement provisions, economics, psychology, etc.). Meetings with management outside normal working hours are paid for by a special fee. At the recently concluded collective bargaining in early spring 2007 in the private sector covered by LO/DA, the nature and role of the employees' representative at workplace was one the main topics on the bargaining agenda. CO-industri and DI agreed to support the important work of the shop steward by a remuneration of up to € 4,000 a year combined with more time for knowledge development, including free access to computers and the internet. All newly elected shop stewards are offered two lots of two day training. This is additional to the existing shop steward training system.

The national Cooperation Board set up on a joint basis by LO and DA, offers advice, training and arbitration if procedures are not followed.

8. Roles and rights According to the LO/DA cooperation agreement (other agreements of this type having similar provisions), shop stewards have a wide-ranging role:

• they conduct collective bargaining at company level in continuation of the conclusion of the sectoral agreement;

• they negotiate individual pay requests from employees to the employer;

• they must 'maintain and promote cooperation between the employer and employees at the workplace'83;

• they represent the trade union locally and monitor the application of collective agreements in the company; and

• they are ex officio members of the cooperation committee and are often safety representatives.

In the case of collective redundancy, the European Directive was transposed by the law on collective redundancies (Act 414 of 01.06.1994 as amended by Act 523 of 24.06.2005) which requires negotiations to be opened as soon as possible with employees or their representatives in order to reach agreement on possible ways of preventing redundancies, limiting their number or mitigating their effects. Employers must provide employees or their representatives with any relevant information, including reasons, the number and timetable of redundancies, and the numbers normally employed. A copy of the written notice is forwarded to the Regional Employment Council, beginning a period of 30 days prior to the redundancy.

In the case of individual dismissal, the principle on which collective agreement provisions are based is that unfair dismissal is prohibited, i.e. dismissal not justified on genuine grounds connected with the individual or the company, the range of these grounds being extensive. Under the LO/DA agreement, when an employee with a length of service of nine months considers that his or her dismissal is unfair, he or she may request negotiations to be held in the company between the employer and employees’ representatives. If these fail, the trade union may take the negotiations to the level of the organisations

83 This includes respect of the industrial peace obligation and a prohibition on the calling of strikes during the re- negotiation of collective agreements.

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and, where necessary, bring the case before a dismissal arbitration council set up by LO and DA. There are similar provisions in other collective agreements.

In the area of health and safety at the workplace, the shop stewards take part in the tripartite local health and safety committees (e.g. the Health and Safety Committee of Agriculture, or Manufacturing, Woodworking, etc.).

New in relation to the employee representation and the nature of the shop steward is:

• Local trade union departments have got access to negotiate on behalf of the member on single issues, if there is no shop steward elected at the company; and

• If the union members want to conclude a local agreement with the company, and no shop steward is elected, the employees can elect a spokesperson, who is obliged to be a member of a union under the umbrella of the cartel CO-industri. Hereby it is secured that non-organised employees or members of a employer run union (unions cannot conclude or cancel local agreements, which are tied to the Industry Agreement.

According to the LO/DA cooperation agreement, the cooperation committee shall determine the scope of cooperation between management and employees at all levels within the enterprise. It is the overall task of the cooperation committee to promote cooperation within the enterprise for the benefit of the enterprise and the individual employee alike. This is achieved by:

• promoting and observing day-to-day cooperation and involving as many people as possible in that task;

• creating and maintaining good and stable working and employment conditions, thereby increasing the welfare and security of the employees; and

• increasing the employees' understanding of the situation of the enterprise in terms of its operation, finances and competitiveness.

The cooperation committee may not deal with issues subject to collective bargaining, such as pay. The Cooperation Board also issues recommendations on the matters dealt with by committees and the priority with which they should be addressed.

According to the provisions of the Cooperation Agreement, information should be given to individual employees as well as to groups of employees. The information should be given in time for viewpoints, ideas and suggestions from employees to be included in the decision-making process. The information provided shall comprise management’s assessment of the consequences of any changes contemplated and shall be communicated in a clear and understandable form. The information should be adapted for the groups of employees for whom it is intended. The information supplied to the cooperation committee must cover the economic and financial situation and forecasts, including information on market and production conditions, the employment situation, plans for major industrial changes or restructurings, including the introduction of new technologies, and on the operation of performance-related pay schemes. The information must be presented in an accessible way and early enough for the committee to issue opinions and proposals; and the employer must also detail the consequences of any changes planned.

The cooperation committee has the following duties:

• Establishing principles for local working and welfare conditions, as well as principles for the personnel policy pursued by the enterprise towards the employees represented in group B on the cooperation committee;

• Establishing principles for training and retraining employees who are to use new techno-logy;

• Establishing principles for in-company collection, storage and use of personal data;

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• Exchanging viewpoints and considering proposals for guidelines on the planning of production and work and the implementation of major changes in the enterprise;

• Assessing the technical, financial, staffing, training and environmental consequences of the introduction of new technology or changes in existing technology, including computer-aided technology and systems, where such introduction or change is extensive; and

• Informing employees of proposals for incentive pay schemes, including particulars of their basic structure, effects and application, and informing them of the possibility of setting up funds for educational and social security purposes.

9. Other representation bodies In large companies, where more unions are represented, each group of employees normally elects their own representatives who often set up a joint committee and elect a coordinator, a joint employees' representative (fællestillidsrepræsentant).

As regards health and safety, a safety organisation must be set up in any company with more than five employees. Employees elect a safety representative84 (sikkerhedsrepræsentant) who takes part in a safety group in each department or workshop (Health and Safety Act, as last amended by Ex. Order 1506 of 21 December 2004). In companies with more than 20 employees, a joint safety committee (sikkerhedsudvalg), composed of safety representatives and representatives of the employer, is set up and plans, informs, consults, organises and implements preventive safety and health measures.

European Works Council Council Directive 94/45/EC was transposed by the Law of 22 May 1996 (Lov om Europæiske Samarbejdsudvalg). Transposition by collective agreement had been desired, but LO and DA were unable to conclude negotiations on this matter. In addition to subsidiaries of foreign groups, some 40 Danish groups are concerned.

10. Protection of rights As in other aspects of the Danish model of labour market regulation the issue of protection of rights of employees’ representatives are solved between the social partners. Thus no state authorities, such as the Labour Inspectorate or the civil courts are involved. In cases where the cooperation committee claim a breach of the provisions of the LO/DA cooperation agreement the case is referred to the Cooperation Board. In the financial sector the case is taken to the Labour Court. A central provision in the cooperation agreement is that management is obliged to inform the cooperation committee about significant changes in the company as early as possible in order to give the employees a real opportunity to influence the decision to be taken. This provision in particular will often be the cause of conflict between management and employees since the management in some cases will be reluctant to give information of a more strategic character concerning the company until a final decision is taken by the competent body, e.g. the board. This issue is critical because the cooperation agreements in the private sector also mention that management is not obliged to provide information about relations “that may damage the business interests” of the company. Nevertheless, the Cooperation Board in one of the two cases that has been brought forward concerning this provision, ruled that the obligation to inform and consult the employees was not fulfilled in a case of a merger between two large companies in the service (cleaning) sector, Jydsk Rengøring and the Danish based multinational ISS. Clearly the merger was of strategic character and thus important to protect from being known about before a final decision was reached between the companies. The arbitrator confirmed that the interest of the company (i.e. Jydsk Rengøring) could be damaged if the cooperation committee was informed about the plan of merger. But the arbitrator also ruled that the moment the merger was a reality, the cooperation committee should have been informed and consulted. There were still special and practical issues to be solved as a result of the merger. Breaches of the cooperation agreement are always sanctioned with a fine, but it is up to the arbitrator to estimate the size

84 There are specific provisions for maritime transport, civil aviation and oil platforms.

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of the fine. In this case, after having weighed up the circumstances, the arbitrator decided to award Jydsk Rengøring a fine of DKK 250,000 (approximately € 33,000) which is at the upper end of fines so far imposed. A similar case was fined DKK 50,000 because the company in question had given the information at a meeting where the member of the cooperation committee, the shop steward, was not present because she was attending another meeting in the company. The arbitrator ruled that information is not given according to the provisions if not all members are present.

IV. EMPLOYEES’ PARTICIPATION IN CORPORATE BODIES

Collective agreements do not contain provisions about employees’ rights to elect representatives to the board of directors in private limited companies. These provisions were, however, introduced through the legislation on private limited companies in the mid 1970’s. The provisions on elected employees’ members of the board of directors are different from the provisions of cooperation committees in that they offer the employees actual codetermination on the decision-making of the management concerning the operation of the company. The provisions of cooperation committees give the employees a more limited codetermination on staff-related conditions, because of the managerial prerogative that is a central part of the Basic Agreement.

Composition Two laws in 1973 on public and private limited companies85, entitled the employees of such companies employing over 50 employees to elect two members of the board of directors (bestyrelsen)86; this representation was increased to one third of the directors (with a minimum of two) in 1980. Since the amendments introduced in 1987, the employees of public and private limited companies with more than 35 employees can elect a number of members of the board of directors equivalent to half of the members elected by shareholders (rounded up where necessary), with a minimum of two.

In the case of a group having at least 35 employees, employees of subsidiaries may elect one third of the members of the board of directors of the parent company. If the parent company itself satisfies the conditions for representation, its own employees may elect two board-level representatives. The total representation of employees cannot exceed half of total board seats and must be a minimum of three. Board-level employee representation takes place only if an initial vote by employees, held at the request of one tenth of employees or their representatives, is in favour. The term of office of representatives, elected by all employees, is four years. Elected members are protected against dismissal in the same way as workplace union members’ representatives.

Functions Directors representing employees have the same rights and duties as other directors. They receive and may request the same information, take part directly in decision-making in the company and are bound to keep confidential matters secret. They take part in particular in the appointment of the management board (direktionen). They do not, however, take part in any discussions relating to collective disputes.

A 1992 survey found that 80% of board-level employee representatives were satisfied with the information that they received and the influence that they were able to exert. A third considered, however, that the confidentiality obligation prevented them from informing their colleagues about key issues. Another survey by LO in 2004 showed that 40% of the employee-elected board members either are or have been shop stewards, and that 80% of all employee elected board members are men in their late

85 As amended in ”Bekendtgørelse om medarbejderes valg af bestyrelsesmedlemmer I aktieselskaber og anpartselskaber(Selskabsrepræsentation)” and Bekendtgørelse om medarbjederes valg af bestyrelsesmedlemmer i moderselskaber der er aktieselber og anpartselskaber (Koncernrepræsentation)”(LOV 942 og 943 af 09/12/1993). 86 The board of directors is responsible for decisions on budgets and major measures for the company. The management board, responsible for day-to-day management, cannot enter into major transactions without the approval of the board of directors. There is a very clear-cut division of responsibilities between the two organs.

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forties or more and own company shares. The conclusions from these surveys have not altered considerably. A significant conclusion of the 2004 survey was that the board-level employee representatives were more concerned about the local society and environment and social values than the shareholder-elected board members, who were more interested in the bottom line.

Employees participation in the boards of European Companies In 2004 the EU Directive 2001/86/EC (8.10.2001) on employee representation in SE-companies were implemented by law in Denmark (Lov nr. 281 af 26/04/2004 om medarbejderindflydelse i SE-sselskaber) and was in 2006 followed by the implementation of Directive 2003/72/EC (22.07.2003) on employee representation in SCE-companies in Lov nr 241 af 27/03/2006 om medarbejderindflydelse i SCE- selskaber.

V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

Bankruptcy or insolvency procedures Article 14 of the Law on insolvency (Konkursloven LBK 118 af 04/02/1997) gives employees limited rights of participation when their company is declared insolvent. As creditors, employees are entitled to the information set out in this law. The law on collective redundancies does not apply when this situation terminates the business and the work of all employees.

From a preventive point of view, employee representatives are entitled to information and to take action in the event of company problems:

• in the framework of board-level representation; and

• in the framework of the cooperation procedures in which shop stewards and cooperation committees are involved, in particular as regards information on the economic and financial situation and forecasts as well as negotiation in respect of the consequences, particularly the financial consequences, of major changes.

Operations concerning shareholders Employee representatives have general opportunities for information and intervention in respect of changes among shareholders:

• in the framework of board-level representation; and

• in the framework of the cooperation procedures in which shop stewards and cooperation committees are involved, in particular as regards information on the economic and financial situation and forecasts, as well as negotiation in respect of the consequences, particularly financial, of major changes.

In cases of transfer, the transposition of the European Directive changed the existing system. Prior to this, the transfer of the company terminated individual contracts of employment and collective agreements, unless the parties agreed to conclude new contracts and agreements. The termination of the collective agreement ended the peace obligation and enabled employees to take collective action to influence decisions in respect of the transfer. Under the Law on transfer of undertakings (Lov om lønmodtageres retssting ved virksomhedsoverdragelse - Ex. Order 710 of 20/08/2002), all the assignor’s obligations, contracts of employment and collective agreements are now transferred to the assignee. This latter provision, together with the peace obligation, prevents employees from taking collective action in respect of the transfer.

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State aid Employee representatives have an opportunity for information and for intervention in respect of public aid:

• through ongoing dialogue and cooperation between the state and employers’ and trade union organisations;

• in the framework of board-level representation; and

• in the framework of the cooperation procedures in the company in which shop stewards and cooperation committees are involved.

As regards training and business support, the 1993 Act on the reform of the labour market (Arbejdsmarkedsreformen 1993) set in motion a decentralisation of administrative powers in order to promote cooperation between trade union organisations, employers’ organisations and similar bodies.

The trade unions have also been involved in the introduction of measures to promote employment as well as prevention measures (Act on an active Employment Policy (Lov om en aktiv beskæftigelsespolitik) - part of the labour market reforms from 1993) as amended in Act no 523 of 24.06.2005).

By 1 of January 2007 a structural reform (Strukturreformen), which is the most important reorganisation of public sector tasks in 35 years, was implemented in Denmark. The reform implies 1) a large-scale redistribution of core tasks between the three territorial levels (state, counties/regions and municipalities), 2) a reduction in the number of municipalities from 271 to 98 and the abolition of the 14 counties, which have been replaced by five regions, and 3) a reduction in the number of territorial levels that have the right to impose taxes from three to two, as the regional level no longer has this right.

Changes in the distribution of tasks impact all three levels, including the responsibility for most employment initiatives, which were transferred from the counties to the state and the municipalities. New job centres were established in the municipalities. The trade unions, however, still have active representation in all important employment-related public bodies at regional and municipal levels.

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ESTONIA

Until 1989, Estonia was part of the Soviet Union. The economy was part of the centrally-planned economy with most companies state owned. In 1991 Estonia gained political independence and in 1992 the Estonian currency, kroon, was put into circulation. Estonia transferred to a market-oriented economy with rapid privatisation. All legislation had to be changed including legislation on industrial relations. During the 1990’s, most essential laws concerning industrial relations were enacted.

In 2004 Estonia joined the European Union. This, together with donor money from the European Structural Funds, has supported already high economic growth. During the past few years Estonia has showed very high economic growth. Since 2000, growth has exceeded 7% each year in real terms. The economic correction that occurred after the economic downturn at the end of 1990’s and steadily high economic growth in recent years have had a positive impact on employment indicators that were worsening from the beginning of the 1990s to 2001. Jobless growth has been replaced with growth- creating jobs and job-creating growth, to the extent that there is now an increasing problem of labour shortages.

I. ECONOMIC AND SOCIAL CONTEXT

Despite high economic growth, the average level of GDP per capita remains substantially below the richest EU countries and the EU average. In 2005, Estonia’s GDP per capita in purchasing power standards equalled 59.8% of the EU25 average.

High economic growth has also resulted in very high wage increases in recent years. This has been reinforced by a shortage of qualified labour in the last two years. Outward migration in some economic sectors has further increased wage increases. Wage pressure, partly explained by outward migration, is felt more in transportation, health care and the construction sector. In the fourth quarter of 2006, year-on- year wages increased by 17.5% or 12.5% in real terms.

The biggest share of value added is in the services sector. The tertiary sector gave 67.9% of value added in 2005. The share of the primary sector has steadily declined, reaching 3.7% in 2005.

The sectors‘ share in economy and in employment (%)

Share of gross value added Share of employment 1993 2005 (2005) Primary sector 10.3 3.7 5.3 Secondary sector 31 28.5 34 Tertiary sector 58.8 67.9 60.7 Total 100 100 100 Source: Statistics Estonia, web database

The number of enterprises has steadily grown. Seven years ago the number of active enterprises per 1000 person was around 10, but by 2005 there were 33 enterprises. The majority of Estonian enterprises are micro-enterprises, employing less than 10 employees – these account for most of the growth of entrepreneurial activity. The share of employment in large enterprises has declined over the past ten years and increased by around one-tenth in smaller ones, indicating the important role of the latter in the job creation process (Eesti ettevõtluspoliitika 2007-2013, p. 7).

Breakdown of employment and enterprises according to the number of employees in enterprises

Number of enterprises Share of employment (% of all enterprises)

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Big enterprises (250 and more employees) 167 (0.4%) 22.8% Medium sized enterprises (50-250 employees) 1255 (2.9%) 27.5% Small enterprises (10-50 employees) 6621 (15%) 28.6% Micro enterprises (up to 9 employees) 36008 (81.7%) 21.1% Source: Eesti ettevõtluspoliitika 2007-2013, Statistics Estonia

In addition to the high proportion of small enterprises, there is very active use of self-employment. In 2004, there were over 50,206 economically active self-employed persons, who formed around 8% of all employed persons.

In summary high economic growth has stimulated entrepreneurial activities and activated also growth of employment and wages.

General labour market indicators The labour market emerged in Estonia together with the market economy. At the beginning of 1990’s, there was virtually no unemployment and almost all people who participated in the labour market were employed. Unemployment rose gradually and reached the highest point (13.8%) in 2001 following an economic downturn in the late 1990’s. Since then, rapid economic growth has increased employment and reduced unemployment.

Employment indicators for age group 15-64

1997 2000 2005

Average Men Women Average Men Women Average Men Women Employment rate 65.2 70.4 60.5 60.7 64.8 57 64.0 66.2 61.9 Unemployment 7.2 9.8 10.3 9.3 13.8 14.9 12.8 8.1 9.0 rate Participation rate 72.3 78.5 66.7 70.4 76.1 65.3 69.6 72.8 66.7 Source: Statistics Estonia

Activity. Participation rates fell during Estonia’s independence from 77.9% in 1990 to 69.6% in 2005. It was a little higher for men (72.8%) and lower for women (66.7%) in 2005. Men’s participation has constantly fallen, but for women there has been a slight increase since 1995. This is partly because of the gradual increases in the retirement age for women (59 years and 6 months in 2006) that will be equalised with retirement age for men (63 years) in 2016.

Employment. The employment rate fell in the 1990’s due to the falling participation rate and the increasing unemployment rate. With the rapid economic growth since 2001, employment rates started to increase slightly due to the decline in unemployment and reached 64% in 2005. The employment rate for men was 66.2% and for women 61.9% in 2005.

The economic restructuring resulted in the decline of industrial and agricultural production and the rapid decline in employment in these sectors. Over recent years, when economic conditions have been more favourable, both the services sector and the industrial sector have grown, but the primary sector continues to lose its importance in employment. In 2005, the agricultural sector accounted for 5.3% of employment, industry 34.2% and over half of the workforce was employed in the service sector (60.5%).

Unemployment. The persistent unemployment that emerged in the beginning of the 1990’s was mainly structural. The qualifications of people employed earlier were useless in the market economy. The restructuring of the economy resulted in jobless growth, meaning economic growth with declining employment. The situation has improved since 2000.

In 2006, with very high economic growth, unemployment decreased to only 5.4%. Female unemployment is lower in Estonia than male, in contrast to the general situation in the EU countries: correspondingly

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7.2% and 9% in 2005. Almost half of unemployed people were long-term unemployed i.e. without work for more than a year.

Labour market by age. Younger people are in a relatively worse situation in the labour market. Fifteen to 24-year olds are twice as likely to be unemployed than the population as a whole. . At the same time, older people have, in general, lower unemployment rates. The employment rate of older people exceeds that of the EU target (50% in 2010) by around eight percentage points. Such a high employment rate among older people is the result of two aspects: first, the level of pensions is quite low thus encouraging older people to work and, second, the rise in retirement age. Also working after retirement does not reduce the old-age pension in Estonia (only early-retirement schemes restricts working and receiving a pension at the same time).

Educational attainment. People with lower education face a higher probability of unemployment. The situation is particularly bad for young people with primary level education. Over one-fifths of those were unemployed in 2005.

One of the disadvantaged groups in the Estonian labour market is ethnic non-Estonians, who face a much higher unemployment rate than that for Estonians. Especially bad is the situation among younger non- Estonians.

Around a third of Estonia’s population are non-Estonians by ethnicity and the majority of them speak Russian as their first language. The disadvantage of non-Estonians results from several aspects. They are largely concentrated in the most industrialised region in North-Eastern Estonia (Ida-Viru County) which has higher unemployment than other regions because of industrial decline. Also, a number of non- Estonians do not speak Estonian which is the only official language in Estonia.

Part-time work is less prevalent in Estonia than it is in the other EU countries. On average, only 7.2% of employees work part-time in Estonia. One of the reasons for this is the low income from part-time work .

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues The industrial relations system in Estonia is based foremost on legislation. This is the result of a weak social partnership and low unionisation. In order to guarantee minimum rights to employees, these had to be defined in legislation and therefore less room is left for agreement between the social partners. On the one hand therefore, low unionisation leads to the need for more regulation and on the other hand, if there is less room for agreement there is also less room for negotiations and unions. However, the unions are still there and social dialogue does take place. There is national level tripartite social dialogue and bipartite dialogue. There are collective negotiations held in some sectors, but more are in companies. A new law has been in place since 2007 for informing and consulting via representatives.

2. Social partners

The fundamental freedom to associate into employers or employees unions is provided in the Constitution (§29) (passed in 28 June 1992, RT 1992, 26, 349, last red. RT I 2003, 64, 429)87.

Trade union organisations According to Trade Unions Act (Ametiühingute seadus, AÜS) (RT1 I 2000, 57, 372, which came into force on 23 July 2000, last red. 1.02.2007) [§2 (2)] a trade union is an independent and voluntary

87 For some legal acts the electronic links on english translations are provided. However, the translations might not include the latest amendments. In the case there are differences between the translations and curent text, the dates for latest amendments provided in the text and for translations should be compared.

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association of people which is founded on the initiative of those people the objective of which is to represent and protect the employment, service-related, professional, economic and social rights and interests of employees. All workers are free to join a trade union apart from the armed forces. Trade unions are independent and autonomous in their activities and can be dissolved only on the decision of union members or a court order (§5). There are no procedures according to which the employer has to recognise the trade union. A trade union may be founded by at least five employees (§2 (1)). A federation of trade unions may be founded by at least five trade unions. The procedure for creating a union is quite simple.

Trade unions in Estonia

There are two major trade union confederations: the Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit, EAKL) and the Estonian Employees' Unions’ Confederation (Teenistujate ja Ametiliitude Keskorganisatsioon, TALO). Usually these are divided respectively as confederations for blue and white collar workers’ unions. However, the division is not so clear cut as in the EAKL representboth types of worker. The confederations have sector-based unions that represent different occupations, as well as some profession-based unions.

- The EAKL is larger and comprises 19 branch unions with a total of 43,776 members (in 2000 there were 26 branch unions).

- The TALO has 12 branch unions with an estimated membership of around 30,000 people (in 2000 were 11 branch unions).

The biggest branch union of the TALO is the Estonian Education Personnel Union (Eesti Haridustöötajate Liit), which represents around 67% of municipal school teachers through 619 organisations with 13,293 members - the share has declined in recent years as in 2003 there were around 80% of teachers represented. The other branches represent such fields as university personnel and scientists, journalists, cultural workers (museum and library workers).

The EAKL includes branch-based associations of unions of metal workers, seafarers, miners, transport sector workers etc. Members of the EAKL include also the Federation of Health Care Professionals Unions (Eesti Tervishoiutöötajate Ametiühingute Liit) and the Association of State and Local Government Servants Unions (Riigi- ja Omavalitsustöötajate Ametiühingute Liit).

Both confederations are members of the ETUC and the EAKL is also a member of ICFTU (International Confederation of Free Trade Unions). Both confederations base their approach on “interest of the employee” and not on political or other ideologies (Chassard 2001).

There are some sectors, which are represented in both the TALO and the EAKL. For example, from health sector workers, radiologists are represented through the TALO; nurses and several other health care professionals are represented through the EAKL. However, the Estonian Medical Association (Eesti Arstide Liit) that represents doctors is not represented in either central organisation of employees.

Additionally there is a separate confederation in the agricultural sector, the Confederation of Estonian Food and Landworker’s Union (Eesti Toiduainete ja Maatöötajate Keskliit, ETMTK). This comprises 27 unions with 4,286 members. The ETMTK is a member of the European level organisation, the European Federation of Food, Agriculture and Tourism Trade Unions (EFFAT) and at international level, the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Association (IUF).

The EAKL and the TALO both participate in state level social dialogue and in tripartite bodies. The EAKL has, however, been more active in state level social dialogue. The main state-level collective agreement, which establishes the level of minimum wage each year, has in recent years been concluded by the EAKL.

Overall membership of trade unions is small and has been declining since the collapse of the Soviet Union. In 2005, according to the Statistics Estonia Labour Force Survey (LFS), only 8.5% employees belonged to trade unions. During the Soviet time, almost all workers were in a trade union. However the unions then had significantly different goals to the traditional role of protecting workers rights. Thus, there has been a big decline in membership during the past fifteen years. A union is present in the workplace of only 19% of employees. As in general unions are present in bigger companies, the share of companies in which unions exist is even lower.

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Membership is higher among women (11% of employees) than men (6%) as well as for older people. Among employees in the 15-24 age group, only 1.7% belong to a union, whereas for those aged over 50, 11% belong to a trade union. Due to the sectoral distribution of union membership, unionisation is higher among white collar workers (10%) than for blue collar workers (7%). Membership is higher in health (22%) and education (26%), which are relatively more active also in sectoral level bargaining. Of industries, membership is higher in mining and quarrying (39%) and in electricity, gas and water supply (23%). Regionally, union membership is highest in the Ida-Viru region, where it is 20% (a union is present in the company for 38% of employees in this region). In all other regions, membership is substantially lower. The reason for this is the concentration of industry the region, which has the only mines and main electricity supply industry in Estonia.

Employers’ organisations in Estonia There are four main employers’ organisations:

- Estonian Employers’ Confederation (Eesti Tööandjate Keskliit, ETK88); - Estonian Chamber of Commerce and Industry (Eesti Kaubandus-Tööstuskoda, EKTK); - Estonian Business Association (Eesti Suurettevõtete assotsiatsioon, ESEA); - Estonian Association of SME’s (Eesti Väike- ja Keskmiste Ettevõtjate Assotsiatsioon, EVEA). The ETK is a non-profit umbrella organisation for representing employers in the social partnership. The ETK has 23 branch associations and 61 companies, through which 1500 companies with 145 000 employees are represented (2005). In 2003, they reported their membership as consisting of 31 branch associations and 23 larger companies. Altogether the ETK represented at this time around 1000 companies with around 200,000 employees. Although the number of members has increased the reported number of employees in these companies has declined.

Employers’ organisations made an agreement on the distribution of work in 1999. According to this agreement ETK is the main organisation responsible for labour and social policy development and therefore also the main partner in social dialogue for trade unions and the Government. Participation in tripartite bodies, dealing with labour and social policy issues is the ETK’s area and the ETK is the partner for trade unions in national level collective bargaining. The distribution of work is also reflected in international cooperation. The ETK is member in BusinessEurope and the IOE (International Organisation of Employers). The other employers’ organisations are partners for the ministries in other fields, such as economic, environmental and foreign policies. However, from time to time the EKTK has also expressed its opinion on labour issues; e.g. the extension mechanism of collective contracts. Only the ETK is of major importance.

There have been complaints by the trade unions that one obstacle to sector-level collective negotiation is the lack of sector-level employers’ organisations. However, there are still a limited number of sectors where sector-level negotiations are actively held. Specifically these are the transportation and health sectors. Employers are represented in these sectors by the Union of Estonian Automobile Enterprises (Eesti Autoettevõtete Liit) and Association of Estonian Hospitals (Eesti Haiglate Liit).

The lasting problem with employers’ organisations is in sectors in which the employers’ side involves local government. Specifically the problem concerns wage negotiations of municipal school teachers, whose remuneration is financed through local authority budgets. Local governments’ associations participate in wage negotiations as observers beside the government and the TALO. Local government associations claim that they have no right to participate in negotiations as employers’ representatives and thus cannot make decisions. This has hindered wage negotiations in this field for a long time. In 2006, there was a meeting on this issue with the State Conciliator (Riiklik Lepitaja). The following opinion was formed on this issue: the regulation of collective industrial relations enables local government associations to participate in negotiations as employers’ representatives, however it was suggested that the Law on Local Government Associations (RTI, 28.11.2002, 96, 565) should be amended so as to make

88 Due to the chage of name in Esotnian the abbreviation is now ETK – Eesti Tööandjate Keskliit (Estonian Employers' Confederation), while it was previously ETTK – Eesti Tööstuse ja Tööandjate Keskliit (Estonian Confederation of Employers and Industry).

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explicit the local governments’ associations’ rights in wage negotiations. The issue has not yet been resolved.

The following Table provides details of the main Union and Employer Organisations

Name of Number of Details of membership union members

EAKL Confederation with blue and white collar workers within 19 sector- 43,776 based union branches TALO Confederation with 12 branch unions 30,000 ETMTK Agricultural sector union confederation 4,286 EHL School teachers (part of TALO) 13,293 ETAL Health care professionals (part of EAKL) Name of Details of membership Number of Employers’ members organisation ETK 1,500 Employers confederation companies EKTK Chamber of Commerce and Industry n.a. ESEA Business Association n.a. EVEA Association of SME’s n.a.

3. State and tripartite bodies

The Government has a dual role in industrial relations. On the one hand it is a policy maker and on the other hand it is an employer. Both roles are represented in Estonia. Given the very low union membership, the minimum guarantees must be provided with regulations and legislation. Thus there is a large role for the government as a policy maker. In the policy-making process, the social partners are involved through the consultation process.

The government participates in state level tripartite negotiations which up to 2001 regularly set the national minimum wage. Since 2001, the minimum wage is agreed upon bilaterally by the ETK and trade unions’ confederations. The national minimum wage agreement is an extended collective agreement. Even though an extended collective agreement should be automatically obligatory for all parties to whom it is extended, the minimum wage is still also rubber stamped by the government decree each year.

From 1992 to 2003 there were regular tripartite negotiations that concluded almost each year with an agreement. The issues concerned different labour and social policy issues (such as the levels of unemployment benefits and the subsistence minimum, basic tax exemption, aspects of legislation etc.). During the past couple of years there have not been such tripartite agreements; instead there have been some multipartite cooperation agreements and declarations of common interest. Tripartite negotiations are supplemented with the consultation process in the legislative process.

In recent years, there has been very fierce opposition of the trade unions to some legislation (draft Representative Act, draft Social Dialogue Act) proposed by the Ministry of Social Affairs. This lead to the passing of the new Representative Act in Parliament with major amendments in favour of trade unions, compared to the initial version of the draft at the end of 2006.

As an employer, the Government conducts negotiations each year with the TALO and Association of State and Local Government Employees' Unions (ROTAL, member of the EAKL). The agreement establishes minimum wages for specific positions financed directly from the government budget. These agreements usually also include a political declaration, stipulating that the government will do all it can in order to increase the wages of civil servants and workers whose salaries are paid from the State budget. The government has participated as the financing institution in the wage negotiations of health sector workers and also in some of the EAKL branch unions’ negotiations.

Tripartite negotiations and consultation on legislation are the main forms of regular tripartite social dialogue. In addition, there are several tripartite consultation bodies and boards. The socio-economic council (founded in 1999) has only a marginal role in Estonia as its functions are ambiguous and its work has not had visible results. The role of the ILO council in the wider context of social dialogue has not

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been substantial. The role is confined mainly to evaluating the ILO conventions in Estonia and reporting to the ILO. There is tripartite Working Environment Council that is an advisory body to the Government on working environment questions. Social partners also participate in some of the Government agencies’ boards, such as the Board of Estonian Unemployment Insurance Fund and the Board of the Estonian Health Insurance Fund. Also, social partners are represented in several surveillance bodies and committees that monitor the use of the EU structural funds.

At local level, there are tripartite employment councils created by the Public Employment Offices. There are also tripartite state level employment councils. These should advise employment offices in designing their activities.

In labour dispute settlements, employees’ and employers’ representatives are represented in local labour dispute committees. At state level, union confederations and the ETK make suggestions to the Government on the candidate of the Public Conciliator.

4. Collective bargaining Collective agreements are regulated by the Collective Agreements Act (Kollektiivlepingu seadus, KLS) (RT I 1993, 20, 353, entered into force 16.05.1993; last red. RT I 2002, 61, 375). This regulates both bi- and tripartite collective agreements. All agreements, which regulate labour relations and are voluntarily agreed upon bi- or tripartite at any level, are collective agreements (KLS §2). If there is a collective agreement, which is signed and valid, the parties must refrain from calling a strike or lock-out in order to get better conditions than those defined in the agreement (KLS §11(3)). A collective agreement may be concluded by (KLS §3(2)):

1. an employer and a union, federation or authorised representative of employees;

2. an association or federation of employers and a union or federation of employees;

3. a local government association and a union or federation of employees and officials;

4. a central federation of employers and a central federation of employees; or

5. the central federation of unions of employees, a central federation of employers and the Government of the Republic, and between local federations of unions of employees, a federation of employers and local governments.

The collective agreement may be signed by the employees’ trustee (an authorised representative of employees) if there is no union in the company (KLS §3(3)). There is no representation criteria set.. The collective agreement regulates the working conditions of the members of the trade union, which concluded the agreement, but it can be extended to all workers in the company (KLS §4(1)). However it is not obligatory to extend the agreement to the whole company. The KLS (§101(2)) allows the granting of preferences to certain employees on grounds of membership in an association representing the interests of employees.

The party which initiates negotiations shall prepare a draft collective agreement and present it in writing to the other party together with a notice of the desire to commence negotiations (KLS §7). The parties commence negotiations within seven days after receiving such a notice. There is no more prescription on procedures for collective negotiations. Still, it is stipulated that the agreement must be formed in writing (KLS §5(1)) and it must be introduced to all workers (including newcomers to the company and those who are not union members) (KLS §12). If it is not specified otherwise the collective agreement is valid for one year.

Where there are several collective agreements regulating working conditions, the conditions more favourable to employees are applied (KLS §4(3)). The same goes if there is a contradiction between individual and collective contracts.

If the parties that conclude a collective agreement are associations of trade unions and employers’ unions, then the collective agreement may be extended to other parties (KLS §4 (4)). However, only conditions

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regarding pay and working and rest time can be extended. The scope of extension is set out in the agreement. The extended agreement enters into force when it is published in the Official Publications (Ametlikud teadaanded) (KLS §4 (5)).

There has recently been much discussion on the issue of extending collective contracts. In 2005 the Chancellor of Justice analysed whether the current extension mechanism violates the freedom of entrepreneurship, based on an application made by a small entrepreneur in the transportation sector. He concluded that the extension mechanism is not fair as there are no representation criteria for the parties that can extend a collective agreement. Also there are no opportunities for those to whom the contract is extended to know when or which conditions are externally determined to him/her and there is no opportunity to express one’s opinion on these issues. There have therefore been proposals by the ETK to change the situation by setting, for example, numerical criteria for representation, or giving the federations the right to assess the scope of extension. From the other employers’ organisation, the EKTK has made the statement that there should not be a regulation that enables an agreement to apply to third parties. The EAKL has stated that the current regulation does not disproportionately violate the right of freedom of entrepreneurship. There is no draft amendment for changing the regulation prepared by the Ministry of Social Affairs, even though the Chancellor of Justice has pointed to the need for such an amendment.

System of collective bargaining The database of collective contracts was founded in 2001. The database is located at the Ministry of Social Affairs. All collective contracts must be registered in this database. However, many agreements are not registered, as there is no incentive to register and therefore there is no overview of the agreements. The register of collective agreements indicates that 85 collective agreements were concluded at enterprise level in 2006 (compared to 52 agreements concluded in 2005). At the same time, the EAKL is aware of 169 enterprise level agreements valid in 2006 (138 in 2005) and TALO estimates the agreements in its member institutions number as many as 250 (Karu et al. 2007). There are no adequate official data on the coverage of collective agreements. According to a survey of employees, Work Life Barometer 2005, the share of employees who are aware of a collective agreement concluded in their workplace is 28%. No systematic analysis of collective contracts has been carried out in Estonia and thus there is no general knowledge on the topics regulated.

Most of the agreements are concluded at company level. There are two sectors in which collective contracts are or have been extended to other companies. These are the health and road transportation sectors. There are still some sectors in which sector level negotiations are held, as for example education, but where there is not extended collective contract.

The main national level collective contract lasting recent years has been the one setting the national minimum wage. This has been concluded between the EAKL and the ETK in recent years. The contract is extended to all employees. Even though the extended collective contract should automatically set the national minimum wage it is also established with a Government Decree.89 However, the government has always established the wage level agreed upon by the social partners.

There have been several other issues discussed on national level bi- and tripartite negotiations. These include several social and labour policy issues such as the subsistence benefit level, unemployment benefit, basic tax exemption, principles of employment policies, and amendments to labour legislation.

In general the system of collective bargaining is decentralised in Estonia as the main level of bargaining is the company and there is no substantial coordination between different unions or employers in concluding the contracts. There is no established sequence or hierarchy of bargaining at different levels. At the same time, central trade and employers unions' confederations often try to reach their goals through influencing the national legislation. The lack of social dialogue at lower levels is therefore compensated by more specific regulations.

89 The Wages Act (Palgaseadus) (§2(7)) establishes that the minimum wage which must be paid is established by the Government Decree.

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5. Industrial disputes (en ital.) Individual labour disputes and collective labour disputes are regulated by different laws. The individual labour dispute settlement is established in the Individual Labour Dispute Resolution Act (Individuaalse töövaidluse lahendamise seadus, ITVS (passed RT I 1996, 3, 57, entered into force 1. 09. 1996, last red. RT I 2006, 58, 439) and collective labour disputes settlement is established in the Collective Labour Dispute Resolution Act. The channels through which labour disputes are solved are as follows:

1. for individual labour disputes: a. mediation by the trustee or the union; b. labour dispute committees; or c. the courts. 2. for collective labour disputes: a. conciliation of federations of employees and employers unions; b. conciliation by Public Conciliator and local conciliators; or c. the court or labour dispute committee. For individual labour disputes, a solution can be found through mediation by a representative of employees or by a governing body of a union or a federation of employees (ITVS §3). However, the party may turn to one of two labour dispute resolution body (labour dispute committees and courts (ITVS §4(1)) directly without trying to find an agreement (ITVS §3(4)). If an application is submitted to both, the court will not consider the application. Labour dispute committees solve disputes concerning demands up to 50,000 EEK (3196 €) (ITVS §4(11)). Applications to labour dispute committees are free of any state fees (ITVS §9(1)).

Labour dispute committees are extra-judicial individual labour dispute resolution bodies (ITVS §10). These are established within the local labour inspectorates (ITVS §11(1)) and there are 15 in total. The membership of a labour dispute committee comprises the chairman of the labour dispute committee, who is an employee of local labour inspectorate, and an equal number of employees’ and employers’ representatives (ITVS §11(2)). The directing bodies of federations (central federations) of occupational and professional associations of employees and central federations of employers appoint the required number of representatives of employees and employers to the Labour Inspectorate as determined by the Labour Inspectorate for membership of labour dispute committees (ITVS §11(5)).

In 2006, there were 2671 applications presented. Applications concerning pay make up 96% of all applications. The main concerns include payments for withholding employment record books and final payments and unpaid wages. There are substantially less employers’ applications than employees. Only each twentieth application is presented by an employer (Tööinspektsioon 2006).

There is a conciliation procedure established for collective labour disputes. Failing an agreement concerning the application of labour legislation and entry into, performance or amendment of collective agreements between employers and employees or associations or unions thereof, the employers and representatives of the employees have the right of recourse to federations of employers and federations of employees (KTTLS §7). An agreement reached by a federation of employers and a federation of employees is binding on the parties to a dispute (KTTLS §7(3)).

There has been one collective labour dispute settled by federation mediation. The decision was made on the resolution of collective labour dispute in Eesti Raudtee AS (Estonian Railways) with the Estonian Locomotive Drivers Union (Eesti Vedurimeeste Ametiühing) in 2004. The decision set the wage level and ended the strike.

For collective labour dispute conciliation there are local conciliators and the Public Conciliator. Where the labour dispute is between federations of trade unions and employers the mediation is led by the Public Conciliator (Riiklik Lepitaja) (KTTLS §8(4)). The Public Conciliator decides whether he/she will process the dispute or appoint a local conciliator for the resolution of the dispute (KTTLS §8(4)). A conciliator identifies the reasons for and circumstances of a labour dispute and proposes resolutions. Conciliation is

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effected through mediation or on the basis of a proposal. The parties reply to the proposal within three days. Parties are required to participate in conciliation proceedings, send their fully authorised representatives to participate in and submit documents necessary for the substantive resolution of the matter by the date specified by the conciliator. Conciliation is documented by a report, signed by the representatives of the parties and the conciliator. A report is also prepared if no agreement is reached. A conciliation contained in a signed report is binding on the parties and enters into force upon signature, unless a different date is agreed on. There is also the obligation to keep the parties’ business secret if the parties of the conciliation process become aware of those.

In 2006 there were five applications to the Public Conciliator and the process on one application continued from 2005. The disputes concerned in total around 27,000 employees. The main reasons for collective labour disputes are wage conditions, working and rest time questions, training and further training issues. Also refusals of employers to negotiate and conclude collective agreements are among the problems. The agreement was reached in 2006 in three cases, and three disputes continue. The lingering of processing the disputes was the result of the failure of employers’ and employees’ federations to agree on the candidate of the Public Conciliator for six months.

Failing an agreement between a federation of employers and a federation of employees in a dispute arising from the performance of a collective agreement, the federations have the right of recourse to labour dispute committees or the courts for resolution of the dispute (KTTLS §12).

Strikes Strikes and lock-outs are regulated by the Collective Labour Dispute Resolution Act (Kollektiivse töötüli lahendamise seadus, KTTLS (passed in RT I 1993, 26, 442 entered into force 7. 06. 1993, last red. RT I 2002, 63, 387). The right of employees or unions or federations of employees to organise a strike and the right of employers or associations or federations of employers to lock out employees to resolve a labour dispute arises only if there is no prohibition against disruption of work in force; if conciliation procedures prescribed in this Act have been conducted but no conciliation has been achieved; if an agreement is not complied with; or if a court order is not executed. (KTTLS §13(1)) (see next section on conciliation).

Strikes are prohibited in government agencies and other state bodies and local government; in the Defence Forces, other national defence organisations, courts, and fire fighting and rescue services (KTTLS §21). The restrictions on civil servants striking rights have been under discussion for several years now. The EAKL made an application to the ILO in order to influence the government to change the situation and to allow civil servants to exercise their constitutional right in collective industrial relations. Striking should be prohibited only to those civil servants who exercise state authority or perform duties of primary need for people. However, the total ban for civil servants striking in Estonia is not justified according to the EAKL and also the Chancellor of Justice has highlighted it. There have been some amendments of regulations proposed, but these have not been accepted.

Organisers of a strike or lock-out are required to notify the other party, a conciliator and the local government of a planned strike or lock-out in writing at least two weeks in advance. The notice shall set out the reasons, exact time of commencement and possible scope of the strike or lock-out (KTTLS §15(1)). An employer is required to inform the parties with whom the employer has contracts, other interested enterprises or agencies and the public through the media of a strike or lock-out (KTTLS §15(2)).

In addition to strikes there can be warning and support strikes (KTTLS §18). Notification about these types of strikes must be at least three days (KTTLS §18(3)). Warning strikes may not last longer than one hour (KTTLS §18(1)) and support strikes cannot be longer than three days (KTTLS §18(2)). Support strikes are permitted in support of employees engaging in a strike. There are no other restrictions on support strikes in the law, i.e. all employees are allowed to support all other employees in their demands despite the economic activity or interdependence of the employees.

The regulation of support strikes has caused much debate in recent years. The ETK has pointed out that even if an employer has a collective contract that should guarantee industrial peace, employees still can strike. With the three days notification period, a support strike may last up to three days, for supporting other employees’ demands, which could cause substantial damage to the economic performance of the

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company. Also the employer might not have any means to influence the other employer and the main strike could be not connected to the employer who faces a support strike at all. The ETK suggests that the regulation should be changed so that the notification period should be longer - the problems with too short notice periods have also been raised by the Chancellor of Justice in 2005 - and the support strike should only be in the same industry (ETK Manifest 2007). The Chancellor of Justice has pointed out that the notification period for main strikes is two weeks, thus the notification period for support strikes could be prolonged without any harm to employees (Chancellor of Justice 2006). The Ministry of Social Affairs made a legislative proposal in 2005 to shorten support strikes to 24 hours and prolong the notification period to one week. The proposal was rejected by the government (mainly because the same amendment also included a proposal to abolish the restriction on the civil servants’ right to strike). The EAKL’s position is that the support strikes regulation does not excessively restrict freedom of entrepreneurship, that three-day support strikes do not harm social well-being and that mere economic loss for an entrepreneur is not a sufficient reason to limit employees’ rights.

There is a striking pact concluded between five associations of unions. The agreement establishes supporting each others’ actions with support strikes, pickets and other means. Also, mutual financial support in the case of strikes has been agreed. In 2004 the pact included 13, 000 trade union members and enables action involving up to 20,000 employees (EAKL 07.06.2004).

However Estonia has not seen many strikes. There have been only two strikes, strikes in support of these, and several warning strikes. One of the two strikes was held by TALO in 2003 and the other in the railway sector by locomotive drivers in Eesti Raudtee AS in 2004. The strike of TALO concerned mainly teachers’ wages. TALO strike included around 18,000 employees and the strike lasted one day. The strike in Eesti Raudtee (Estonian Railway) lasted seven days and employees demanded wage rise for locomotive drivers. There have not been any lock-outs. In 2006 there were several strike threats in transport and the health care sector. However, all the conflicts were resolved before the strikes could begin. The labour disputes that are resolved by the conciliator concern mainly wage issues.

There is no systematic data collection on strikes in Estonia. Therefore different sources and institutions must be contacted in order to get a picture on striking activities. There is an overview of strike activities made for period 1996-2002 (Lauringson 2002). During this period, lost work days due to striking were 0.9 per 1000 employees (Kallaste 2006, p. 117).

Besides wages, collective labour disputes arise most often on the grounds of concluding a collective agreement. The main complaints include employers not being interested in concluding collective agreements and therefore delaying negotiations, and problems with the implementation of agreements. According to the relevant legislation, collective agreements are documents negotiated through bipartite dialogue and there is no legal responsibility on either side to conclude an agreement. The result is that many employers’ organisations delay talks or even refuse to negotiate (Public conciliator 2005).

III. EMPLOYEES REPRESENTATION SYSTEM IN THE COMPANY

1. General issues The employees’ representation system has long been discussed in connection with the need to transpose the EU framework directive on informing and consulting employees (2002/14/EC). The new Employees Representatives Act (Töötajate Usaldusisiku Seadus, TUIS) was passed in Parliament at the end of 2006 and has been in force since February 1, 2007. The Act establishing the creation of European Works Councils90 was passed in Parliament in 2005. It took two more years to establish a general framework for information and consultation, mainly due to union opposition to the previous versions of the law.

90 Involvement of Employees in Activities of Community-scale Undertakings, Community-scale Groups of Undertakings and European Companies Act (Üleühenduselise ettevõtja, üleühenduselise ettevõtjate grupi ja Euroopa äriühingu tegevusse töötajate kaasamise seadus) (passed in 12.01.2005 RT I 2005, 6, 21)

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There are two types of employees trustees in Estonia. First, there is a trustee elected by the general meeting of employees (TUIS §2). The purpose of the trustee is to represent workers and to take part in informing and consulting workers. Second, there might be a separate trustee for union workers, who also has the right to participate in informing and consulting workers (AÜS §16(4)). At the same time while union has the prerogative for collective bargaining (KLS §3(3)), the authorised workers representative may be involved in collective bargaining if there is no union in the company present.

The system has changed so that there is no need for employees in the same company, if there are union members and non-members, to have two separate trustees for being informed and consulted. Through creating a single specific channel for informing and consulting of all employees, the Estonian system moved closer to a traditional dual channel representation system. However, both channels may engage in both activities: informing and consulting and collective bargaining in certain conditions in Estonia.

There was not much information available on the activities of trustees under the old law of representation. According to the working life barometer 2005, there was a trustee representing non-union workers for 9% of employees (Tööelu baromeeter, 2006). On the practice of representation based on the new law that came into force only at the beginning of February 2007 it is obviously too early to say anything. Therefore, only legal regulation is examined.

2. Types of representation and bodies There are the following types of workers’ representatives and representation bodies established by legislation:

1. Employees trustee elected in general meeting of employees with informing and consulting purposes; 2. Unions trustee; 3. Work environment representative; 4. Working environment council; and 5. European Works Councils. There is no obligation to have a trustee in certain companies, but there is the informing and consulting obligation in companies which have more than 30 employees (TUIS §17(1)). The informing and consulting is obligatory to all employers, except in the civil service (TUIS §17(2)), despite the existence of an employees’ trustee (TUIS §19). However, the employees’ trustee might be elected also by civil servants (TUIS §1). Thus the election of a trustee is a possibility for employees, but informing and consulting is an obligation of an employer regardless of the presence of a trustee. There is no specific regulation on works councils or workers representation in religious organisation, or in workplaces . The regulation concerns the company as a whole

According to the Occupational Health and Safety Act (Töötervsihoiu ja tööohutuse seadus, TTOS) (passed in RT I 1999, 60, 616 entered into force 26.07.1999, last red. RT I 2007, 3, 11) occupational health and safety representative must be elected by employees in companies where there are more than 10 employees (TTOS §17). In companies with more than 50 employees, a working environment council is formed. The council is formed on the basis of parity and there are at least four members (TTOS §18). The Labour Inspectorate can demand the establishment of a working environment council also in a smaller company, depending on the work environment in the company. The aim of working environment representatives is to participate in the information and consultation process on workplace health and safety matters.

The laws oblige different representatives to cooperate, but there are no more specific regulations. The laws do not specify interdependence between different representatives and representation bodies. However, there are some examples from practice, where the work environment representatives also work as representatives in general matters, or where the union representative is also the work environment representative and representative of all workers. There are some examples from companies where work councils have been created also on general matters, even though these are not established by law, not just for health and safety purposes (Kallaste 2005).

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3. Union representation at work place level The elected union representative, who is an employee of the company, is representative of employees as defined in the Employees Representatives Act (AÜS §16(4)). The aspects provided in 3.4 also concern union representatives therefore. There is no restriction on the number of union trustees that can be elected, however paid time off is guaranteed to one trustee (AÜS §211). The procedure of union members' representation, the list of union bodies and the formation of those is stated in the union's articles of association. The procedure for formation of bodies and electing representatives must enable participation of as many union members as possible. The union trustee is the main person representing unions and union members in collective labour relations with employer.

With the passing of the new Employees Representatives Act, the unions’ role was seen more to be collective bargaining and role of the representative, who is elected in the general meeting to be more participating in information and consultation. With the new law (TUIS) the representative of all workers was created, in order to create one channel for informing and consulting all employees. Previous law established two separate channels: one for union members and the other for non-members informing and consulting, thus both channels were expected to fulfil this task. However, the union trustee also now has the right and obligation to participate in informing and consulting and therefore there is paid time-off guaranteed with the law – the amount depending on the number of union members. In the previous law the both representatives had the same amount of paid free time according to the total number of employees. The union trustee is obliged to cooperate with other employees’ representatives in the company (AÜS §21(1)).

Employees may belong to the union in the workplace or to another union (AÜS §19(1)).

Not much is known about union and other representatives’ work and influence in the companies in practice. It is likely that in companies with a higher union membership, the influence is higher. . Kallaste et al. 2005 analysed two companies where due to a small and non-influential union, an additional non- union employees’ representative was instituted. At the same time there are some companies that claim that there is no need for any other representative in their company as the unions function sufficiently well in order to guarantee information and consultation.

4. Representation at workplace or company level There is no works council type of body established by law. There is only the trustee of the company or if it is decided by the general meeting of employees, there may be many of them. The employees’ trustee, who is elected by general meeting of employees, must be the employee of the respective company (TUIS §2). There may be several trustees in one company. In this case, each trustee may represent employees in all aspects laid down in the law if there is no decision by the general meeting that some of them must represent employees together (TUIS §3). If there is more than one trustee to be elected by the general meeting, it must be in agreement with the employer (TUIS §7(4)). If there are many trustees, they may elect a chief trustee among them, who organises the work of trustees (TUIS §7(5)).

5. Capacity for representation The employees’ trustee elected by the general meeting of employees (with a quorum) represents all employees of the respective employer. The law (TUIS) does not specify which kind of contract relationships count in determining the number of employees.

The trustee has the right to turn to the labour dispute resolution body (labour inspectorate or court) in order to solve a dispute arising from confidentiality of information or from refusal for giving information by the employer (TUIS §9(7)). The trustee has an obligation to turn to the labour inspector if there necessary, if working conditions are not followed (TUIS §10(3)).

6. Elections The trustee is an employee of the respective employer and he/she is elected by the general meeting of employees (TUIS §2(1)). The general meeting may be summoned by (TUIS §5(1)):

• the union, which is active in the company;

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• majority of union members if the union is not created in the company; or • at least 10 percent of employer’s employees. Candidates for the position of trustee may be presented by all employees and by the union, which is active in the company (TUIS §7(3)).

The announcement of the reasons and time of meeting must be at least two weeks prior to the meeting (TUIS §5(2)). The meeting has a quorum if at least half of the employer’s employees participate in it (TUIS §6).

The terms and organisation of elections and removal of employees’ trustee are decided by the general meeting (TUIS §7(1). The terms and conditions must give all employees opportunity to participate in elections and removal of a trustee (TUIS §7(2)). The trustee is decided in secret voting (TUIS §7(3)).

7. Protection The trustees are elected for three years if the general meeting of employees does not decide otherwise (TUIS §8). Termination of an employment contract at the initiative of the employer of an employee representative is permitted during the term of authority of the employee and within one year after termination of the authorisation, but only with the approval of the local labour inspector. This is not necessary if the reason for termination of the contract is liquidation of the company (TLS §94(1)). The labour inspector must give written justified consent or refusal for the termination of the employment contract of the trustee (TLS §94(2)). It is prohibited to terminate an employment contract of a trustee of employees because of his or her lawful activities in representing the interests of the employees (TLS §94(3)).

After the election the workers trustee maintains his or her average wage while fulfilling their representation tasks and respective training (Wages Act §301).

8. Obligations towards employees and employers Trustees have the following obligations (TUIS §10) to employees and the employer:

• to participate in information and consultation:

• monitor working conditions and notify the employer and, if necessary, labour inspector of any breaches; violations.

• on the request of an employee, represent an employee in a labour dispute before turning to a labour dispute resolution body.

• if a collective agreement is signed by the trustee, help to keep industrial peace; and cooperate with other employees’ representation bodies, such as union trustees, working environment representatives and the working environment council.

9. The rights of trustees In order to fulfil their obligations, the trustee has following rights (TUIS §9):

– To examine working conditions and work organisation without obstruction; – To obtain necessary information from the employer and to consult with the employer; – To suspend collective redundancy where problems are not solved in time; – To represent employees in collective bargaining and collective labour dispute, if there is no union or unionised employees present in the company; – To inform the relevant union or association or federation of unions of breaches of working conditions by the employer;

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– To turn to the labour dispute resolution body if there is a dispute regarding the employer’s refusal to give information or confidentiality of information; – To get necessary training to a reasonable extent. On the agreement of parties, the employer may cover the expenses; – To involve experts for fulfilling the tasks; and – With the agreement with the employer, to use the employer’s rooms and other equipment.

10. Facilities The trustee is granted time-off from the job in order to fulfil their tasks. The minimum time-off for which the worker also receives his/her average wage, depends on the number of employees he/she represents (TUIS §13(1). In general it means the number of workers of the company as the trustee is elected by the general meeting of employees (TUIS §2):

– 4 hours if there are 5-100 employees; – 8 hours for 101-300 employees; – 16 hours for 301-500 employees; and – 40 hours for over 500 employees. On the agreement between the trustee and the employer the representation work is done during working time or outside working time. The conditions and organisation of representation work is agreed upon between employer and the trustee. On the agreement of the employer the trustee has the right to use the rooms and other facilities of the employer. Also training expenses are covered by the employer if there is an agreement for it. There are no provisions for covering expenses of external experts that the trustee wants to use.

11. Information and consultation provisions Informing and consulting workers is established by the Employees' Representatives Act. Informing workers means giving employees’ representative, or directly to workers if there is no representative, adequate information to enable a timely, clear and sufficient overview of the company’s structure, economic and employment situation and possible development of these, as well as on the other aspects concerning employees interests (TUIS §19(1)). Also the information must provide an overview of the impact of economic and other developments on employees.

The employer must inform employees at least of the following aspects (TUIS §20):

1. Employer’s structure, employee structure, changes in these, planned decisions having substantial impact on employment or employer’s structure;

2. Planned decisions potentially involving substantial changes in work organisation;

3. Planned decisions which potentially involve substantial changes in contractual relations of employees, including termination of contacts; and

4. On the annual report, within 14 days after it has been approved.

The information must be given in a way that enables thorough examination of the information and time to prepare for consultations with the employer. The employer gives information in writing or in format which can be reproduced in writing if the parties have not agreed otherwise (TUIS §21(1)).

Employer may claim information to be confidential; he/she must justify the confidentiality if representative does not agree with it ((TUIS §15). If publication of the information harms or could harm the employer’s activities, he/she can refuse to give it. The refusal must be justified with objective criteria. Employers must not refuse to give information about the number of employees.

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Consulting is defined in the law as adequate dialogue and exchange of opinions between the trustee, or employees if there is no representative, and the employer that enables employees or representatives to express opinions and to get justified answers from the employer to those opinions with the aim of coming to an agreement.

The issues on which consulting must happen are the same as for informing of employees, except the annual report.

The representative, or employees where there is no representative, have right to give a written opinion or to make a proposal on the information that is given by employer or to announce on the request for consulting within 15 days of receiving information (TUIS §21(2)). If the employer does not take into account the proposals, he/she must explain why at the first opportunity in writing or in a format which can be reproduced in writing. The employer starts consulting within seven days after receiving such a request (TUIS §21(3)). The employer explains during the consultation about any planned activities and the impact on employees. The parties try to reach agreement on the planned activities (TUIS §21(4)). The representative of employees or employees, if there is no representative, has the right to involve experts (TUIS §21(5)).

Other issues on which informing and consulting is demanded are listed in the Employment Contracts Act (TLS). The main articles concerning employees’ information and consultation are: paragraph §63 in case of transfers of undertakings, §42 on internal rules of work organisation, §892 in the case of collective redundancies.

In the case of a transfer of undertaking, the previous and the future employer must present to the workers’ representative or, the workers, all relevant information concerning the transformation. As a minimum, it must include the date, reasons, legal, economic and social consequences to workers and the planned measures with regard to the workers. If there are any changes planned with regard to the workers, the employer has to consult the workers’ representative first. If there is no representative, the employer is not obliged to consult. During the consultations, employees have the right to meet the employer’s representative and members of the board. They can present written proposals within 15 days from the date of receiving the announcement of transfer. The employer must justify their decision if they reject the employees’ proposals. The paragraph adopts the directive 2001/23/EC into Estonian legislation.

In the case of collective redundancies the law provides that the employer must give timely written information to employees’ representatives or, to employees concerned. The information must include at least the reasons for lay-offs, numbers, names and selection criteria for workers who are laid off, the number of employees in the company, timing of lay-offs, and the principles for calculating and paying redundancy. Employees’ representatives must be consulted on these issues and they have at least 15 days to present their opinion. The employer must justify their rejection of the employees’ proposal. Also, employees’ representatives can make proposals to the Labour Inspectorate, who must also agree with the collective redundancy. Additionally, the employees’ representative has a right to postpone collective redundancy by a maximum of 30 days if the problems accompanying lay-offs are not solved. This paragraph adopts the rules laid down in the directive 98/59/EC.

All employees have the right to see the draft of internal procedure rules and make proposals on it. The employer must forward it for consultation a week before presenting it to the Labour Inspector. However, the employer can take workers’ proposals into account or discard them without further explanation (TLS §42).

The disputes arising around information and consultation are solved by the Labour Inspectorate or by court. There are penalties specified in the law for infringement of obligations to inform or consult by the employer or for infringement of obligation to keep confidential information by the representative or employees.

European Works Council In addition to workplace representatives in the company there is regulation on European Works Councils established in Involvement of Employees in Activities of Community-scale Undertakings, Community- scale Groups of Undertakings and European Companies Act (Üleühenduselise ettevõtja, üleühenduselise

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ettevõtjate grupi ja Euroopa äriühingu tegevusse töötajate kaasamise seadus, ÜETKS)91 (passed in 12.01.2005 RT I 2005, 6, 21). The competence of the European Works Council is limited to information and consultation on the matters which concern a Community-scale undertaking or Community-scale group of undertakings as a whole or at least two of its enterprises or group undertakings situated in different Member States (ÜETKS §33(1)).

The European Works Council comprises at least one representative from each Member State where a Community-scale undertaking, its enterprise or a controlling undertaking or controlled undertaking of a Community-scale group of undertakings is located (ÜETKS §24(3):

1. one representative from each Member State where at least 25 per cent of the employees of a Community-scale undertaking and a Community-scale group of undertakings are employed;

2. two representatives from each Member State where at least 50 per cent of the employees of a Community-scale undertaking and a Community-scale group of undertakings are employed; and

3. three representatives from each Member State where at least 75 per cent of the employees of a Community-scale undertaking and a Community-scale group of undertakings are employed.

Representation in European companies ÜETKS sets regulations for workers involvement in Societas Europaea (SE) and in Societas Cooperativa Europaea (SCE). The regulations are more precise than they are for community-scale undertakings concerning the content of information, possibilities for participation and voting rules for decision making. As well as informing and consulting there is the opportunity for workers co-decision if it was established before in one company which is part of formation of SE or SCE. The voting rules for decisions in the special negotiating body for setting up the employees' involvement procedure (ÜETKS §57) or in the representation body of employees are quite high in order to avoid possibility of lowering worker participation compared to the situation before European company was formed.

IV. EMPLOYEES REPRESENTATION IN CORPORATE BODIES

There is neither a legal basis nor practice of employees’ representation in the board of directors or supervisory boards.

V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

There are no specific information and consultation procedures for preventing economic difficulties of a company. However, employees must be aware of the annual report and potential changes in economic activities that might have impact on employees. Employees’ information and consultation in the case of collective redundancies, transfers and mergers is specified in the Employment Contracts Act.

There are no specific procedures for information and consultation in the case of insolvency or bankruptcy. In the case of bankruptcy, information and consultation procedures are in place only where a collective redundancy is involved. The more precise information and consultation procedures may be set in collective agreements. However, the coverage of collective agreements is not very wide and there is no overview of the contents of collective agreements.

91 With this law the Council Directive 94/45/EC on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees and the Council Directive 2001/86/EC supplementing the Statute for a European company with regard to the involvement of employees are transferred into Estonian legislation.

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There are no rules specified for informing and consulting workers if the company receives state aid. The social partners are involved in distributing EU structural funds through the involvement of unions and employer federations into the planning and management process (steering committees, for example).

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FINLAND

Finland declared its independence from Russia in 1917. After the Civil War it became a presidential republic After World War II Finland was influenced by both the Soviet Union and Western influences, but maintained its democratic government and market economy. Finland joined the European Union in 1995.

I. ECONOMIC AND SOCIAL CONTEXT

Basic economic data Of all the Scandinavian countries, only Finland has chosen to be among the first countries to use the euro. Between 1990 and 1994, the couuntry went through an even more serious crisis. It was severely affected by the collapse of bilateral trade with the Soviet Union, combined with low cycle paper prices and the international recession. Finland managed to emerge from this crisis and the situation greatly improved in the second half of the 1990s. Since 1995 the growth rate has been one of the highest in the OECD. Finland has been nominated as the most competitive country from 2002 to 2005 (World Economic Forum). Within the global market, its economy has been in recent years very much based on communication technology.

Industry is dominated by the timber/paper sector, metallurgy and mechanical engineering. Since the 1980s, high-technology production, such as mobile phones (Nokia), has developed strongly.

Public services (state and local authorities) employ just under 30% of employees but state enterprises are important (with 17% of the working population) particularly in transport, communications, energy and manufacturing. Privatisation programmes have been undertaken since 1991. The State was required to maintain a minority or majority holding depending on the case in question. Many share issues have taken place and from 1991 to 2007, the selling of shares has resulted in around 17 billion euro income to the state.

Exports and imports represent around a quarter of the GDP of the Finnish economy. Exports focus on the timber/paper sector and the metallurgy/mechanical engineering sector. Until the 1980s, Finland enjoyed privileged commercial relations with Russia and the Comecon countries. This trade collapsed with the disintegration of the Soviet bloc but is today gradually being built up again in different forms. Europe is the primary market: 60 to 80% of exports are destined for the European Economic Area and the most important commercial partners, apart from the other Scandinavian countries, are Germany and the United Kingdom Exports to Russia are now 9.3 % of the total and 14.9 % of imports and have been growing very rapidly over the last 10 years The significance of exports has been growing strongly since 1990. While exports to the European Union are no longer rapidly growing, exports to Russia and China are increasing.

Large companies in the timber/paper sector and producers of capital goods, which are partly privatised, are dominant. The 1990s were marked by drastic cutbacks in staff among these major employers. From 2001 to 2007 dismissals have also taken place within the technology industry. However, there is a growing lack of human resources in the labour market.

Labour market The employment rate is one of the highest in Europe, and has increased more than five points in the last eight years, from 63.3 in 1997 to 68.4 in 2005.

Meanwhile, unemployment has gone down in the same period from 314,000 in 1997 to 220,000 in 2005 – the unemployment rate has also gone down from 12.7 in 1997 to 8.4 in 2005.

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Employment and unemployment figures

All 199 199 199 200 200 200 200 200 200 7 8 9 0 1 2 3 4 5 Population in employment aged 15-64 216 221 228 231 235 235 234 234 237 0 2 2 9 0 4 5 5 8 Employment rate (% population aged 15-64) 63,3 64,6 66,4 67,2 68,1 68,1 67,7 67,6 68,4 Activity rate (% population aged 15-64) 72,4 72,3 73,9 74,5 75,0 74,9 74,5 74,2 74,7 Total unemployment (000) 314 285 261 253 238 237 235 229 220 Unemployment rate (% labour force 15+) 12,7 11,4 10,2 9,8 9,1 9,1 9,0 8,8 8,4 Youth unemployment rate (% labour force 15-24) 25,2 23,5 21,4 21,4 19,8 21,0 21,8 20,7 20,1 Long term unemployment rate (% labour force) 4,9 4,1 3,0 2,8 2,5 2,3 2,3 2,1 2,2 Youth unemployment ratio (% population aged 11,4 10,8 10,9 11,2 10,3 10,8 11,0 10,3 10,2 15-24) Source: Employment in Europe 2006

The vast majority of employees in Finland are concentrated in services –69.4% in 2005 – while the importance of industry, and especially of agriculture, and has fallen in the period from 1997 to 2005.

Employment in sectors

All 1997 1998 1999 2000 2001 2002 2003 2004 2005 Employment in Services (% total employment) 65,5 65,9 66,0 66,3 67,0 67,9 68,5 69,0 69,4 Employment in Industry (% total employment) 27,5 27,8 27,8 27,8 27,4 26,8 26,3 25,8 25,8 Employment in Agriculture (% total employment) 7,0 6,3 6,2 6,0 5,6 5,4 5,3 5,2 4,9 Source: Employment in Europe 2006

In the last eight years self-employment and fixed-term contracts gave fallen to 11.6% and 16.5% respectively, while the proportion of part-time employment has increased from 11.4 in 1998 to 13.7%.

Type of employment

All 1998 1999 2000 2001 2002 2003 2004 2005 Self-employed (% total employment) 12,4 12,4 12,2 11,9 11,8 11,8 11,8 11,6 Part-time employment (% total employment) 11,4 12,1 12,3 12,2 12,8 13,0 13,5 13,7 Fixed term contracts (% total employment) 17,4 16,8 16,3 16,4 16,0 16,3 16,1 16,5

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues Industrial relations are strongly determined by the principle of tripartite negotiation. The decision-making is all-embracing, taking into account macro-economic conditions and developments within the field of economic policy. Agreements usually consist of a package of tax, social and labour measures given effect by the government and representing industrial parties in a coordinated way. The aims also include harmonising the conditions of labour agreements; establishing a period of industrial peace; and developing rules for resolving potential disputes by negotiation. All agreements established by the central actors bind the lower bargaining levels, including sectoral levels.

The State as actor The State plays a very important part in Scandinavian systems of social relations. Legislation, which is often drafted by committees in which the social partners are represented, provides for:

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– a framework for resolving disputes (the first law instituting the industrial tribunal and a mediator in Finland 1947) and the participation of employees in an undertaking’s decisions;

– minimum provisions for the protection of employees (working time, notice, dismissal, leave health and safety): and

– the foundations of the social welfare system.

The State is, or has been, actively involved in an incomes policy which has been drawn up by tripartite cooperation. Also it is the leading player in economic and tax, employment and social redistribution policy, which has been framed in cooperation with the social partners.

2. Social partners The rate of unionisation is 80% of employees. Finland’s social partners have been subject to political divisions. The history has followed the course of relations between the Social Democrats, Central (Agricultural) Party and Conservatives. Union representation is dominated by the SAK, which is the oldest union confederation, and by STTK (salaried employees) and AKAVA (academic). Employers combine forces within the EK (Confederation of Finnish Industries).

The following table provides information on union organisations and employer organisations

UNION ORGANISATIONS (SAK, IRS,293,321,304,310)

Three confedérations unite most employees:

• SAK Suomen Ammattiliittojen Keskusjärjestö (Central Organisation of Finnish Trade Unions), established in 1907, is the leading confederation and had 1,000,000 members. It caters for different political persuasions.92. It is organised into branch federations.

• The STTK Toïmihenkilökeskusjärjestö (the Finnish Confederation of Salaried Employees) is the second-largest confederation and has approximately 600.000 members grouped into federations and negotiation cartels. In 1992, TVK (the employees’ federation founded in 1922) was dissolved following serious financial difficulties and most of its federations decided on affiliation to the STTK. The latter was thus swollen by approximately 350.000 members, essentially women, two-thirds of them working in the public sector.

• AKAVA Akateemisten Toimihenkilöiden Keskusjärjestö, founded in 1950, had approximately 480.000 members, half of them in the public sector. They are grouped into 32 trade federations, the most important being that of teachers.

EMPLOYERS’ ORGANISATIONS

• Confederation of Finnish Industries, EK, represents the entire private sector, both industry and services, and companies of all sizes

Insurance and unemployment occupational funds are closely linked to the unions, contributing to an additional growth in affiliations in this period of profound crisis in employment. A major survey in 1997 among the members of the three confederations93 concluded there was a strengthening of the collective attitude and of the links between employees and their unions in situations of instability and insecurity

92.Conflicting relations between the Social Democrat element and the Communists element led in 1957 to the split of the SAK between the Social Democrat SAJ and the SAK which had remained pro-Communist. Union reunification subsequently took place between 1969 and 1974. Since then, the rules of the SAK stipulate that the Social Democrats should hold two-thirds of the seats in the congress and in managing bodies, the Communists being in the minority. The members want depoliticisation of their union and the 1991 5-year congress affirmed this distancing stance in relation to the parties. 93 Dealt with by K Ilmonen & P Jokivuori, Université de Jyväskylä.

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(which affect between 30% and 42% of these members depending on the confederations). Apart from the traditional sectors (metallurgy, chemicals, transport, public sector, etc.), this strengthening is perceptible among women, young female graduates and white-collar workers affected by restructuring processes (such as in the banking sector).

Union organisations are divided on the questions of working time and multi-sector and branch negotiation.

3. Collective bargaining The system of collective bargaining functions on three levels. At the highest level, the employee and employer organisations may make a general incomes policy settlement (so called TUPO). Government usually assists in this type of agreeing by designing various measures in the field of taxation, social policy etc.

The second level of negotiations take place at the level of collective agreements (centralised or sector specific). Issues can also be agreed on at local level.

Collective agreements usually concern salaries and working time, establish minimum standards, and are sector specific. They are designed to avoid industrial action. Agreements can be applied to everyone in the sector, whether they are union members or not. The same applies in the public sector.

Pressure towards decentralisation Collective bargaining, which was rare until after the Second World War, has undergone extensive centralisation in Finland since the 1970s, with a hierarchy of rules regulated by the Act on Collective Agreements and the Act on Work Contracts:

– At central multi-sector level, tripartite income policy agreements concerning the public and private sector provide a general framework on wages, taxation and economic/social policy. These agreements, which are regularly concluded, are not collective agreements in the strict sense, but they guide sectoral collective agreements within the framework of a “wage policy binding on all parties”. At the same level, “General Agreements” between trade associations deal with questions over a long period (status of shop stewards, for example) and take the form of collective agreements.

– At individual federation level, national collective agreements are concluded differently in the case of the public sector and the private sector for a period of one or two years, integrating and adapting the central agreements, with a variable degree of discipline. Major collective agreements are generally applied (erga omnes) under the terms of the Act on Work Contracts, guaranteeing minimum conditions in respect of pay, working time, social advantages, guarantee of employment, etc. to all employees in a branch or sector. 94

– At undertaking level, collective bargaining has increased since 1993 as a supplement to national collective agreements.95 Local collective bargaining covers questions relating to working time (particularly in metallurgy and the possibility of it has been increased by the

94. Collective agreements also apply to non-unionised workers, unless they are expressly excluded. National collective agreements are regarded as being generally applied when half of the employees in the sector concerned (branch in industry or professional sector in services) are within its scope under the normal application clause. There are approximately 140 collective agreements recognised as being generally applied but not all sectors are covered, particularly when employers are less organised, for example in services (313). Bargaining procedures in the public sector are in line with those in the private sector, particularly as regards “non-permanent public servants” (304). 95. In 1997, written agreements were concluded at local level in 49% of cases (55.5% in industry and 70% in metallurgy, 48% in the public sector particularly for local government employees and 25% in private services) and unwritten agreements in 7.5% of cases (SAK research 4/1997 in (308)).

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1997 Act on Flexibility), the organisation of work (particularly in the case of local government workers) and variable remuneration (particularly in export sectors).

The collective bargaining system is orientated towards differentiation by branch under pressure from the social partners in exporting sectors and decentralisation towards the undertaking. Following pressure from small and medium sized enterprises (SMEs) and government proposals to extend the opportunity for concluding company agreements derogating from the legal provisions on working time to employers who are not members of an employers' organisation, the main social partners in Finland drew attention, in 1998, to the need to restrict the development of company-level bargaining. They undertook a study whereby the issues and constraints of this development could be gauged with a view to formulating proposals and are developing the training of negotiators, both among unions and undertakings.

Collective agreements are based on the traditional recognition of the autonomy of the industrial parties. The role of the state is to help the parties to reach the agreement. The Act on Collective Agreements (Työehtosopimuslaki 7.6.1946/436) regulates the making, content, application and the legal effects of the agreement. The principle of general binding nature of the collective agreements may make the collective agreement generally binding regardless of the membership in a union.

The pact between employers and unions came later and was more fragile. Finland’s history is marked by the turbulences which beset Russia: until 1917, it was a Grand-Duchy of the Russian Empire in which freedom of association was restricted and employers, who had arisen around sawmills and paper pulp production installations, were little inclined to recognise unions and negotiate with them. The Russian Revolution of 1917, then the civil war of 1918 and the fascist movements 10 years later, disrupted Finland’s political system and the country became independent. Like the parties, Finnish unions underwent, by turns, great development and repression, and remained internally divided by Social Democrat and Communist influences and employers refused to recognise them.

It was in 1940, through a joint declaration, that relations less marked by conflict arose between the SAK union confederations and the STK employers' federations, and in 1946, after the coming of peace, a “Central Agreement” signalled the commitment of the partners to develop collective bargaining and institute the rules for it.96 Nevertheless, the State continued to regulate post-war wage policies heavily and political disputes were bitter.

SAK/STK “General Agreements” 97, which were subsequently amended, made possible the drawing up of joint rules on protecting employees against dismissal (1966), rationalisation and cooperation in undertakings (1968), shop stewards (1969), informing employees (1970), training (1976) and consulting employees (1981).

However, it was only after the reunification of the SAK in the 1970s that unionisation became widespread and a centralised system of social bargaining was set up, thereby sealing a true pact between social partners. Nevertheless, the level of industrial conflict, linked to political influences, remained high until the 1980s.

The crisis in the first half of the 1990s resulted in the social actors stepping up tripartite cooperation in framing national policies. This was reflected in particular by the signing of “pacts” for employment, to which the main social partners are tied.

4. Collective disputes Where there are disputes of interest, the Act on Mediation in Labour Disputes requires two weeks’ notice for work stoppages (strikes and lockouts). This notice allows the conciliation service (managed by a national conciliator and six regional conciliators) to undertake mediation, which the parties must submit to, although they are not obliged to accept the settlement proposals. The national conciliator plays an

96. Like the relations negotiated long since in the printing industry and in construction. In the public sector, equivalent agreements date from 1970. 97. Similar agreements with the white-collar unions TDK and STTK generally followed, occasionally after several years.

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important part in the event of failure in the negotiations. In exceptional cases, where public interest demands it, the Ministry of Labour may, moreover, defer the date for which the triggering of work stoppages are planned.

Strikes The right to strike is considered as a basic constitutional right. However any strike which takes place against a valid collective labour agreement, and concerns issues in that agreement, is illegal.

III. EMPLOYEE REPRESENTATION IN UNDERTAKINGS

1. General issues Employee representation has the essential features of a single channel, the union and the union delegation (luottamusmies) playing a key role against the background of heavy unionisation: shop stewards are the leading partners in bargaining and in cooperation in undertakings. The shop stewards were joined in 1990 by representatives in administrative bodies for undertakings (hallintoesdustus) who also have economic functions. Staff elected representatives and participation system complete the representation system.

The four main forms of representation are: collective labour agreement system (shop stewards etc.), work council system, workers representation in the supreme bodies of the enterprise, and a pre-negotiation system related to decision making regarding plans which have a direct or indirect influence on the position of the employees (Act on co-operation).

2. Legal basis and scope It was in 1944 that the social partners agreed for the first time on the principle of union representation. The 1979 Act on Co-operation in Undertakings (yhteistoiminta) formalised rights to information, negotiation and co-operation on the part of representatives of employees in private undertakings with more than 30 employees. In the public sector, the principles of this Act were taken up by the 1987 Act on Cooperation in Offices and State Institutions. Until 1989, there was no voluntary worker representation in company bodies, except in certain public undertakings. In 1989, the union confederations signed a General Agreement on this question.

Changing and amending the Act on Co-operation on the basis of various European directives (14/2002, 86/2001, 72/2003) during 2002 and 2005 was completed on 1.7.2007. The new law on Co-operation in Undertakings (yhteistoiminta) and many other laws related to the issue were enacted (Co-operation within Finnish and European groups, Act on Personnel Representation in the Administration of Undertakings, Act on the Labour Council and Derogation Permits Concerning Labour Protection, Act on Employee Involvement in European Companies, State Enterprise Act, Act on co-operation in state offices and institutions). Changes took into account the international and European obligations and emphasised the spirit of the co-operational and common understanding as the main objective of co-operation98.

98 The essential references on the subject of shop stewards and the representation in general are: the Act on Co- operation in Undertakings 725/78 (as amendment on 1.1.1997 and finally changed 1.7.2007 by 334/2007) (Lco), the Collective Agreements Act 436/1946 (as amended by several acts, including No. 864/2001) (Caa),the Act on Employee Involvement in European Companies and Cooperative Societies 758/2004 (changes to the section 35 regarding applicability of this law 1.7.2007) (Aeiec), the Act on the Co-operation within Finnish and European groups 335/2007 (Lcog), the Act on Personnel Representation in the Administration of Undertakings 725/1990 (as amended 68/2001 and 339/2007) (Apr), the State Enterprise Act 1185/2002 (as changed 341/2007) (Sea),the Act on Co-operation in State Offices and Institutions 1.7.1988/651 (as changed 347/2007) (Lcoso),the Central Agreements on Shop Stewards of 1969, 1981 and 1986 (Ca), the 1970 Work Contracts Act (Lw) and the Act on Training Leave and the Central Agreement on Training (Atl).

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3. Capacity for representation Shop stewards perform dual representation: that of employees and that of their union.

The agreements on shop stewards provide for shop stewards to be present at all workplaces, with no mention of any threshold. The Work Contracts Act requires the employer to provide for union meeting premises where there are more than 10 employees. The Act on Co-operation in Undertakings applies to undertakings usually employing at least 20 persons. An Undertaking is a corporation, a fund or a natural person exercising economic activity regardless of whether the aim is profit or not.

However, the themes like the principles and methods of employment itself, what information can be gathered about an employee, hiring of the workforce, principles of internal informing, gender equality questions, substance abuse issues, video surveillance issues, access control issues, principles of electronic communications and some other issues (education, internal rules, accommodation, social events etc.) must be discussed in co-operation only in companies with at least 30 employees (Lco §2.1).

Otherwise the provisions of chapter 9 of the Act on Employment contract apply (Lco §2.1.).

The Act on Co-operation does not apply to undertakings owned by the State and to economic and industrial bodies of local authorities and other public bodies. These entities are covered by another law 651/1988. The Act on Co-operation in Services and Establishments in the Civil Service extends its scope to civil servants. There are also some other exceptions relating to the enterprises with ideological, artistic and religious etc. activities. (Lco §4)

However, certain collective agreements, like that for the paper industry concluded before the Act, do not provide for any threshold for group cooperation (307).

4. Composition Laws do not regulate the composition of union representatives. It is the General Agreements which provide for a union representative and a principal shop steward to be present at all workplaces and each sector of the undertaking. The Act on Cooperation considers parties to the cooperation to be the employer and employee. Parties in the negotiation can be the employee, representative and employer including receiving companies or a company party to a merger (Lco §7). Parties to the negotiation itself are shop stewards, other elected representatives or even the industrial safety representative in the case of health (§8).

If the co-operation regards many sectors of employees, employers and employees deal with the issue in a joint meeting. They may agree to take care of the issue also in a joint committee with defined authority (Lco §9).

5. Protection granted to members The Work Contract[s] Act provides for the protection of shop stewards against dismissal: a shop steward can only be dismissed for misconduct if the majority of the employees he represents consent to it; and can only be dismissed for economic reasons in the event of the complete cessation of his work and where it is impossible to find a job matching his professional qualifications. In practice, this means that a shop steward is the last person to be dismissed. The agreements signed by the social partners also contain protection measures of this kind, particularly in connection with technical unemployment. The elected cooperation representative has similar protection as shop stewards. This gives increased protection against the termination of the contract on individual grounds and in collective terminations.

The duration of the mandate of shop stewards is not regulated by law. The mandate of the representatives to the Joint Committee is two years, unless specified otherwise (Lco §9).

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6. Working of the body and decision-making The Act on Co-operation does not in any way cover the organisation of union representatives or means; these matters are regulated by collective bargaining and the internal rules of union confederations. The system of representation is very flexible in its implementation procedures.

The Acts on the European Company and Cooperative Societies and on the Finnish and European groups are similar as they are concerned with the release from work, compensation of losses and costs, and the use of experts.

7. Means The Act on Co-operation provides that the employer must release employees’ representatives from their work for the time necessary for the co-operation procedure or for the group cooperation provided for by this Act and also for any preparation directly linked to it. He must ensure remuneration is paid in respect of this time or that financial compensation is given where the activities take place outside working hours and must compensate for costs associated with group cooperation (Lco 56§). The Work Contract[s] Act also provides that the employer must make premises available for meetings for union activities where there are more than 10 employees.

The Co-operation Act envisage the possibility of assistance from experts (Lco §55).

8. Role and rights

Information The employer must provide the representatives of employees with (Lco Section 10):

– annual accounts as soon as they are drawn up and a detailed report on the economic situation of the undertaking showing the outlook for production, employment, margins and cost structures; details regarding the financial situation must be supplied at least twice a year;

– statistics on pay, detailed by category and prepared in accordance with the provisions of the collective agreements applicable (Lco Section 11.2.3);

– annual balance-sheet and training plan detailed by categories, linked with the anticipated developments in employment (Lco Section 6b);

– annual report, including the consolidated accounts or their equivalent; information on production forecasts at group level, employment, profitability and cost structures; an evaluation of the changes envisaged in the number and categories of employees (Lco Section 11d.1). The information must be presented in such a way that discussion on the subject is possible (Lco Section 11d.2).

Where a group is undertaking work abroad, only information of essential significance for the Finnish staff is compulsory as a supplement to the consolidated accounts (Lco Section 11d 3).

The minimum content of the agreement on representation is determined by section 16 of the Law on the European Company and Cooperative Societies. The list is not exhaustive.

Further to this, the employer must inform the employees’ representatives without delay of any major change in the economic and financial development of the undertaking (Lco Section 11.2.4), and also in the event of a transfer and merger the reasons warranting it, the financial and social consequences, and the measures provided for employees (Lco Section 11.3, 11.4, 11.5).

The employer must inform the employees’ representatives in a group where a decision entailing a major change in the activities of the group, or an undertaking in the group, affecting the situation of the staff is envisaged (Lco Section 11.d.1.2, 11d.1.3, 11d.2). Furthermore, the employers must also supply the information necessary for the negotiations provided for in the co-operation procedure before these begin.

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Where the dismissal of more than 10 employees is envisaged, this information must be sent in writing (Lco Section 11.1).

An obligation of secrecy for the employees, co-workers and their representatives applies to individual data on the financial situation and state of health in the absence of any agreement on the part of the party concerned and also the commercial information presented as confidential by the employer, the divulging of which might be detrimental to the undertaking or one of its partners (Lco Section 12).

Consultation The employer must initiate negotiations with employees or their representatives, where appropriate at a meeting common to the different categories concerned, by discussing with them the reasons for the decision envisaged, its effects and the possible alternatives. Written proposals must be submitted five days before the beginning of the negotiations (Lco Section 7.12 to 7a. 1)99. Any agreement concluded within this framework has the effects of a collective agreement.

This obligation to negotiate, which is not an obligation to conclude, operates unless there are exceptional circumstances100, before any decision concerning:

– any major change in the methods, organisation and distribution of work,

– any investment or reorganisation of major premises, any change in activities affecting the situation of the staff,

– the closure, transfer, reduction or growth on a major scale of or in an activity in the undertaking or part of the undertaking,

– any cutback in staff or modification to contracts following a merger or a transfer and the corresponding training and redeployment plans,

– any dismissal, layoff or reduction in working time for economic, financial and reorganisation reasons and training and redeployment plans,

– plans relating to employment and training,

– rationalisation plans, and

– any consequence of the above measures affecting the number and allocation of employees (Lco Sections 6.1 to 6.5).

In the event of a cutback in staff (dismissal, layoff or reduction in working time) provided for by one of these decisions,

– the employer must send his proposals to the work administration [department] (Lco Section 7b),

– the obligation to negotiate is met by concluding an agreement or if the minimum negotiation periods have passed, unless there is a contrary agreement: 7 days for less than 10 employees, 6 weeks, if more than 10 employees are concerned and in the event of a transfer, one month in the event of a procedure involving the “reorganisation of the undertaking” (Lco Section 8.2 to 8.5),

– in undertakings with less than 30 employees (or less than 20 employees if more than 10 employees are affected by the cutback), it is the provisions of the Work Contracts Act which apply: prior information of staff representatives, and if more than 10 employees are concerned,

99 The collective agreement for the paper industry provides that any negotiation in the groups must be prepared by a special committee (294). 100 Particularly important and unforeseeable circumstances arising to the detriment of production, and constituting an obstacle to the co-operation procedure. The procedure must then operate as soon as possible (Lco Section 10).

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of the work administration [department], 6 weeks’ minimum advance notice in the event of dismissal and 14 days minimum in the event of a layoff,

– in all cases, a reason for dismissal must be serious: the employer cannot order the dismissal of an employee for an economic or production reason unless there is a steep and definitive reduction in the workload and if the employee, bearing in mind his professional knowledge and skills, cannot reasonably be assigned to, or trained for, another post. An obligation of re- recruitment applies for nine months (Lw).

In the event of recourse to subcontracting, the employer must provide detailed information and, if the employees’ representatives request it, begin negotiation. The employer may not conclude contracts while the discussion continues, a period which may not exceed one week. Representatives must not request this negotiation if the work for which recourse to subcontracting is envisaged is unusual or urgent (Lco Section 9).

An obligation to negotiate, without specification of duration, also relates to: (Lco Section 6.6 to 6.15):

– the principles of recourse to subcontracting,

– the budget for vocational training and training for co-operation,

– work timetables, recruitment criteria, internal information systems, rules for work and suggestion schemes, and criteria for the allocation of staff accommodation.

Since 1997, an employer who is a member of an employers' organisation and union representatives may conclude agreements at undertaking level derogating from the legal provisions governing work time, provided the applicable collective agreement provides for this. According to collective agreements, other subjects like the organisation of work, the variable proportion of remuneration, etc. can be negotiated in the undertaking.

Co-operation An agreement must be reached between the employer and representatives of employees on:

– rules of procedure; and

– the content of training for co-operation (Lco Section 6.10, 6.12, 7.4.1, 7.4.2).

9. Other representation bodies Every workplace has to have a Committee on Work Safety, if there are at least 20 employees. Its task has been regulated in the Degree on Supervision of Safety at the Workplace. It mandate lasts 2 years. The Committee has employee representation. Safety delegates have to be elected to every workplace, if there are at least 10 employees. Special shop stewards can be elected to work on a specific sector.

European Works Councils The system of European Work Councils was implemented by the Act of 9 August 1996 on the amendment of the Act on cooperation in undertakings.

10. Protection of rights The Labour Court hears legal disputes arising out of collective agreements, collective civil servants' agreements, the Collective Agreements Act’ or the Act on Collective Civil-Servant Agreements. It deals with the specific question of the competences, validity, contents or extent of a collective agreement or interpretation. It also examines questions relating to whether an action is in accordance with the collective agreements or Acts. The Court may impose or confirm sanctions for breaches (a compensatory fine). It may not impose a disciplinary sanction or a criminal sentence. The amount of fine is defined in the Collective Agreements Act and collective agreements. In 2003 the maximum fine was EUR 25,300. Any

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court may also ask the Labour Court to produce an opinion in a matter which requires specialist knowledge on collective agreements. The court is not, however, bound by the opinion of the Labour Court. The Court may also confirm the general applicability of collective agreements from the request. The Labour Court does not decide disputes regarding individual employment contracts. The decision may be reviewed only by extraordinary processes of appeal (Supreme Court).

11. Codetermination rights As regards social and cultural activities (canteens, after-school child-minding facilities, holidays, etc.) and in the absence of any agreement between the employer and employees’ representatives, the final decision is taken in accordance with the position of the latter or, where appropriate, with the position of representatives of the employees directly concerned, within the framework of the budget which has been set (Lco Section 6.14, 7.4.3).

IV. EMPLOYEES’ PARTICIPATION IN CORPORATE BODIES

Finnish companies are usually of a one-tier structure (with a management board), although there is the possibility of a two-tier structure (supervisory board and a board of directors) and it is used by certain large companies.

The Act on Staff Representation in the Administration of Undertakings, which entered into force in 1990 applies to companies employing more than 150 employees in Finland, except partnerships, insurance groups, foundations and public undertakings. The provisions concerning groups apply where there are at least 500 employees in Finland. Staff representation must be instituted if at least two categories together representing a majority of employees request it.

Composition and appointment/election system The Act provides that representation in bodies of an undertaking should be the subject of an agreement setting out its terms. This agreement must comply with certain rules. If no agreement is reached, the different categories of staff may elect, from among their members, at least one representative to the management board, the supervisory board or the board of directors. The employer may decide in what body representation operates. The number of representatives may vary between one and four, representing a quarter of the total members of the body.

Groups of more than 500 employees are subject to the same provisions: the Act provides that employees have the right to cooperate in the bodies of the company where actual decisions are taken. Representation is not, however, guaranteed except in the employee’s company and where that company employs more than 150 employees.

The Act does not provide for any specific provisions concerning operation and the means granted to representatives of employees.

Functions Employees’ representatives have the same rights and duties as other administrators except as regards discussions relating to the selection or dismissal of members of management, to clauses covering their contracts, to pay, to working conditions and to company disputes, in which they cannot take part.

The Act lays down that the representatives of employees must be able to participate in decisions concerning the economic, commercial and financial policy of the undertaking but also employment policy.

Representation in bodies is viewed as positively influencing employees and cooperation between the employer and employees.

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Representation of employees in the boards of European Companies or European Cooperative Societies The Act on Employee Involvement in European Companies and Cooperative Societies applies to the organisation of representation of staff of European companies (SE) and Cooperative Societies registered in Finland. The law concerns SE’s, which are formatted on merger, holding-companies, daughter- companies or transformation of a company established in Finland. European companies registered in other EEA countries would be covered by the corresponding law of that country. The exception is certain rules regarding the distribution of posts in the negotiation body and the representing body and the election of the representatives in those and other bodies (like board of directors and supervisory board), the protection, release from work, compensation of the loss of income of the representatives and experts and the responsibility for costs and the consequences of the non-application.

The Act on the Co-operation within Finnish and European groups maintains that the co-operation obligation regards groups as usually employing over 500 people in Finland and individual companies of a group employing more than 20 employees. In the European Company and Cooperative Societies representation is determined by negotiations and agreement. If no written agreement is achieved, the secondary minimum rules of the law apply. The special negotiating body is created exactly as maintained in Directive 2001/86/EC. The system is rather complicated depending on the previous organisation and form of establishment of the SE. There are some special rules in the Finnish system. The Finnish law is, however, identical to Directive 2001/86/EC with regard to secondary and obligatory rules of the Directive applying in the case of non-agreement by the parties. In the Law on the European Company and Cooperative Societies the representative is also protected on the basis of Labour contract law in the same way as shop stewards.

V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

Recovery or bankruptcy procedures In the event of a procedure for the “reorganisation of the undertaking”, an obligation to bargain with shop stewards comes into play, concluding in an agreement or the end of the minimum bargaining period of one month. On a preventative basis, the representatives of employees have an opportunity to obtain information and to act in the event of the undertaking experiencing difficulties:

– within the framework of representation in bodies of the company or of the group; and

– within the framework of information and bargaining processes in which shop stewards are engaged, particularly through regular information on the financial situation, information on major changes in the economic and financial development of the undertaking, the obligation to negotiate before any decision concerning plans for rationalisation, technical unemployment, closure, transfer, major reduction or increase in activity of the undertaking or part of the undertaking.

Operations affecting shareholders The employer must inform employees’ representatives sufficiently in advance in the event of a transfer or merger about the reasons warranting it, the financial and social consequences and the measures laid down concerning employees.

The information and obligation to bargain come into play before the decisions concerning any reduction in staff or modification of contracts following a merger or transfer, and also the corresponding training and redeployment plans and the transfer of the undertaking’s, or part of the undertaking’s, activity and plans for rationalisation.

In general, employees’ representatives have an opportunity to obtain information and to act in relation to operations affecting the shareholders:

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– within the framework of representation in the bodies of the company and group; and

– within the framework of information and bargaining processes in which shop stewards are engaged, particularly through regular information on the financial situation, information on major changes in the economic and financial development of the undertaking and the obligation to negotiate before any major decision affecting employees.

State aid Employees’ representatives have an opportunity to obtain information and to act in relation to state aid:

– through permanent processes of dialogue and cooperation between the State and union and employer organisations;

– within the framework of representation in bodies of the company and group; and

– within the framework of information and bargaining processes in which shop stewards are engaged, in particular through regular information on the financial situation, prior information on major changes in the economic and financial development of the undertaking and the obligation to negotiate before any major decision affecting employees, particularly on plans concerning employment and training.

Moreover, a national tripartite programme for the development of workplaces was embarked on in 1998/99. This programme, which was set up with union and employer organisations, provides for the financing of systems for training and for modernising the organisation of work.

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FRANCE

I. ECONOMIC AND SOCIAL CONTEXT

The first article of the Constitution of 4 October 1958 proclaims that “France is an indivisible, secular, democratic and social republic.” The French system of government may be described as semi- parliamentary, with balance sought between the executive and Parliament. The executive consists of the president of the republic and the prime minister, who heads the government. The latter is answerable to the National Assembly, which together with the Senate forms Parliament. The president of the republic, elected by universal suffrage for a renewable term of five years, has the power to dissolve the National Assembly. There are four levels of government in France: the state, the regions, the departments and the municipalities. There are nearly 37,000 municipalities, 100 departments and 26 regions.

Some basic economic data At 1 January 2007, France’s population was estimated at 63.4 million. By age group, the French population breaks down as follows (%)

of which 75 or Below 20 20 to 59 60 or over over 2000 25.8 53.8 20.4 7.1

2006 25.1 54.2 20.7 8.1

2007 (p) 25.0 53.9 21.1 8.3 (p): Provisional data Source: Insee, Demographic Overview

The figures show a drop in the proportion of people aged below 20, while the number of elderly people has increased. Among the latter, there are a steadily increasing number of people aged 75 or over.

In 2006, gross domestic product amounted to 1792 billion euros, i.e. 28,356 euros per inhabitant.

Percentage growth over the previous year

Year In value In volume 2004 4.1 2.5

2005 3.5 1.7

2006 (p) 4.3 2.0 p : Provisional data Source: Insee, National Accounts

Inflation is under control, with a retail price index of some 2% over the last few years.

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Labour market

Employment trends between 2000 and 2005 (%)

Men Women Older workers (aged 55-64) 2000 2005 2000 2005 2000 2005 EU-25 71.2 71.3 53.6 56.3 36.6 42.5 France 69.2 68.8 55.2 57.6 29.9 37.9 Source: Eurostat – Europe in Figures 2006-2007

The employment rate has reached 63.1%, which is still lower than the European Union average (EU 25: 63.8%). The figures show a slight drop in employment for men but an increase for women. In this respect, France is above the EU average. On the other hand, France remains below the European average as regards employment for older workers, though a sharp rise has been recorded since 2000.

Employment by sector (%)

1990 2000 2005 Agriculture 5.7 4 3.6 Industry 19.5 15.9 14.1 Construction 7.4 6.0 6.4 Services 67.4 74.1 75.9 Source: Insee, Employment Survey 2006

Recent data on the distribution of employment by sector show a steadily increasing proportion corresponding to services. This steady growth has made services the main source of employment. So the role of the tertiary sector in the French economy continues to grow. On the other hand, agriculture, with a share of 3.6% in 2005, continued to shed jobs. And industry and construction no longer provide more than a fifth of jobs in the French economy. Deindustrialisation, therefore, in employment terms, remains a reality despite public policies aimed at reversing the trend.

There are 2.3 million self-employed people, i.e. 9% of the workforce. The great majority of workers are therefore in waged employment. Permanent employment contracts (CDI) remain the predominant form of employment (nearly 85% of jobs in 2005). But special forms of employment (temporary, fixed-term and subsidised contracts) continue to account for a large portion of French employment. Between 1982 and 2000, the proportion of such jobs doubled, from 6% to 12%. In 2005, more than 13% of wage earners had temporary jobs (source: Eurostat, Labour Force Survey). In the second quarter of 2006, 3.5% of wage earners had temporary contracts, representing a rise of 8% over the previous year.

In 2005, 17.2% of people with jobs worked part-time, as against 16.6% in 2004. It is still mostly women that are employed in this way. Part-time employment is also a form of under-employment, and a source of worker insecurity, as shown by the wish expressed by most such workers to find a full-time job.

Since the end of 2006, unemployment in France has fallen appreciably, with a rate of 8.3% in 2007. Over a longer period, unemployment has been falling since the mid-90s. Unemployment for young people and manual workers, however, remains high.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues Industrial relations in France have a constitutional basis, founded on the recognition of a series of rights and freedoms concerning collective labour relations. These rights and freedoms appear in the Preamble to the 1946 Constitution, and are evoked in the Preamble to the 1958 Constitution. First is trade union

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freedom, underpinning the free establishment of trade unions and the freedom both to join and not to join a union. The Preamble also proclaims the right of “all workers to take part, through their representatives, in the collective determination of working conditions and in company management.” This provision also gives a constitutional basis to the rules on employee representation in companies. Finally the right to strike also has constitutional status.

French labour law operates chiefly at state level. The French constitution empowers the legislation to lay down the broad principles of labour law. It is then up to the government to implement them. A recurrent political question is that of the place of collective bargaining in employment regulations. Despite appeals for greater input from collective bargaining, the state continues to play a major, if not leading role, in the regulation of employment.

2. Social partners

Trade unions

The five trade union confederations are affiliated to the European Trade Union Confederation (ETUC):

- General Labour Confederation (CGT), - French Democratic Labour Confederation (CFDT), - General Labour Confederation – Workers’ Force (CGT-FO), - French Confederation of Christian Workers (CFTC), - General Confederation of Managers (CGC). The plurality of trade unions increased over the last two decades of the 20th century with the establishment of new organisations. Shortly after François Mitterand’s election as president in 1981, 10 independent trade unions, mostly active in the public sector, opted to join together in an organisation with the name of Group of 10 (G10).

The SUD (Solidarity, Unity, Democracy) union, set up in the late 80s by ex-members of the CFDT, joined the G10 in 1992 and has a predominant place in it. In 2006 the G10 changed its name to “Solidaires”. Today it embraces more than 30 trade unions with more than 10 SUD unions. Set up with a view to trade union reform and unification, it is increasingly geared to anti-establishment trade unionism.

In 1993 the National Federation of Independent Unions (UNSA) was set up, catering for the unions remaining after the break-up of the National Education Federation (FEN) and other unions that rejected the G10’s anti- establishment tendency. Structured in a confederation since 1998, it has eight occupational strands. The G10 and UNSA are seeking representative legal status at cross-sectoral level. So far this status has not been granted. The UNSA is affiliated to the ETUC through the CFDT.

This multiplication of trade unions has been occurring at a time when the appeal of trade unions is particularly weak. The fragmentation of the trade union movement, often accompanied by division, may also be seen as partly explaining workers’ loss of interest in trade unions. From more than 25% at the end of the Second World War, the rate of union membership among wage earners had dropped to 8.2% by 2003. In the public sector, union membership stands at 15% as against 5% in the private sector. Just 2.5% of workers with fixed-term or temporary contracts are union members. The rate for part-time workers is 6%, as against 9.4% for full-time workers with open-ended contracts.

The loss of interest in trade unions is also expressed by the low turnouts in worker elections. Thus in the 2002 vote for the election of employment tribunal members, just 32.7% of employees took part, as opposed to 34.4% in the 1997 vote. The turnout is higher, however, in works council elections. In 2005 there was a turnout of 63.2% of those on the electoral roll.

Despite a loss of appeal and members over recent years, the three major confederated trade unions – CGT, CGT-FO and CFDT – continue to have the largest number of supporters and to get most votes at worker elections. With 803,635 declared members at the end of 2006, CFDT has the largest membership. In 2004, CGT claimed to have some 700,000 members. Also in 2004, CGT-FO said that it had some 600,000 members.

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In legal terms, trade unions do not all enjoy the same treatment, which in practice limits the scope of trade union plurality. The notion of trade union representativeness is a key one in the French system of post- war labour law, establishing unions’ legal aptitude to represent and defend the interests of workers as a whole. Thus certain rights and prerogatives are reserved for trade unions regarded as representative. At national level, only representative trade unions can enter into extendible collective bargaining agreements and cross-sectoral national agreements, and benefit from resources for trade union activities (union sections and representatives, subsidies and training) and take part in joint national employer/worker bodies. In companies, only representative trade unions can enter into collective bargaining agreements and present lists in the first round of worker elections. At international level, only confederations of representative trade unions may have seats at the International Labour Conference and appoint representatives on the Economic and Social Committee.

A trade union’s representative status allows it to act in legal proceedings on behalf of employees. In order to address the difficulties experienced by some employees in asserting their rights, French law allows a representative trade union to bring legal action on behalf and in substitution of the employee101. An action may be brought whether or not an employee so requests but only if the employee does not object to it.

In French law there are two ways of establishing representativeness. Some trade unions enjoy legally representative status at national and cross-sectoral level. Five confederations were recognised as representative at national and cross-sectoral level by an order of 31 March 1966: CGT, CFDT, CGT-FO, CFTC and CFE-CGC (the last for managers only). This presumption of representativeness gives any trade union affiliated to one of these confederations (sector, company) representative status of Other trade unions must provide proof of their representativeness before the courts at the level where they claim recognition (sector, company). The judge’s assessment must be guided by five legal criteria: size, independence, dues collected, experience and seniority, and patriotic attitude during the German occupation (art. L.133-2 of the Labour Code), to which case law has added the criterion of influence. Thus, in companies, representative trade unions are those that are affiliated to the confederations with legally representative status at national level and those having proven their representativeness in the company in question.

Employers´ organisations MEDEF (the movement of French Companies) embraces 85 federations or sectors covering 600 occupational groupings. MEDEF is a member of BusinessEurope. Employers are also represented by other organisations: - The General Confederation of Small and Medium Sized Companies (CGPME102), represents small and medium- sized companies (SMEs. Affiliated to UEAPME at European level, CGPME is organised in 400 occupational or cross-sectoral structures and 3500 grassroots organisations, and runs AGEFOS-PME for vocational training. - The Professional Trade Association (UPA), set up in 1975, is an umbrella for three trade federations: CAPEB (construction), CNAMS (services), and CGAD (food retailing). - The National Union of Liberal Professions (UNAPL), set up in 1977, embraces 63 organisations representing professional people. - The National Federation of Farmers’ Unions (FNSEA) and the National Confederation of Mutual Societies and Agricultural Credit (CNMCCA) represent farmers. - The Farmers’ Confederation (Confédération paysanne) and Rural Coordination (Coordination rurale) also in the agricultural sector.

101 Such actions are aimed at foreign workers, temporary workers, employees of employer groupings and employees with fixed-term contracts. The technique of substitutionary action is also allowed in the context of unlawful loans of labour, discrimination within the meaning of article L.122-45 of the Labour Code, sexual harassment or bullying or redundancies. 102 Most companies belonging to CGPME are also members of a federation affiliated to MEDEF.

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3. Joint bodies The institutionalisation of the representative trade unions and employers’ organisations is shown in their participation in joint employer/employee bodies. This is a form of “paritarisme” – a term referring to the delegation by the state to the social partners of the management of labour institutions, or the handing over of tasks normally pertaining to the state. Thus the social partners jointly and independently manage UNEDIC, the agency in charge of unemployment benefit, and also the social security system. They are also responsible for vocational training funds. The representative trade unions and employers’ organisations also participate in consultative bodies such as the Economic and Social Council, the National Collective Bargaining Committee, the Strategic Analysis Commission and the National Vocational Training Council. Employment tribunals also operate on a joint employer/employee basis.

The Modernisation of Collective Bargaining Law of 31 January 2007 introduces into French law an obligatory dialogue process regarding any government projects for reforming individual and collective labour relations, employment and vocational training that are a matter for national and cross-sectoral negotiation (art. L.101-1 of the Labour Code). This dialogue concerns the representative trade unions and employers’ organisations at national and cross-sectoral level and is held with a view to the opening of negotiations. The government must provide the social partners with a document giving an overview of the planned reform. If the social partners decide to enter into negotiations, they must notify the government of the period that they believe the negotiations will require. This procedure does not apply in urgent situations.

4. Collective bargaining

Legal basis and key features In French law the right to collective bargaining has a constitutional basis in the right of workers to take part, through their representatives, in the collective determination of working conditions, recognised in the Preamble to the 1946 Constitution. Workers’ right to collective bargaining is moreover enshrined in article L.131-1 of the Labour Code. This right appears increasingly in French law as a multiplicity of obligations to negotiate imposed on employers. These obligations to negotiate operate at sectoral and company level.

– At sectoral level, article L.132-12 of the Labour Code makes it compulsory to open negotiations on particular issues and at a certain frequency. Employers’ organisations and trade unions must meet at least once a year to negotiate on wages and at least once every five years to review job categories. The Code states that “wage negotiations shall be the opportunity, at least once a year, for an examination by the parties of the economic developments and employment situation in the sector, as well as of employment trends and yearly or multi-year forecasts, especially as regards fixed-term and temporary contracts, and of any preventive action envisaged in view of these forecasts, and of trends in actual average wages by occupational category and sex, with consideration, where applicable, of minimum wage rates.” Negotiations are also required every three years on measures aimed at ensuring occupational equality between men and women. The law states that such negotiations must in particular relate to access to employment, training and promotion, as well as working and employment conditions and in particular those of part-time workers. Three-yearly obligations are also provided as regards working conditions and forward planning concerning the jobs and skills of older workers, and also as regards employment for disabled people. Finally, every five years, negotiations must be held at sectoral level on company savings schemes. Before such negotiations are held, the employer is required to submit a report on the issue in question.

– At company level, the Law of 13 November 1982 introduced the obligation for employers to hold negotiations on particular issues where trade unions are present in a company. According to article L.132-27 of the Labour Code, these mandatory obligations relate annually to actual wages, actual hours and organisation of work, occupational equality and occupational illness cover where the company’s employees have no such cover. Pursuant to the Social Cohesion Law of 18 January 2005 (art. L.320-3 of the Labour Code), companies and groups with at least 300 employees and Community-scale companies and groups with at least one establishment, or companies with at least 500 employees in France, must hold negotiations every three years

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on the forms of informing and consulting the works council on the company’s strategy and the foreseeable effects thereof on employment and employees in general. These negotiations must also relate to the implementation of forward planning arrangements regarding jobs and skills.

French law gives a specific meaning to the concept of collective bargaining agreements. They are agreements entered into by an employer or an employers’ organisation and one or more representative trade unions with the aim of regulating employees’ working conditions, their entitlement to vocational training and their social benefits (art. L.132-1 of the Labour Code). Labour law and collective bargaining agreements are organised according to a principle by which the latter may be at odds with the former only if the relevant measure is favourable to employees (art. L.132-4 of the Labour Code). In French law, agreements have obligatory and normative effects. Hence collective bargaining agreements have automatic, immediate and mandatory effect on employment contracts. Their effect is automatic in that the agreement’s application is not subject to its provisions being included in the employment contract. The normative character of collective bargaining agreements also explains their immediate effect on employment contracts. Assimilated into labour law, collective labour agreements automatically replace contradictory clauses in employment contracts. Finally, their mandatory nature means that they cannot be opted out of by the parties to an employment contract. This rule is however qualified by article L.135-2 of the Labour Code, introducing the “more favourable” clause rule in the relationship between collective bargaining agreements and employment contracts. Accordingly the clauses of a collective bargaining agreement will not apply to employment contracts if the latter contain more favourable provisions. A contract clause more advantageous for employees may therefore be an obstacle to the application of a collective bargaining agreement.

Recent reforms have made profound changes in French collective bargaining law. These changes relate first of all to those involved in collective bargaining in companies. There is a monopoly of trade unions regarded as sufficiently representative to negotiate collective bargaining agreements. One of the most notable recent changes in collective bargaining law has been that of giving companies the option of entering into collective bargaining agreements with representatives other than trade unions. Without challenging the trade union monopoly, this option allows working conditions to be regulated in companies with no trade union representatives, and in particular in companies with fewer than 50 employees. In an order of 25 January 1995, the Court of Cassation opened up this option by allowing negotiations, in the absence of trade union representatives, with an employee authorised by a representative trade union. This technique of authorisation by trade unions was taken up by the National Cross-Sectoral Agreement of 31 October 1995 and ratified by the Law of 12 November 1996. This Law allows employees to enter into negotiations, subject to the signing of a sectoral agreement to this effect, with authorised employees and also with elected staff representatives. Extended by the Law of 19 January 2000 on the Reduction of Working Time, the system was then amended by the Law of 4 May 2004 on Vocational Training and Social Dialogue. At this point the law established a ranking among negotiators: the employer must first approach the elected representatives, and only in the absence of such representatives may he/she resort to the authorisation method.

Secondly, major changes have been made in the conditions affecting the validity of collective bargaining agreements as regards the signatory trade unions. The Law of 4 May 2004 strengthened the majority principle in collective bargaining law. Since 1982 this principle has involved giving the trade unions representing most workers the right to object to the application of company collective bargaining agreements that depart from the law or from a higher-level agreement. This is known as “majority objection” (majorité d’opposition). The Law of 4 May 2004 maintains and generalises the majority objection rule, though it does not impose a majority requirement at the stage where agreements are signed. Hence the law imposes no principle of “majority commitment” (majorité d’engagement). The law does however allow sectoral collective bargaining agreements to opt for the latter approach (art. L.132-2- 2. III of the Labour Code). In the absence of a sectoral agreement requiring majority commitment, company agreements may be reached with one or more minority trade unions. The rule therefore remains that of a majority objection allowing trade unions in the majority to obstruct the application of a collective bargaining agreement. This majority is calculated on the basis of the results obtained by the representative trade unions in the first round of works council elections or, failing that, elections for staff representatives. Unions having won at least half of the vote at the last elections may exercise the right of objection.

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Finally, the Law of 4 May 2004 has transformed the interrelation between collective bargaining agreements of various levels. According to the previous law, a collective bargaining agreement could depart from another of wider occupational or territorial scope provided that any departure involved more favourable conditions for employees. This represented the application of the favourability principle in the interrelation between sectoral and company collective agreements (art. L.132-23 of the Labour Code) but also between sectoral agreements and the text of agreements with broader territorial or occupational scope (art. L.132-13 of the Labour Code). The law passed on May 2004 revises this criterion of interrelation between the provisions of agreements at various levels. In fact it inverts the mechanism provided by the previous law. As of the passing of this law, company collective bargaining agreements may contain both more favourable and less favourable clauses than sectoral agreements. But the social partners may decide to sign a sectoral agreement providing for the maintenance of the favourability principle in the interrelation between sectoral and company agreements. Failing such an agreement, the law rules out the favourability principle. The Law of 4 May 2004 therefore marks a rolling back of the favourability principle.to optional status for the social partners, and breaks with the idea of sectoral agreements as a regulatory foundation equalising working conditions for employees in any one sector. This break has lead to a progressive decentralisation of collective bargaining over the last few years.

French law provides a procedure for extending sectoral collective bargaining agreements, introduced by the Law of 24 June 1936. This extension of an agreement’s sphere of application to all the companies in a sector is effected at the request of the representative trade unions and employers’ organisations or on the initiative of the labour minister (L.133-8 of the Labour Code). Before issuing an extension order, the minister must consult the National Collective Bargaining Committee, whose opinion is not binding. He/she may also rule out the extension of clauses deemed contrary to the law or not in keeping with the situation in the sector. This extension mechanism allows collective bargaining agreements to be applied to companies not belonging to the employers’ organisations that signed the sectoral agreement. It is this mechanism that explains why the coverage rate of collective bargaining in France is more than 90% (source: EIRO). But the extension of collective bargaining agreements should be distinguished from their expansion. The latter involves an order by the labour minister making an agreement applicable beyond its initial geographic or occupational sphere of application (L.133-12 of the Labour Code). This expansion procedure may be applied only where a lack of employees’ or employers’ organisations makes it impossible for an agreement to be signed in one particular sector or region.

5. Method for settling disputes

In French law there are several procedures for extrajudicial resolution of disputes. First is the possibility of applying the conciliation procedure provided for in article L.523-1 of the Labour Code. This procedure, optional since 1982, may be applied in the framework of a collective labour dispute. If no channel is specified by agreement, the procedure is conducted before departmental, regional or national committees. These tripartite committees are chaired by a representative of the state and may produce a binding statement of conciliation.

The conciliation procedure may lead to a process of mediation. Provided for by article L.524-1 of the Labour Code, this procedure brings in a third party – a mediator, appointed by the parties or, failing an agreement, by the government authority. The mediator’s task is to propose solutions in the form of recommendations submitted to the parties. If the parties reject these recommendations, the mediator submits the text of the recommendations and a report on the dispute to the labour minister. The minister may decide to make this public.

Another way of settling collective labour disputes provided for is arbitration (art. L.521-1 et seq. of the Labour Code). Arbitration is binding only if so agreed by the parties or where a collective bargaining agreement so provides. This procedure is resorted to in the event of deadlock in conciliation or mediation. The jurisdiction of the arbitrator, chosen by the parties or pursuant to a collective agreement, is confined to the points specified in a “non-conciliation statement”. The arbitrator’s ruling may be contested before the supreme arbitration tribunal consisting of members of the Council of State and senior magistrates from the judiciary.

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Strikes French law gives the right to strike a constitutional dimension. The Preamble to the 1946 Constitution, which has constitutional status, provides that “the right to strike shall be exercised in the framework of the laws that regulate it”. Yet despite this reference to law, there is very little French legislation regulating the right to strike and the legal framework of this right is to be found largely in case law. French regulations on the subject relate chiefly to the public sector. Thus article L.521-3 of the Labour Code requires public service workers to serve notice of a strike before specifying those involved or the issues. Certain categories of public servant (police, prison wardens, service personnel) have no right to strike.

Generally speaking, strikes do not break employment contracts, but rather entail their suspension. Except in the event of gross negligence by the employee, striking is not grounds for dismissal. Any dismissal made without taking account of this rule is liable to be invalid.

There has been an increase in the number of days not worked between 2004 and 2005. Over a longer period, this growth chiefly concerns transport companies and the civil service. Surveys show an intensification of industrial disputes: between 2002 and 2004, 30% of establishments with more than 20 employees experienced at least one collective dispute. Between 1996 and 1998 the rate was 21%. Surveys also show that the number of collective disputes increases with company size. Wages and working hours were the main issues giving rise to disputes. The sector with the largest proportion of companies experiencing collective disputes between 2002 and 2004 was industry (41%). The figures for construction, commerce and services were 18%, 18.5% and 30% respectively.

French law does not recognise the right of employers to impose lock-outs. Aside from any specific situation, a company lock-out is treated as a breach of employment contract by the employer, who is failing to give his employees work. Case law, however, allows employers to suspend the activity in the event of a “compelling situation” or “force majeure”.

III. EMPLOYEES’ REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues and types of representation and bodies French labour law establishes two channels for staff representation in companies.

The first is based on the election of representatives by the company employees: staff representatives and works councils. The second channel is based on trade unions. The two-tier representation of staff in French law corresponds to an apparently clear distribution of roles between trade union representatives and elected representatives. The elected institutions’ function is to ensure the collective expression of views by company staff. According to article L.422-1 of the Labour Code, the task of staff representatives is “to submit all individual and collective demands to employers”. This role of making demands assigned to staff representatives is often set against the role of making wider claims assigned to union representatives. But in reality the distribution of roles is not so clear. Union representatives present both employees’ demands and their wider claims. Similarly, in companies with less than 50 employees, staff representatives convey the workforce’s individual and collective demands but also the wider claims of the working community.

As well as managing companies’ social and cultural activities, works councils provide “a collective means of expression for employees, allowing their interests to be continually taken into account in decisions relating to the company’s management and economic and financial development, work organisation and production techniques” (art. L.431-4 of the Labour Code). Their role is mainly consultative in the field of economic development and work organisation. Union representatives represent their unions and defend the interests of their members in the company. But they also have a role in defending the interests of workers as a whole, as evidenced by their monopoly in the signing of collective bargaining agreements. The signing of company collective agreements is indeed reserved for company

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union representatives, though this assertion must be qualified in view of recent developments in collective bargaining law.

There has been an increased presence of bodies representing staff in companies in the periods 1998-1999 and 2004-2005. From 74% in 1998-1999, the proportion of establishments with at least 20 employees with a body representing staff rose to 77 % in 2004-2005. Industry is the sector with the highest density of staff representatives, with 81% of establishments with at least 20 employees having at least one representative body as against 77% in services and 67% in construction.

2. Trade union representation The presence of trade unions in companies has been guaranteed since 1968 by two institutions: trade union sections and union representatives.

Established in 1968, trade union sections cater for company employees belonging to a trade union, whose “material and moral interests” they protect (art. L.412-6 of the Labour Code). Trade union sections are de facto groupings with no legal personality. Each representative trade union may set up a trade union section for which the law since 1982 specifies no minimum number of members. In companies with more than 200 employees, premises must be made available to trade union sections (art. L.412-9 of the Labour Code). In companies with more than 500 employees, trade unions sections enjoy time-off rights for members designated to negotiate company agreements. These rights must be no less than 10 hours a year in companies employing at least 500 workers and 15 hours a year in those employing at least 1000 (art. L.412-10 of the Labour Code). Finally, trade union sections may collect trade union dues in companies.

Union representatives represent trade unions in companies (art. L.412-11 of the Labour Code). Each representative trade union can designate one union representative in companies or establishments with more than 50 employees. In companies with fewer than 300 employees and at establishments belonging to such companies, the union representative is the trade union’s legally entitled representative on the company or local works council. In this capacity the union representative is the recipient of any information provided to the works council. He/she is also empowered to negotiate and enter into collective bargaining agreements in the company. The mere presence of a union representative entails the creation of trade union section.

The number of union representatives varies according to the size of the company workforce (art. R.412-2 of the Labour Code):

50 to 999 employees 1 union representative 1000 to 1999 employees 2 union representatives 2000 to 3999 employees 3 union representatives 4000 to 9999 employees 4 union representatives more than 10,000 employees 5 union representatives

Surveys show a growing presence of trade unions in companies and establishments. In 2004-2005, union representatives were present at 38% of establishments with 20 employees or more as against 33% in 1999.

When companies have several establishments, the representative unions may designate both local union representatives at establishments and a central union representative. In companies with less than 2000 employees, the central union representative must be one of the local representatives. For companies with larger workforces, the central union representative may be a different person.

In order to perform their functions, company, local and central union representatives are entitled to move freely about the company or establishment and enjoy time-off rights for representational purposes. These rights, treated and paid as working time, are equal to at least 10 hours a month in companies or establishments employing betweem 151 and 500 employees, and 20 hours a month in companies or establishments employing more than 500 employees. This time may be exceeded in the event of

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exceptional circumstances. The central union representative has 20 hours a month in which to perform his/her functions. These hours are in addition to those to which he/she may be entitled in a capacity other than that of union representative. Like all staff representatives, union representatives have protected status as regards the termination of contracts. Any termination of contract attributable to the employer requires prior official authorisation.

3. Elected representatives Two bodies of elected representatives exist: staff delegates and work councils.

The presence of staff representatives is compulsory at all establishments employing at least 11 employees. It is up to the employer to organise elections for staff representatives, whose term of office was in 2005 set at four years. The law gives representative trade unions in the company a monopoly in the presentation of candidates in the first round of such elections. According to article L.422-1 of the Labour Code, the function of a staff representative is to submit individual and collective claims relating to social protection and health and safety and collective bargaining agreements applicable in the company to the employer. They also have the task of informing the Labour Inspectorate of any complaints or remarks relating to the application of labour law in the company or establishment. In companies with less than 50 employees, the staff representatives must be convened and consulted by the employer when considering redundancy measures. This obligation also applies in companies with more than 50 employees but with no works council. Staff representatives generally perform some of the duties of a works council or a health and safety and working conditions committee where these bodies are not present. They also have whistleblower rights in the event of infringements of personal rights or individual freedoms in the company. If the employer takes no action, a staff representative may apply to the courts to have the infringement stopped. In companies with a workforce of fewer than 200 employees, the employer may, after consultation with the staff representatives and works council, if any, assign the staff representatives to the staff delegation on the works council. In this event, the law provides for an increase in the number of staff representatives (art. R.423-1-1 of the Labour Code). Finally, staff representatives may also be appointed as union representatives in companies with fewer than 50 employees. In order to perform their functions, staff representatives enjoy time-off rights of 15 hours a month. As with all staff representatives, they may be dismissed only with the authorisation of the Labour Inspectorate.

Number of staff representatives according to company workforce (art. R.423-1 of the Labour Code):

11 to 25 employees 1 full member and 1 deputy 26 to 74 employees 2 full members and 2 deputies 75 to 99 employees 3 full members and 3 deputies 100 to 124 employees 4 full members and 4 deputies 125 to 174 employees 5 full members and 5 deputies 175 to 249 employees 6 full members and 6 deputies 250 to 499 employees 7 full members and 7 deputies 500 to 749 employees 8 full members and 8 deputies 750 to 999 employees 9 full members and 9 deputies 1000 employees and above 1 full member and 1 alternative per 250 employees in addition

Staff representatives may also be elected within the confines of a “site”. This form of representation is found when several companies with less than 11 employees are established on the same site. Site representatives may then be elected by all the employees in companies present on the site. The recognition of a site and the organisation of elections are matters for the departmental labour and vocational training inspector, i.e. the labour authority.

It is compulsory for all companies with at least 50 employees to set up a works council. Article L.431-1 of the Labour Code gives this obligation very wide scope, as works councils must be set up not only by private companies but also by public and ministerial offices, professional bodies, mutual societies, associations and social security offices. The figure of 50 employees must have been reached over 12

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months, consecutive or otherwise, over the past three years. In companies with more than 50 employees, works councils may be set up by collective agreement.

If a company has several establishments, each establishment must elect a local works council. Local works councils are made up of and operate in exactly the same way as ordinary works councils. They have legal personality and the same prerogatives as ordinary councils. Each local council elects its representatives on a central works council. The number of representatives is two full members and two deputies per establishment within a limit of 20 elected members, except in the event of a more favourable arrangement (art. L.435-4 of the Labour Code). In economic matters, central works councils carry out duties relating to questions of the company’s general operation exceeding the limits of the powers of the various establishment managers. They must necessarily be informed of all business and financial projects affecting the company, especially in the cases defined in the fourth and fifth paragraphs of article L. 432- 1 of the Labour Code.

Works councils have legal personality (art. L.431-6 of the Labour Code) and may accordingly act in the courts to defend their interests in civil and criminal jurisdictions. The interests defended must however be direct, current and personal. Unlike trade unions, works councils are not entitled to act in the collective interest of a profession or to act in the stead of employees.

4. Composition of the work councils Works councils are made up of the company manager, who takes the chair, staff representatives elected for four years and a spokesperson designated by each representative trade union in the company. These trade union spokespeople attend works council meetings in a solely consultative capacity. In companies with fewer than 300 employees, the union representative is the legally entitled trade union spokesperson on the works council.

The number of works council members is as specified in article R.433-1 of the Labour Code.

50 to 74 employees 3 full members and 3 deputies 75 to 99 employees 4 full members and 4 deputies 100 to 399 employees 5 full members and 5 deputies 400 to 749 employees 6 full members and 6 deputies 750 to 999 employees 7 full members and 7 deputies 1000 to 1999 employees 8 full members and 8 deputies 2000 to 2999 employees 9 full members and 9 deputies 3000 to 3999 employees 10 full members and 10 deputies 4000 to 4999 employees 11 full members and 11 deputies 5000 to 7499 employees 12 full members and 12 deputies 7500 to 9999 employees 13 full members and 13 deputies As from 10,000 employees 15 full members and 15 deputies

Special committees may be set up, of which some are compulsory where the company workforce exceeds certain thresholds. Thus companies employing at least 1000 workers must set up an economic committee within the works council. In companies with more than 200 employees, a training committee and an occupational equality committee must be set up. In excess of 300 employees, the works council must include a committee for employee information and aid for housing.

5. Working of the body and decision-making The law lays down certain rules on the operation of works councils. Even so, it is up to each works council to provide internal regulations on its own operation. Article L.434-3 of the Labour Code provides for a meeting of the works council at least once a month where the workforce exceeds 100 employees. In

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companies with fewer employees, the works council meets at least once every two months. There may in any event be a further meeting when so requested by a majority of the council members.

It is up to the company manager to convene the works council. Failing that, the council is convened by the labour inspector when so requested by at least half of the council members. The works council is then chaired by the labour inspector.

The council elects a secretary, who in conjunction with the company manager draws up and signs the agenda, which is notified to the other members at least three days before the meeting. Since the Law of 18 January 2005 on Social Cohesion, however, the employer may unilaterally include compulsory matters for consultation on the agenda. In the event of disagreement on an issue’s inclusion on the agenda, each party may refer the matter for an urgent ruling in the courts.

Works council resolutions are adopted by a majority of the members present. The council chairman does not take part in the vote “when consulting the council’s elected members in their capacity as staff representatives” (art. L.434-3 of the Labour Code).

6. Means of employees’ representatives Employees’ representatives are entitled to move freely about the company both outside and during their hours spent on representational functions. They may make any contacts required within the performance of their functions, especially with employees.

In order to carry out their functions, employees’ representatives have time-off rights allocated by law. These rights total 20 hours a month for members of the works councils, 15 to 20 hours for trade unions representatives and 15 for staff delegates. In companies with more than 500 employees, the trade union spokesperson on the works council also has time-off rights of up to 20 hours a month.

Works councils have an operating budget consisting of a grant paid by the employer equal to at least 0.2% of the gross wage bill. There is an additional grant for funding social and cultural activities. The employer must provide the council with duly fitted out premises and the necessary materials for the performance of its functions. Where the company is divided into various establishments, each local works council receives its share of this funding.

Full works council members also take an economics training course lasting for five working days, taken from working time and paid as such by the employer.

Works councils may be assisted by the following experts:

– An accountant: designated by a vote of the works council in which the employer does not take part. The accountant may give assistance in the examination of annual accounts (art. L.432-4 paragraphs 9 and 13 of the Labour Code), accounting documents for forward planning (art. L.432-4 paragraph 14), redundancy measures (art. L.321-3 of the Labour Code) and in the exercise of whistleblower rights (art. L.432-5 of the Labour Code). He/she also assists the works council’s economic committee (art. L.434-5 of the Labour Code). The accountant has wide investigative powers. With free access to the whole company, he/she may have any information that is needed pursuant to his/her functions sent to him/her, and make all manner of checks. With similar powers to those of an auditor, he/she may in particular demand to be sent accounting documents relating to the parent company and subsidiaries. He/she is paid by the employer.

– An expert in new technology: in companies with at least 300 employees, the works council may seek the assistance of an expert in the event of any major project for the introduction of new technology (art. L.434-6 of the Labour Code) where this is liable to have effects on employment, qualification, remuneration, training or working conditions (art. L.432-2 of the Labour Code). Such an expert is engaged by agreement of the company manager and a majority of elected council members. He/she is paid by the employer and has free access to the company.

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7. Role and rights of work councils Works councils operate in the field of “social and cultural activities” in the company and in the economic and occupational sphere. Their duties are moreover very different in each of these areas. Whereas they exercise real managerial power in their social and cultural duties, they have only a consultative role in economic and occupational matters.

a) Social and cultural duties

According to L.432-8 of the Labour Code, “the works council shall perform or monitor the management of all social and cultural activities organised in the company, especially for the benefit of employees and their families, or take part in their management, however they may be funded…” The employer must provide the works council with funding for social and cultural activities. But the law sets no minimum amount. Where a company is made up of several establishments, these are responsible for the management of social and cultural activities.

b) Economic duties

According to article L.431-4 of the Labour Code “the works council’s purpose is to provide a collective expression of employees’ views, allowing their interests to be constantly taken into account in decisions relating to the company’s management and economic and financial development, work organization, vocational training and production techniques.” On all these matters, French law gives works councils information and consultation rights. As regards economic responsibilities, local works councils have “the same duties as ordinary works councils within the limit of the powers granted to establishment managers” (art. L.435-2 paragraph 3 of the Labour Code). However, economic duties are exercised by the central works council where they exceed the limits of the powers of establishment managers (art. L.435-3 paragraph 1 of the Labour Code).

Works council information and consultation rights are enshrined in French law and with broad scope. Ignorance of these information and consultation obligations on the employer’s part constitutes hindrance, punishable by criminal sanctions.

1. Information The law precisely specifies the documents that companies must provide to works councils. French law requires employers to notify newly elected works councils of a range of information, to be supplied within a month of their election (art. L.432-4 of the Labour Code). The details in question are the company’s legal status and organisation; its foreseeable business prospects; its position within its group, if applicable, in view of the information available to the company manager; the distribution of capital among shareholders owning more than 10% of its shares, and its position in the sector of activity to which it belongs.

Annual information The information to be furnished to the works council depends on the company size:

Economic information This relates to the company’s activity and financial situation; the extent of part-time working in the company; developments in employment, qualification, training and wages; the comparative situation in general employment and training conditions for men and women; wages, and actions aimed at promoting disabled employment in the company.

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Economic information

In companies with fewer than 300 employees, economic and social information may be conveyed in a single annual report. It must contain the following information (art. R.432-19 of the Labour Code):

I. The company’s activity and financial situation: 1.1. Statistical data – Turnover, profits or losses recorded – Activity results in value and volume – Major capital transfers between the parent company and its subsidiaries – Subcontracting situation – Distribution of earnings – Grants or financial benefits given to the company by the state or local authorities, and the use made thereof – Investments – Trends in the company wage structure and total wage bill 1.2. Other information – The company’s business prospects for the coming year – Measures planned for improving, renewing or transforming equipment – Measures planned for improving, renewing or transforming production and operating methods – Effects of such measures on working and employment conditions

II. Developments in employment, qualifications and training: 2.1. Statistical data – Month-by-month changes in the company workforce – Distribution of the workforce by sex and qualification – Number of employees with open-ended employment contracts – Number of employees with fixed-term contracts – Number of employees with temporary contracts – Number of workers belonging to external companies – Number of working days worked over the past 12 months by workers with fixed-term and temporary employment contracts – Number of alternative integration and training contracts open to young people aged under 26 – Number of return-to-work contracts as provided for in art. L. 322-4-2 of the Labour Code – Name, sex and qualification of part-time employees – Hours of part-time work done in the company – Number of part-time contracts giving an entitlement to the allowance provided for in art. L. 322-12 of the Labour Code 2.2. Supporting data – Reasons for fixed-term contracts, temporary contracts, part-time contracts and workers belonging to external companies 2.3. Forecasts regarding employment – Quantified employment forecasts – Specification of health and safety and training activities that the company manager plans to implement, especially for older or low-skilled employees or those experiencing particular difficulties in society – Employer’s account of any disparities between forecast and actual employment levels, and of the implementation status of actions planned for the past year 2.4. Comparative situation of men and women – Analysis of statistical data by occupational category on the respective situations of men and women as regards recruitment, training, promotion, qualification, classification, working conditions and actual pay – Measures taken over the past year with a view to ensuring occupational equality – Objectives and actions for the coming year – An account of actions planned but not performed 2.5. Disabled workers – Actions taken or planned in the field of recruitment, adaptation, or vocational training or retraining – The annual statement provided for in article L. 323-8-5 of the Labour Code, except for the list mentioned in paragraph 1 of article R. 323-9-1, must be attached to the report

In companies with at least 300 employees, the employer must, pursuant to article L.432-4 of the Labour Code, submit an annual written report including information on: – The company’s activity – Turnover, profits or losses recorded – Overall production results in value and volume – Major capital transfers between the parent company and its subsidiaries

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– Subcontracting situation – Distribution of profits made – European grants and financial grants or benefits, especially regarding employment – Investments – Trends in the company wage structure and total wage bill – Trends in productivity and production capacity utilisation, where such elements are measurable in the company

In the course of every quarter, whatever the size of the company, the company manager must provide the works council with information regarding the company’s overall order levels and financial situation, the implementation of its production programmes, and any delays in payments of social security contributions or contributions due to complementary pension institutions or premiums payable to insurers. Every quarter in companies with at least 300 employees and every six months in other companies, the works council must also be informed of any planned measures concerning the improvement, renewal or transformation of equipment or production or operating methods and the effects on working and employment conditions (art. L.432-4 paragraph 16 of the Labour Code).

Accounting information In trading companies, the company manager must provide the works council with all the documents that must necessarily be furnished to the general shareholders’ meeting, before they are submitted to that meeting or to the general partners’ meeting, along with the annual accounts report (art. L.432-4 paragraph 9 of the Labour Code). These documents must be provided before the date of the general shareholders’ meeting. The works council may decide to call upon the auditor to gather further information on the company’s situation. In all joint stock companies, individual information for works council members should be provided. In other companies, the works council is provided with the accounting documents. This concerns sole proprietorships, non-commercial companies, professional associations, other associations, public and ministerial offices and the professions. The works council may be assisted by an accountant of its choice up to two times in the financial year.

Social information The company manager annually conveys the following information to the works council:

– A social report in companies with at least 300 employees (art. L.438-1 et seq. of the Labour Code). Where a company has several establishments, a social report must be drawn up on each establishment with more than 300 employees. This report contains information on employment, pay, working, health and safety conditions, training, occupational relations and employee living conditions.

– The employer must inform the works council of any vocational training plans, on which the council gives its opinion (arts. D.932-1 and D.932-2 of the Labour Code).

– The report sent by the company manager to the health, safety and working conditions committee (CHSCT) must also be sent to the council. In companies with more than 300 employees, the works council must receive a detailed written report along with a programme of action proposed in this field.

– The report drawn up by the occupational doctor in companies or establishments with more than 300 employees must also be sent to the works council. In other companies, the council may ask for such a report to be drawn up.

Employment information The employer must provide the works council with a whole set of information on employment in the company. In companies with more than 300 employees, this information is quarterly; otherwise it is given every six months (L.432-4-1 of the Labour Code). The employer must inform the works council of the general employment situation with in particular a month-by-month description of the workforce and employee qualifications by gender. He/she must also specify the number of employees with open-ended

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and fixed-term contracts, the number of part-time employees, the number of temporary workers and the number of workers belonging to external companies. The employer must explain the reasons for any outsourcing. In this respect French law provides that when, between two works council meetings, the number of company employees with fixed-term contracts and of temporary workers rises significantly, this issue will be automatically included on the agenda of the next meeting. Information on the use of subsidised contracts must also be conveyed to the works council, the local works council or the staff representatives (art. L.432-4-1-1 of the Labour Code).

In companies with at least 300 employees, a report on the comparative situation of men and women in the company must be submitted to the works council every year. The data supplied must give a picture, for each professional category, of the respective situation of men and women as regards recruitment, training, promotion, qualifications, classification, working conditions, actual pay and balance between work and family responsibilities (art. L.432-3-1 of the Labour Code). A report on part-time work (art. L.212-4-9 of the Labour Code) must also be drawn up, along with a statement of pay levels in the company by gender and professional category (art. L.432-4 of the Labour Code). In companies with at least 300 employees, these data must appear in the annual general report.

The works council must be briefed on the forward planning structure for employment, which must be negotiated every three years in companies with 300 employees or more.

Occasional briefings French law requires that the works council be briefed when events occur that may affect the company. The information, to be supplied prior to a consultation of the works council, is as specified in article L.432-1 of the Labour Code, according to which “the works council must necessarily be informed and consulted on matters affecting the organisation, management and general development of the company, and in particular on measures liable to affect the volume or structure of the workforce or the company staff’s working hours or employment, working and vocational training conditions.” This wording gives wide scope to the employer’s obligation to brief the works council. The works council is also entitled to be briefed in certain situations expressly provided for in the law. Thus any public announcement by the company manager must be the subject of a works council briefing (art. L.431-5-1 of the Labour Code). Where the measures announced are liable to significantly affect employees’ working and employment conditions, the works council must be briefed before the announcement. In other cases, the briefing may be subsequent to that announcement.

Since the Law of 15 May 2001 on New Economic Regulations, the company manager must convene the works council in the event of a takeover bid or stock-swap offer. This consultation takes place after the bid has been made. According to article L.432-1 of the Labour Code, the works council must meet as soon as a takeover bid has been made on the company. It may decide to listen to the bidder and take a view on whether the bid is friendly or hostile. The bidding company must send the briefing note provided for in the Monetary and Financial Code within three days of its publication. A second meeting should be held within 15 days of the briefing note’s publication and before the general shareholders’ meeting. The law provides a deterrent sanction in the event of refusal by the company manager or his/her representative to attend this meeting. In such a case, the bidding company will not be able to exercise the voting rights attached to the company shares that it holds or may acquire. A consultation with the bidder’s works council is also provided for. Since the Law of 18 January 2005, this consultation no longer needs to be prior to the launch of the takeover bid or stock-swap offer. The works council must be convened within two working days of the publication of the bid so that it may be given precise written information on the bid’s content and possible consequences for employment (art. L.432-1 ter of the Labour Code).

A special works council meeting is also provided for when the company takes part in a corporate concentration (art. L.432-1 bis of the Labour Code). In this event the works council may request the assistance of an accountant. Since the Law of 2 August 2005 for the Promotion of Small and Medium- sized Firms, the works councils of companies that are party to a corporate concentration that is referred to the Competition Council may be heard by that Council at their request (art. L.430-6 of the Commercial Code).

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2. . Consultation Article L.432-1 of the Labour Code provides in general terms that “in the economic sphere, the works council must necessarily be informed and consulted on matters affecting the organisation, management and general development of the company, and in particular on measures liable to affect the volume or structure of the workforce or the company staff’s working hours or their employment and working conditions and vocational training.” In economic and occupational terms, French law therefore gives wide scope to works council consultations. Article 432-1 and other provisions of the Labour Code expressly indicate certain situations requiring that the works council be informed and consulted. Consultations must take place before the employer takes the relevant decision (art. L.431-5 of the Labour Code). The consultation must be in connection with a definite plan, not a blueprint. Finally, the works council should receive “precise and written” information, be given “sufficient time to study the matter in hand” and receive a “reasoned answer” to its remarks from the employer.

Some consultations concern the company’s economic and financial situation. Article L.432-1 of the Labour Code specifically mentions changes in the company’s economic or legal structure, as well as mergers, transfers, major changes in production structures and the acquisition or transfer of subsidiaries. This consultation involves the works councils of both the transferring and transferee companies. The article specifies that the works council is also consulted in the event of capital movements affecting the company, namely when it acquires an interest in another company. The works council must moreover be informed of interests acquired by other companies in the company’s capital.

The works council must also be informed and consulted before any declaration of suspension of payments or when the company is the subject of safeguard, administration or judicial winding-up proceedings.

This consultation also relates to employment in the company and, pursuant to article L.432-1 of the Labour Code, measures liable to affect employees’ jobs. More specifically, article L.432-1-1 provides that that the works council should be informed and consulted every year on developments in employment and qualifications in the company over the past year. The consultation includes annual or multi-year forecasts and initiatives – in particular preventive and training initiative – that the employer intends to implement. Article L.432-3 paragraph 7 of the Labour Code also requires that the works council be consulted on the company’s vocational training policy.

Redundancy measures are another event in which the works council must be consulted. The Labour Code provides for two types of consultation. The first is as provided in article L.432-1 paragraph 2 regarding staff cutbacks. The second type regards dismissal plans affecting more than 10 employees over a period of 30 days (art. L.321-3 of the Labour Code). In companies with at least 50 employees, the employer must convene the staff representatives on two occasions. The two meetings must be separated by no more than 14 days. In companies with more than 50 employees, the employee must also conduct two different consultations separated by a variable maximum period depending on the number of dismissals: 14 days when the number of dismissals is less than 100, 21 days when the number of dismissals is from 100 to 249, and 28 days when the number of dismissals is 250 or more. The Law of 18 January 2005 provides the possibility of combining the meetings required by articles L.432-1 and L.321-3 of the Labour Code.

Companies with more than 50 employees making more than 10 employees redundant over a period of 30 days must present an “employment protection plan”. Designed to prevent redundancies or to limit their number and to facilitate the relocation of staff when dismissals cannot be avoided, the employment protection plan must be submitted for consultation with the works council at the first meeting provided for in article L.321-3 of the Labour Code. Failure to consult the works council is punishable by a declaration of invalidity of the redundancy procedure and of the announced dismissals.

The works council may apply for assistance from an accountant. This decision must be taken at the first meeting provided for in article L.321-3 of the Labour Code. If the services of an accountant are engaged, the council may hold a third meeting (art. L.321-7-1)

There are other consultations expressly provided for in the Labour Code regarding new technologies. An annual consultation is stipulated on the company’s technological research and development policy (art. L.432-1 paragraph 9 of the Labour Code). Moreover, pursuant to article L.432-2 of the Code, the works council should be informed and consulted prior to any major project for the introduction of new technology.

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8. Other functions and responsibilities The Law of 18 January 2005 provides for the technique of “methodology agreements”. Covered by article L.320-3 of the Labour Code, these agreements signed by representative trade unions may opt out of the standard works council information and consultation procedure. They set the conditions on which the works council is convened and briefed on the company’s economic and financial situation, and the council may propose alternatives to plans involving restructuring with effects on employment and is entitled to receive a reasoned answer from the employer to its proposals. Methodology agreements may also anticipate the contents of an employment protection plan. The legal enshrinement of methodology agreements represents a growing preference in French legislation for collective bargaining and a certain rolling back of the law. Methodology agreements may be signed at company, group or sectoral level.

9. Other representation bodies Established by the 1982 Auroux laws, Health, safety and working conditions committees (CHSCT) must be set up at establishments with more than 50 employees. They are made of the employer, who takes the chair, and, depending on the company size, three to nine representatives designated by the elected members of the ordinary or local works council and the staff representatives. The company doctor and safety officer, if applicable, attend the meetings in a consultative capacity. The CHSCT meets at least once a quarter, convened by the employer. Its role is to help protect employee health and safety. The employer must consult the CHSCT before any major decision regarding measures changing health and safety or working conditions. It also has monitoring powers in respect of the application in the company of health and safety rules. It must conduct inspections at least once a quarter. Finally the CHSCT has whistleblower rights in the event of serious and imminent danger to health and safety.

Established also by the 1982 Auroux laws, group councils are set up within groups consisting of a controlling company and controlled companies. Article L.439-1 of the Labour Code provides criteria for the definition of such groups. The task of setting up a group council falls to the company manager, within six months of the group’s creation. It may be set up either by arrangement of those concerned or, failing that, by a decision of the courts. If a council is not convened within this period, the employer is liable to prosecution. A group council consists, on one side, of the controlling company manager, or his/her representative, who takes the chair. He/she may be assisted by two people acting in a consultative capacity. On the other side, the group council is made up of representatives of staff in the group within a limit of 30 members. But where the number of companies with works councils in the group is less than 15, the number of group council members may not be more than twice the number of such companies. Staff representatives are designated by the employees’ trade unions from among the post-holders on the ordinary or local works councils of all of the group companies and on the basis of the results at the last elections. These designations are made every four years. The group council meets at least once year. It is to be noted that the law provides no specific time-off rights for the function of group council member. But the law does provide that time spent at group council meetings must be paid for by the members’ respective employers. In a Community-scale group, the council’s operating conditions may be adjusted or the council disbanded, as appropriate, by a European works council agreement or a group resolution. However, the entry into effect of such a resolution requires a vote in favour by the group council. If a group council is disbanded, the provisions relating to the group council’s duties and resources shall be applicable to the European works council (art. L.439-24 of the Labour Code). The group council is entitled to be informed of the group’s economic and financial situation. Pursuant to article L.439-2 of the Labour Code, the council receives information on the activity, financial situation and employment forecasts of the group and its constituent companies. It is sent a copy of the consolidated accounts and balance sheet as well as of the corresponding auditor’s report. It must be informed of takeover bids and stock-swap offers involving the group’s controlling company. It may be assisted by an accountant at the expense of the controlling company. In the event of a takeover bid or stock-swap offer affecting the controlling company, the company manager must immediately inform the group council. In this event the group council has the same role and rights as works councils (see above). Group councils have legal personality, allowing them to defend their interests in the courts (after Court of Cassation, 23/01/1990).

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European works councils Directive 94/45 of 22 September 1994 was transposed into French law by Law 96-985 of 12 November 1996. The legal provisions relating to EWC are included in articles L.439-6 et seq. of the Labour Code. French law provides rules on the composition and operation of the works council applicable in the absence of an agreement. A EWC is made up, on one side, of the company manager or the manager of the controlling company of the Community-scale group or his/her representative, assisted by two people of his/her choice acting in a consultative capacity, and on the other side by staff representatives at the establishments of the company or companies forming the Community-scale group. The number of staff representatives cannot be less then three or more than thirty. The European works council is chaired by the company manager or the manager of the controlling company of the Community-scale group or his/her representative. A council secretary must be elected, along with a three-member committee where the council has at least ten members.

French law provides for an annual meeting of the European works council, convened by its chairman and based on a report that he/she provides. This report outlines the progress of the business of the Community-scale company or company group, along with its prospects. The law specifies that the annual meeting must in particular relate to “the group or company group’s structure, economic and financial situation, the probable development of the business and of production and sales, the situation and probable trend of employment, investments, and substantial changes concerning organization, introduction of new working methods or production processes, transfers of production, mergers, cutbacks or closures of companies, establishments or large parts thereof, and collective redundancies.” (art. L.439- 15 of the Labour Code).

A special meeting of the select committee or, where no such committee exists, of the European works council may be requested in the event of exceptional circumstances significantly affecting employees’ interests. These may in particular be relocations, company or establishment closures or collective redundancies. The European works council members directly elected or designated by the establishments or companies directly concerned by the measures in question are also entitled to attend the committee meeting. According to article L.439-15 of the Labour Code, this meeting takes place as soon as possible, on the basis of a report provided by the company manager or his/her representative or by any other manager at a suitable level of the Community-scale company or company group. An opinion on this may be delivered at the end of the meeting or within a reasonable time.

The works council must have the necessary material or financial resources for it to perform its duties. Its operating expenses are paid by the company or controlling company of the company group. The time spent by European works council members in meetings is treated as working time and paid in the same way as normal work. The secretary and committee members of the European works council enjoy time- off rights not in excess of 120 hours per year. European works councils may by assisted by experts.

11. Codetermination rights French law does not establish any codetermination rights for employees’ representatives within the undertakings. An exception regards the setting of individualised working hours. In this situation, the Labour Code foresees that such a measure may be implemented only if the employees’ representatives do not oppose it.

IV. EMPLOYEES’ PARTICIPATION IN CORPORATE BODIES

French law gives elected staff representatives the right to monitor company management. This right may take the form of participation in the company’s managerial bodies. In public companies subject to private law, the law provides for the presence of employee directors on the board of directors or the supervisory board. These managerial bodies may be two- or three-sided depending on whether they include state representatives. In the latter case, the staff representatives form one third of the directors. Otherwise, the staff representatives form one third of the directors as opposed to two-thirds elected by the shareholders. In private companies, any presence of employee directors taking part in the proceedings of

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the board of directors (art. L.225-27 et seq. of the Commercial Code) or the supervisory board (art. L.225- 79 et seq. of the Commercial Code) requires an amendment of the company’s articles of association. The number of employee-elected directors may not exceed a third of the members of the managerial body or the figure of four, or, in companies whose shares are traded on a regulated market, five. The employee- elected directors must hold a prior employment contract with a term of at least two years on their appointment, corresponding to an actual job.

Representation of employee shareholders

Since the Law of 25 July 1994, a general shareholders’ meeting may assign seats on the board of directors or supervisory body of a public limited company to employee shareholders (arts. L.225-23 and L.225-71 of the Commercial Code). This measure concerns only companies with employee shareholders holding more than 3% of the corporate capital.

Representation of the works council on the supervisory body

More often, employee monitoring rights are exercised through the option given since 1946 to works council members of attending all the meetings of the board of directors or the supervisory board (art. L.432-6 of the Labour Code). They may also attend the general shareholders’ meeting. In companies with just two electoral colleges, the delegation consists of two members. One belongs to the category of technical managers and supervisors and the other to that of white-collar and manual workers. Where, pursuant to article L.433-2 of the Labour Code, there are three electoral colleges, the delegation has four members, of which two belong to the category of manual and white-collar workers, the third to that of supervisors and the fourth to that of engineers, heads of department and administrative, commercial or technical managers. The works council members elected to participate in the managerial bodies receive the same documents as the other board members. Where, pursuant to the law or the articles of association, there are employee directors, the representation is reduced to one council member.

The rights of works council representatives on the board of directors and the supervisory board are fewer. They take part in proceedings only in a consultative capacity103, though they are entitled to express their views. They must receive the same documents as those sent or handed over to the members of the board of directors or the supervisory board. Through them the works council may submit requests to the board of directors or supervisory board, on which a reasoned opinion must be delivered.

Certain rights are granted to the works council to enable it to take part in the general shareholders’ meeting. It may first of all submit remarks on the economic and social situation of the company that must be transmitted to the general shareholders’ and company meetings (art. L.432-4 of the Labour Code, paragraph 6). In public limited companies and joint-stock companies, French law then grants the works council the right to request in the courts the designation of a person responsible for convening the general shareholders’ meeting in an emergency. Since the Law of 15 May 2001, the works council may also demand the inclusion of proposed resolutions on the meeting agenda. Moreover, two works council representatives, one from the category of managers, technicians and supervisors and one from that of white-collar and manual workers, are entitled to attend the general shareholders’ meetings. They must be allowed to speak, when requested, in all proceedings where unanimity is required. In other cases they have no particular prerogative.

103 The Court of Cassation decides that the absence of works council representatives does not invalidate the proceedings, except in the event of fraud by the company (Soc., 26/05/1998, Revue de Jurisprudence Sociale, 10/98, no. 1243).

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V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

Prevention of financial difficulties

The Laws of 1 March 1984 and 25 January 1985 give works councils special duties when a company undergoes financial difficulties. These provisions are designed first of all to give the works council a better view of the company’s probable development. Here the works council acts in a preventive role. It must receive the management’s written report analysing the forward accounting (art. L.233-3 of the Commercial Code). It also receives the auditors’ report if the management produces no report. In order to analyse these confidential documents the works council may be assisted by an accountant on two occasions in the financial year. The council also has whistleblower rights when it is aware of facts liable to have a harmful effect on the company’s financial situation (L.432-5 of the Labour Code). In this event it may ask the employer to supply an explanation. This request is automatically included in the agenda of the next works council meeting. If no sufficient reply is given or the reply confirms the worrying nature of the situation, the works council draws up a report that is submitted to the employer and to the auditors. In preparing this report it may seek the assistance of an auditor and two employees, chosen for their expertise and acting in a consultative capacity. In view of the report’s recommendations, the works council may demand that the company manager includes the matter on the agenda of the board of directors or the supervisory board.

Collective procedures

The works council also has rights when the company’s economic and financial situation is significantly impaired in the context of insolvency procedures. In the event of suspension of payments, the Law of 26 July 1995 provides a conciliation procedure conducted by a conciliator appointed by the president of the court of first instance or the commercial court liable to lead to the conclusion of an agreement between the creditors and the debtor company. First it should be noted that the employer must inform and consult the works council before any declaration of suspension of payments. In the event of an agreement between the creditors and the company, the company may then apply for approval of the agreement from the president of the court, during which procedure the views of the works council representatives or, in their absence, the staff representatives are heard. These staff representatives also take part in the protection procedure aimed at “facilitating the company’s reorganisation so as allow its business to continue, employment in it to be maintained and its liabilities to be discharged” (art. L.620-1 of the Commercial Code). The works council representatives or, in their absence, the staff representatives take part in the procedure from the start, as the commercial or first instance court must hear their views or summon them when ruling on the application. If it grants the application, the court must invite the works council representatives or, in their absence, the staff representatives to designate an employee representative. In the absence of both a works council and staff representatives (art. L.621-4 of the Commercial Code), this representative is directly elected by the staff. The works council representatives or, in their absence, the staff representatives must also be heard or summoned when, during the observation period, the court decides to order the partial cessation of the company’s business, to convert the protection procedure into administration proceedings or to announce the company’s liquidation.

Finally, the works council representatives or, in their absence, the staff representatives are informed and consulted during the preparation of the employment protection plan and before the ruling that puts it in place. They are also informed of the plan’s implementation. If the company undergoes a change of ownership at this stage, the employees’ view must be heard. Similar prerogatives are granted to the works council representatives or, in their absence, the staff representatives in the context of judicial administration proceedings, intended for the event of suspension of payments by a company (arts. L.631-7, L.631-9 and L.631-19 of the Commercial Code). Where it is impossible to keep the company going in administration, judicial liquidation proceedings begin. Here the institutions representing staff enjoy rights similar to those granted in the framework of employment protection and administration procedures (art. L.641-1 of the Commercial Code). The works council representatives or, in their absence, the staff representatives may notify the court president or the public prosecutor of any event denoting a suspension of payments (art. L.631-6 of the Commercial Code). They must also be informed prior to any declaration of suspension of payments by the employer. Finally, in all of these procedures, an

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administrator or, in his/her absence, the employer or a liquidator must, when planning to make redundancies, convene the works council or, in its absence, the staff representatives pursuant to the relevant redundancy procedures (art. L.321-9 of the Labour Code).

State aid

In the framework of the annual report submitted by employers (art L.432-4 of the Labour Code), works councils are informed and consulted on European subsidies and employment subsidies granted by the state, the regions and the local authorities, and on the use made thereof. Since Law 2001-7 of 4 January 2001, any works council or, in its absence, employee representative may appeal to the body processing the subsidy or the competent authority if it is considered that the employer is not respecting his/her undertakings to take advantage of such subsidies. They may do this on the basis of knowledge of the amount and use made of public grants of which the employer is obliged to inform them pursuant to article L. 432-4 of the Labour Code. The body or authority may decide, once it has heard the views of the employer and the staff representatives, to suspend or withdraw the subsidy granted, and, if applicable, to demand that it be refunded.

Works councils are also consulted on plans for training and retraining agreements reached with the National Employment Fund (art. R.322-8 of the Labour Code).

Finally, works councils are consulted every year on companies’ technological research and development policies. If they are not consulted, public subsidies for technological research and development are suspended (art. L.432-1 of the Labour Code).

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GERMANY

A specific characteristic of the German economy is its regional organisation which mirrors its political and administrative structure. The Länder are autonomous federal states, each Land having its own Constitution in compliance with the Federal Constitution. This organisation is reflected throughout economic and social life, and the various Länder differ very much from each other. Since 1990, five so- called new Länder (Neue Länder) cover the East German territory of the GDR.

In terms of population and jobs, prior to reunification, which began in 1989, East Germany accounted for between one quarter and one third of West Germany. For more than four decades, these countries had followed different paths and the differences between them were considerable. East Germany’s SME network, which existed prior to the war, disappeared and industrial undertakings were organised into VEB (Volkseigener Betrieb), basically nationalised companies, VVB, (Vereinigung Volkseigener Betriebe), vertical groups of companies belonging to the same industry, and Kombinat, horizontal groups of companies.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Germany remains a rich country, accounting for more than one quarter of Europe’s production104. It is also the economy with the most exports in Europe and worldwide105. However, considering population numbers and purchasing power, Germany’s economic performance is only tenth in Europe.

One of the central features of Germany’s economy is strong exports as the following table shows.

Current account surplus (billion Euro)

2002 2003 2004 2005 2006 43,4 40,3 81,9 92,6 4,7 Source: Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2006, HWWA-Report 266 (Jahresgutachten der Wirtschaftsweisen)

However, the recession it has experienced since the nineties has raised questions about the German economic and social system. In 2005, GDP per capita was still at 9.3% above EU-25-average; but its growth of 0.9% against 1.7% in EU-25 was at the bottom of the EU-scale (1). A marked recession, a sharp rise in unemployment, the cost of unification, an increasing number of bankruptcies and significant job losses in industry raised doubts as to whether the German economy would be able to compete and the “Rhineland model” survive. Increasing competition in world trade has worsened the situation. The German Social Model is today threatened by cheaper labour costs in Eastern Europe and possible transfer of economic activities to the new member states. In general, trends in Germany are closely linked to those in the new member states, especially Poland and the Czech Republic, which account for one tenth of German exports106 and are important countries for investment as well as for the outsourcing of production and employment. Germany’s economy has suffered hard and long from the recession; with the first signs of an economic recovery only showing as recently as the beginning of 2007.

104 Germany accounts for around a quarter of the EU-25’s BIP of 2005 (2,200.0 billion Euro) (1). 105 Statistisches Bundesamt (Hrsg.), Im Blickpunkt: Deutschland in der EU 2006, published 2006 106 Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2006, HWWA-Report 266 (Jahresgutachten der Wirtschaftsweisen)

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Germany’s Gross Domestic Product in comparison

average annual variation in % 1985- 1990- 1994- 2005 2006 1990107 1996 2004 (1) EU 27 (EU15 for 1985-1996) 3.2% 2.0% 1,7 2,8 Germany 3.4% 1.5% 1.5% 0,9 2,3 West Germany 1 2,3 East Germany –0,1 2,1 Euro countries 1,4 2,6 Source: Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2006, HWWA-Report 266 (Jahresgutachten der Wirtschaftsweisen)

Considerable efforts to raise productivity (a 4.5% rise in 1997), wage restraint and company restructuring followed, with a resulting decline in direct labour costs. There was a 1.3% annual reduction in average unit costs between 1994 and 1997 (4). In 2005, average labour costs per unit decreased by 0.9%, after a decrease of 1.3% in 2004(1). In 2005, at last, Germany’s productivity lay just over the EU-25-average. Still, efficiency per employment hour lies significantly above the EU-25-average.

However, these efforts had their price. While company and investment incomes have constantly been rising, employees’ incomes have not kept up. In 2004, income from capital rose by another 6% after 12% in 2004; the average increase of employees’ remuneration in 2005 was limited to 1.6 %. The gross income in employee remuneration was 1,128.8 billion € in 2005, against 557 billion in company and investment income, resulting in an increase of 1.2% on 2001 for the former, and a respective increase of 19% for company and investment incomes.

Nowadays, the tertiary sector dominates the German economy and, in terms of value added, Germany is no longer Europe’s most highly industrialised country. Industry’s share of total employment declined from 45% (ex-FGR) to 33% between 1975 and 2003, reflecting a major structural change in old and new Länder alike. This development is projected to continue108.

The dense network of small and medium-sized enterprises (SMEs) (Mittelstand), which contributed significantly to the success of West German industry, remains important today. However, SMEs have been undermined due to problems of succession and are now particularly vulnerable in the present climate of restructuring and globalisation. Large groups, such as the conglomerates still have a vital role to play in the organisation and development of the German economy both at home and abroad. Very small enterprises, on the other hand, have little weight in Germany, compared with their position in southern European countries.

Traditionally, banking and industry have been closely linked (Hausbank) e.g. Daimler-Benz and Deutsche Bank. Due to the votes assigned to the custody accounts of individual shareholders and mostly transferred to the banks according to the Act on Stock Corporations (AktG, sec. 135), the banks hold the great majority of the voting rights in the largest German companies, and regional public banks played a major role in the organisation of the industrial fabric. However, globalisation and external growth has diluted and weakened these links109. The growing activity of hedge funds and private equity companies has been contributing to weakening the traditional non-formal social integration of large groups and the banking sector.

In the early days of reunification, industrial output in East Germany collapsed. GDP fell by 45% and employment by 37% between 1989 and 1991. The number of employed people fell from 8.8 million in 1990 to 6.1 million in 1993 (3). Roughly 60% of jobs were abolished in the 8,000 establishments “owned

107 Source Eurostat (3 and 4). 108 Hans-Böckler-Stiftung, Key Data Germany 2006 109 Bosch, Gerhard/Weinkopf, Claudia, Gesetzliche Mindestlöhne auch in Deutschland?, published by Friedrich- Ebert-Stiftung, 2006

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by the people of the GDR”, which the Treuhandanstalt (trust office) and its successors were assigned to streamline and privatise, and which employed 4 million people in the mid-nineties. This was followed by an increase of about 9% per annum until 1995, due to modernisation of infrastructure and housing. However and overall, Germany lost 3.4 million jobs between 1990 and 1997, 2.7 million in the new Länder. This has been a major economic and social challenge.

Some degree of convergence has taken place between East and West. East German salaries had almost reached the West German level by the end of the nineties. In 2005, wages in the East as regulated in collective agreements are now at an average 94.6% of the respective average West remuneration, after 60% in 1991, 80% in 1993 and 91.9% in 2000.

Despite continuing transfers payments (a net transfer of 83.2 billion € in 2003), East Germany has not yet developed its own growth momentum and employment in the new Länder has not risen considerably. The economy has even been slowing since 1996.

Average gross wage for full-time jobs

Germany 2.456 € West 2.564 € East 1.944 € Source: Hans-Böckler-Stiftung, Key Data Germany 2006, based on official statistics (Mikrozensus)

Labour Market There were 36.6 million people employed in Germany in 2005. The employment rate, 65.4% was still slightly higher than the European average of 63.8% in 2005, without reaching the Lisbon target of 67%. The following table also shows the continuing differences between East and West in this respect.

Activity rate 2005 Women West 65.5% East 72.1% Men West 80.8% East 79.1% Source:110

The activity rate of women reached 59.6% in 2005 against 58.1% in 2000. However, this increase is largely due to part-time work, which is almost exclusively limited to female employees. The per-capita- increase in employment activity is not reflected in an increase in hours of employment of women. While 43.8% of women work part time, only 7.8% of men do so. Against 1996, this amounts to a significant increase of part-time work (3.8% of men and 33.6% of women in 1996).

In 2005, 45.4 % of the economically active population was between 55- and 64 years old – an increase by about eight percent against 2000. In this respect, Germany is above the EU-25-average of 42.5%. Self- employment now accounts for 12.3% of total employment 2005. The numbers have increased considerably in the last years, especially with the social and labour market policy initiated by the Schröder government, which promoted self-employment. In 2005 alone, the numbers increased 16.8% in 2005 on the previous year (10).

110 The persistent decline in western and eastern Germany, 1980-2004: What can we learn from a decomposition analysis? By University of Lüneburg Working Paper Series in Economics No. 31 October 2006, www.uni- lueneburg.de/vwl/papers

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Self-employment among the economically active population (in 1000 persons)

2002 2003 2004 2005 2006 Economically active 39 096 38 724 38 875 38 823 39 026 Self-employed 4 003 4 073 4 222 4 356 4 374 Source: (2)

While in 1992, the German unemployment rate was still significantly below the European average (4.5%), it rose to 7.9% in 1993, and in 2005 amounted to 9.5% (8.9% among men and 10.3 among women), significantly above the EU-25 average of 8.8%111. Long-term unemployment is at 5% against the EU-25-average of 3.9%.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues The social relations established in the post-war period have been an essential component of German economic power and social cohesion. This social relations system, the German Social Model, has been built around key elements. The first of them is the principle of the “social market economy” (Soziale Marktwirtschaft), defined after the war, which implied companies were required to create an equitable social order. The principles of the social partners’ autonomy and of equality between them are guaranteed by the 1949 Constitution. Tripartism is limited to the social partners’ participation in state institutions; when it comes to regulating working conditions and labour law, however, the autonomy and freedom of the social partners and the legal and actual powers of collective agreements are far reaching. Any state law regulating working conditions is in danger of breaching the social partners’ autonomy. The intervention must therefore be objectively justified. Lastly, codetermination (Mitbestimmung) on establishment level as well as on company level is a central feature and foundation of the characteristic relations of “social partnership relations between employers and employee representatives.

2. Social partners Unions

Estimates based on union statistics indicate a union density of about 24% in 2005, but these data include retired and unemployed members. Representative survey data, relating to employees only, suggest a union density value closer to 20%. Since 2001 total membership in united Germany is lower than it was in West Germany before unification.

The DGB (Deutscher Gewerkschaftsbund), with 6.8 million members in 2005 and a member of the ETUC, is by far the largest union federation (84% of all unionised workers).

However, the nineties had already radically changed the face of trade unionism. Unification saw the demise of East Germany’s only trade union, FDGB (Freier Deutscher Gewerkschaftsbund), which boasted 9.6 million members in 1989. The FDGB, which acted as a “communication channel” between the State and the workers, also provided a raft of social services (holidays, loans, training, etc…). When it was disbanded in 1990, it urged its members to join the DGB unions and many, anxious to protect their interests in terms of jobs and income, did so, swelling the number of DGB members from 7.9 million in 1989 to 11.8 million in 1991112.

111 Statistisches Bundesamt (Hrsg.), Im Blickpunkt: Deutschland in der EU 2006, published 2006 112 Statistisches Bundesamt (Hrsg.), Im Blickpunkt: Deutschland in der EU 2006, published 2006

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Radical changes in the new Länder, the rise in unemployment, the sharp decline in industrial jobs and the rapid structural changes in the labour market resulted in a slump in union membership (-27% for the DGB between 1991 and 1997 (DGB). The decline in membership has since become a generalised feature of trade unionism in East and West. For example, 2006 saw a decline of 2.8%. This was less than the 3.3% of members lost in 2005 but overall, since 2000, the DGB has lost 15.3% of its members, despite being joined by a new union – the DAG (see below).

The beginning of the millenium saw a number of important trade union mergers under the umbrella of the DGB. In 2006, it was organised into only eight single trade unions (against 12 trade unions in 1998), the most important merger being the creation of one large services union, Verdi (Vereinigte Dienstleistungen). This merger also ended a long-term and important competition between trade unions in the service sector. For a long time, DAG (Deutsche Angestellten-Gewerkschaft), a white-collar union which had also been affiliated to the ETUC but was outside the DGB, had been competing with service sector unions associated to the DGB.

Other trade union organisations competing with DGB continue to exist:

- The DBB (Deutscher Beamtenbund) is the civil servants’ unions’ federation affiliated to ECITU, and has 1.25 million members.

- ULA (Union der leitenden Angestellten) organises managerial staff, mainly in the chemical sector, and is affiliated to EMC, having around 50,000 members.

The most important competition today, however, comes from trade unions affiliated to the CGB (Christlicher Gewerkschaftsbund), Confederation of Christian Unions and member of ECITU, accounting for 290,150 members. Starting in the East German metal industry, it has concluded collective agreements competing with IG Metall’s collective agreements. The capacity of these unions to conclude legally valid collective agreements has long been challenged, due to their low representativity. In March 2006, however, the Federal Labour Court recognised the capacity of the Christian Metalworkers’ Union (CGM) to conclude collective agreements. In the sector of temporary employment, two collective agreements, one concluded by DGB and one by CGB, co-exist, with the latter regulating lower wage levels. These agreements owe their importance to their legal capacity of contracting-out of the equal-pay principle for temporary employment.

Particurlarly in the service sectors, the newly-founded Verdi is challenged by new trade union organisations. Unions representing only specific professions or occupations have begun to change the structure of the trade union sector which has traditionally been shaped by a system of unified and sectoral unions organising all the employees in a certain sector. One example is Cockpit, an association of pilots and flight engineers, representing (in 2005) around 8,200 members. This organisation has successfully been fighting for higher wages and used the bargaining power deriving out of the flight industry’s vulnerability for pilots’ strikes. Another example is Marburger Bund, representing about 110,000 salaried doctors in hospitals.

Employers´organisations

The employers come together in three national organisations, divided into regional occupational groupings or chambers, with complementary responsibilities and powers:

- BDA (Bundesvereinigung der Deutschen Arbeitergeberverbände, the confederation of German employers’ associations represents the employers in all sectors of the economy and is organised on a sectoral basis, along the lines of the unions, having 51 sectoral organisations. The sectoral organisations include Gesamtmetall for metallurgy, BAVC (Bundesverband Chemie) for chemicals, VDMA for mechanical construction and HDB (Hauptverband der Deutschen Bauindustrie) for building construction.

- The BDI (Bundesverband der Deutschen Industrie/Federation of German industry) covers 39 regional and sectoral industrial groups. The BDA and BDI have close links, sharing tasks. Both are members of BusinessEurope. While BDA deals with labour relations, working conditions, employers’ functions and the trade unions, the BDI is focused on economic questions.

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- The VKA (Verband der Kommunalen Arbeitgeberverbände), affiliated to CEEP, and TdL (Tarifgemeinschaft deutscher Länder) group together local public bodies and the Länder.

- Different organisations cover SMEs, cottage industries and commercial firms.

- The DIHT (Deutscher Industrie- und Handelstag/Association of German chambers of trade and industry) brings together about one hundred chambers. These public bodies to which membership is compulsory deal with local problems and vocational training, and are present in the SMEs.

According to BDA estimates, about 75% of companies (employing 80% of workers) were members of the employers’ organisation in 2005. Like the unions, the employers, too, have had to come to grips with major changes in the nineties, including: the establishment of employers’ organisations in the new Länder, the financial difficulties of their members’, the withdrawal of companies wishing to escape the wage constraints of collective agreements, especially in East Germany. The development is called Verbandsflucht (escape from organisations).

3. Joint bodies The Social Partners, namely BDA and its counterpart DGB, participate in a number of state institutions. They co-manage the social protection bodies and the federal labour office; they participate in the labour courts. The reduction in the coverage offered by collective agreements, social services reform, and the introduction of employment plans had, for a short time, lead to a shift towards tripartism, in the context of the 1998 “alliance for work” (Bündnis für Arbeit), a governmental initiative at federal level for cooperation between trade unions, employers and the government, under the Schröder government. However, these attempts failed, and the tendency has since been to think about independent legal protection by the state. With less and less working relationships covered by collective agreements, the lack of statutory minimum standards has become precarious. In 2002, 19% of workers received a wage below the OECD-low level standard of one third of the national average wage113. This is one of the reasons why the introduction of a statutory minimum wage, along the lines of the Posting of Workers Act (Arbeitnehmerentsendegesetz, AEntG) of 1996 is currently being discussed.

4. Collective bargaining system

Legal basis and key issues The constitutionally guaranteed “autonomy of the social partners” means that action by the social partners takes precedence over State intervention, which is used only to provide a framework or minimum rules and regulations. Combined with case law, collective agreements form the legal basis for labour relations. There is no formal obligation to negotiate; however, collective action such as strikes and lock- outs are admissible in order to exert pressure in negotiations.

Due to the establishment of new trade unions, the capacity of trade unions to conclude collective agreements has recently come under discussion. Representativity is not a formal requirement. In March 2006, the Federal Labour Court acknowledged the legal capacity of a Christian trade union, founded not in representativity of membership, but on actual bargaining power documented by the fact of having formerly and actually negotiated collective agreements.

Collective agreements, according to the Collective Agreements Act (TVG, Tarifvertragsgesetz) have direct and binding power. They apply to the members of the signatory parties (TVG, art. 4.1) and may be extended (allgemeinverbindlich) by a tripartite committee if they cover at least 50% of the workers concerned (TVG, art. 5). However, their actual importance goes beyond the members of the signatory parties, as employers usually apply them to all their workers on a contractual basis.

113 Beckmann, Petra, EU-Beschäftigungsquote. Auch richtige Zahlen können in die Irre führen, IAB-Kurzmitteilungen Nr. 11/2003

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Most collective bargaining is decentralised at sectoral and regional level. Sectoral collective agreements (Flächentarifvertrag) are generally negotiated at regional level, based on federal guidelines. Collective agreements at company level are still rare.

Main features There are consistently around 8,000 newly negotiated or modified collective agreements each year. Currently, more than 50,000 sectoral collective agreements and about 6,000 single-company collective agreements are in effect114.

As for unification, the introduction of a collective bargaining system has encountered difficulties in the new Länder such as declining membership of employers’ organisations and unions, divisions between the unions, limited coverage, failure to comply with agreements (which are considered as points of reference rather than as norms). These difficulties put the entire system under pressure, not least in the metallurgy sector, where employers are proposing more decentralisation, i.e. bargaining within the company.

In 2004, collective agreements covered 68% of West German undertakings and 53% of West German workers, and 26% of East German undertakings and 44% of East German workers, but with significant variations depending on the sector and the size of the undertakings. Company agreements covered 9% of West German and 14% of East German undertakings.

Development of adherence to collective agreements (%)

1998 1999 2000 2001 2002 2003 2004 West 76 73 70 71 70 70 68 East 63 57 55 56 55 54 53 Source: (9)

Structure of adherence to collective agreements (%)

Sectoral company collective collective no collective agreement agreement agreement company policy/ contracts in line none at all with a collective agreement West East West East West East West East 61 41 7 12 32 50 48 47 Sources: Hans-Böckler-Stiftung

Collective agreements include multi-annual “framework agreements” on general working conditions and “ordinary” annual agreements on salaries, holidays, working hours, etc. Extra agreements intended to safeguard job security (Beschäftigungssicherung) cover flexible working hours, lower pay for some workers entering the workforce for the first time, part-time work for older workers and guaranteed sickness benefit.

Current trends suggest a decline in sectoral negotiations, and the decentralisation and differentiation of collective negotiations. However, decentralisation has not resulted in the conclusion of collective agreements at company level, but rather by a shift of collective bargaining to Works Council level. Increasingly, sectoral agreements make provision for waivers or opening clauses (Öffnungsklausen, Härteklausen) covering a portion of the wages or contractual working hours, through agreement or in the event of the company running into difficulty. For specific situations of economic difficulty, opening clauses provide for Works Councils’ competences to regulate certain working conditions (or sometimes

114 Zachert, Ulrich, Labour conciliation, mediation and arbitration in Germany, in: Valdés Dal-Ré, Fernando (dir.), Labour conciliation, mediation and arbitration in European countries, Madrid 2003, p. 171

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the employer’s prerogative) contrary to the collective agreement.115 The competition between trade unions and Works Councils which everyone had thought to be overcome seems to be re-emerging in this context, and collective agreements use these clauses to try and control decentralisation processes.

5. Collective disputes There is no mandatory state arbitration or mediation. The collective agreements’ arbitration and mediation procedures are used in the event of a breakdown in negotiations: in the metallurgy sector, the 1980 Gesamtmetall-IGMetall agreement made provision for a voluntary arbitration procedure.

Strikes Under the “peace obligation” (Friedenspflicht), the social partners must not take collective action as long as there is a collective agreement in force. Mostly, this obligation is extended beyond the period of validity of the agreement, in order to guarantee negotiations in good faith. Collective action has become a rare occurrence and has been in decline since 1970. Since 1981, 33 workdays days per 1000 workers have been lost in strikes in Germany – only four work days in the service sector116. However, the emergence of new trade unions such as Cockpit and Marburger Bund threaten to destabilise traditional labour relations again by forcing competition between trade unions.

6. Codetermination Codetermination (Mitbestimmung) comprises two aspects:

- codetermination and participation at establishment level (Mitbestimmung im Betrieb), based on the involvement of the Works Council (Betriebsrat),

- codetermination – or co-decision – at company level (Mitbestimmung im Unternehmen), based on employees being represented on the company’s supervisory board.

Founded on the principles of economic democracy, equal rights for capital and labour, the monitoring of economic power and social progress, codetermination has not always been as accepted as it is today. Historically, it came into being following a bitter power struggle between the social partners and required a learning process which is far from over.

“Blue-collar workers’ committees” and “white-collar workers’ committees” first emerged as far back as the 19th century117. In 1920, the legal establishment of Works Councils was marked by violence (44 demonstrators were killed on the day of the vote). The Weimar Republic’s constitution conferred social policy functions on the workers’ and soldiers’ “councils” which arose out of the 1918 revolution. However, due to the economic and political unrest under Weimar, these councils did not develop fully, and the national-socialism of 1933-1934 brushed aside the unions and councils. Following Germany’s collapse in 1945, Act N° 22 of 10 April 1946 on monitoring committees allowed Works Councils to be set up once again. The Länder issued their own laws on the subject, based on the 1920 provisions, but with significant differences.

The SPD and DGB continued to claim co-decision rights in economic matters. This idea resulted in the Act of 21 May 1951 on workers’ co-decision rights on the boards of directors and management boards of mining and steel companies (Montanmitbestimmung, Act completed in 1956), which introduced joint representation on the Supervisory Boards of companies in this sector. However, the conservative majority under Adenauer was very reluctant to extend these rights to all sectors of the economy.

115 According to representative IAB-numbers (with 16.000 companies participating), 13% of establishments adhering to a collective agreements say it contained an opening clause (13). 116 IW Köln, Mitbestimmungsgesetz von 1976: In die Jahre gekommen, iwd 35 31 August 2006 117 The distinction between blue-collar and white-collar workers had permeated work relations in German industry for a long time, but has almost disappeared since the 1990s.

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Strikes and other action led to the Works Constitution Act (Betriebsverfassungsgesetz BetrVG), passed on 11 October 1952. Respective representation for public sector workers on the establishment (called Dienststelle - administrative service unit) was introduced in 1955 (BPersVG, Bundespersonalvertretungs- gesetz). These Acts form the basis for today’s Works Councils. The BetrVG gave employees codetermination rights in social matters and some participation in employers’ economic decisions. However, no provision was made for any co-management or co-administration rights; those were left for co-decision on company level. The Act made provision for a minority representation for employees on the supervisory boards (one third of members) which were codified in 2004 in the Act on One-Third- Participation (Drittelbeteiligungsgesetz).

The social democratic/liberal coalition under Chancellor Brandt completely revised the 1952 Act (BetrVG) on 15 January 1972. The employers, considering the reform an erosion of their managerial prerogatives and consequences for the economy, blamed the “union-controlled State”. The social partners, however, gradually learned to live with these institutions which now share a common understanding.

A further step was taken with the Codetermination Act of 4 May 1976 (MitbG, Mitbestimmungsgesetz) which followed a compromise between the Social Democratic and Liberal parties of the government coalition. This Act made provision for almost-equal representation on the supervisory boards of companies employing more than 2,000 persons. The initial opposition of the employers (the BDA took the Act to the Constitutional Court) now seems to have been overcome, even though it may not be true to say that a consensus has been reached.

Important revisions of the Works Constitution Act (BetrVG) came into force in 1988 and 2001. In 1988, the mandates of the Works Councils were extended from three to four years and minorities’ rights were strengthened. Information and consultation on new technologies were introduced. The notion of managerial staff (Leitende Angestellte) was defined and given representation through representative committees (Sprecherausschuss) which come under a specific law (Sprecherausschussgesetz of 1988). In 2001, election and Works Council management were simplified in order to facilitate elections and the creation of Works Councils in SMEs, and provisions to promote equality and prevent discrimination in the workplace were introduced.

Unification radically transformed representation systems and, more generally, all labour-related matters in the former GDR. Then, the GDR Constitution had guaranteed “participation rights”, and the codified law on labour relations (unlike that of the FRG) provided for annual company agreements and cooperation between the workforce and management in the drawing up of rationalisation measures. Companies’ five-year economic and social development plans were prepared by unions and management. Establishment union offices (BGL Betriebsgewerkschaftsleitung), introduced in 1948, emulated the role of the FDGB as the communication channel at establishment level. The BGLs were involved in social regulation and the implementation of plans, the management of day nurseries, cooperative shops, leisure activities, etc., playing a key role in making the establishment a social venue118.

The first Works Council elections in more than 40 years were held in late 1989-early 1990. Often, these councils co-existed for several months with the BGLs. In a radical change, the Treaty of State on the creation of the Economic and Social Union of 18 May 1990 provided for a “social market economy”. It also introduced essentially West German laws on labour relations. The Unification Treaty of 31 August 1990 then extended the entire West German legal system to the former GDR. Works Councils became more widespread as new union structures were set up and undertakings were reorganised. The Works Councils immediately had to come to grips with a number of issues: new legal, economic and political rules, changes in company organisation and mass redundancies, the emergence of new players, the taking on of new roles by unions and employers, and high expectations in a variety of areas on the part of the employees.

A thorough review of the future of the codetermination system first began in 1998, based on the work of a Mitbestimmung committee, made up of representatives of all social players. The committee’s report stated that codetermination was “one of the pillars of German economic order”. It was also a “means of social integration” and an “efficient company management tool in that it combined social responsibility

118 Hans-Böckler-Stiftung in journal « Mitbestimmung « 9/2006

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and economic reason”119. In view of European harmonisation, a new Codetermination Commission (Mitbestimmungskommission) under the presidency of Kurt Biedenkopf was established in 2005. It delivered its report in December 2006, the academic members of the Commission proposing changes while basically holding that codetermination was an essential and useful feature of the German industrial relations system. However, in the end the members were not able to prepare a common report120. Employers’ representatives on the Commission particularly objected and judged the economic consequences of codetermination differently than did academic members.

III. EMPLOYEES’ REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues and types of representation and bodies Works Councils (Betriebsrat) are made up solely of employees and represent their interests in the private sector. They are elected for four years in establishments with at least five employees. The complete number of Works Councils existing in Germany is unknown121. In 2004, the IAB estimated that Works Councils existed in around 105,000 establishments, representing around 11 million employees.

Companies/employees working in companies with Works Councils

2005 2004 2003 2002 2001 Companies 13.8% 13.4% 13.9% 15.8% 15.8% Employees 52.2% 52.5% 53.2% 55.7% 55.7% Source: Hans-Böckler-Stiftung

Works Councils’ rights are particularly extensive in social matters, but more limited on economic and financial matters (representatives on supervisory boards are supposed to deal with the latter). The transposition of Directive 2002/14/EC has not induced any major changes. An economic committee (Wirtschaftsausschuss) is set up in establishments with more than 100 regular employees (BetrVG art. 106). A company works council (Gesamtbetriebsrat) is set up when there are several works wouncils in a single company (BetrVG art. 47). There is no specific election. The local works Councils send representatives. A group works council (Konzernbetriebsrat) may be established at the request of the joint Works Councils where 75% of the group’s employees are represented (BetrVG art. 54). There is no specific election. The company works councils send their representatives.

Works councils are strictly independent of the unions, but actual relations between the two are close:

– Most works council members are members of unions, particularly the DGB. However, in the absence of an official method for collecting the results, estimates by different bodies vary depending on the sample groups used.

– The unions help the works councils by providing them with information, training and expertise within the framework of their new prerogatives (e.g. new technologies).

– The trade unions represented in an establishment have statutory rights to help and support, but also to control works councils and employers (namely BetrVG art. 2, 23). They can initiate works councils elections (art. 16.2).

119 vorher Kommission Mitbestimmung, Mitbestimmung und neue Unternehmenskulturen – Bilanz und Perspektiven, Bertelsmann Stiftung/Hans-Böckler-Stiftung, Gütersloh, 1998 120 Kommission zur Modernisierung der deutschen Unternehmensmitbestimmung, Bericht der wissenschaftlichen Mitglieder der Kommission mit Stellungnahmen der Vertreter der Unternehmen und der Vertreter der Arbeitnehmer, Dezember 2006 121 Wanger, Susanne, Beschäftigungsgewinne sind nur die halbe Wahrheit, IAB-Kurzbericht Nr.22/2005

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Estimates of union membership among works councils members

WSI IW WSI IW estimates WSI estimate IW estimates estimates122 estimates123 estimates 2002 2006 2006 1998 1998 2002 Participation 80% 68% 80.4% 81% rate

DGB 83% 62% 75.7% 58% 73% 49% DAG 3% 3% dissolved dissolved dissolved dissolved Others 2% 3% 1% 3% 3% not unionised 33% 41% 23.6% 47.5% Sources: Wanger, Susanne, Beschäftigungsgewinne sind nur die halbe Wahrheit, IAB-Kurzbericht Nr.22/2005 Bispinck, Reinhard/WSI-Tarifarchiv, Wie flexibel sind Tarifverträge? Eine Untersuchung von Tarifverträgen in über 20 Wirtschaftszweigen und Tarifbereichen. Reihe: Elemente qualitativer Tarifpolitik, Nr. 60, Düsseldorf: 2005

Union representatives have access to the establishments, can attend establishment meetings and, in some cases, Works Council meetings (but they rarely do so). Relations with the unions differ depending on the views of the Works Council members. In very large establishments, the trade unions themselves are represented by elected members and employees (Betriebliche Vertrauensleute, “trusted members of the establishment” workplace representatives). Union action at sectoral level and Works Council action at local level usually complement each other. They also complement each other in terms of the action they take: the Works Councils cannot intervene in labour disputes, only unions can call a strike. The competence of Works Councils and employers to regulate working conditions which are ordinarily regulated by collective agreement is limited (BetrVG art. 77.3).

However, decentralisation and negotiation differentiation is shifting the balance. Opening clauses and derogation clauses contained in collective agreements open space hitherto not available to Works Councils and employers. There have also been developments of “illegal flexibilisation”, of Works Councils and employers collaborating on concluding agreements deviating from collective agreements against TVG art. 4.3 and BetrVG art. 77.3. In 1999, the Federal Labour Court accepted the right of the social partners (trade unions and employers’ organisations) to ask for an inhibitory injunction in such cases (Unterlassungsanspruch)124 and that decision remains controversial.

2. Legal basis and scope The main legal text is the Works Constitution Act of 11 October 1952, repealed and replaced by the Act of 15 January 1972 (Betriebsverfassungsgesetz BetrVG), revised in 1988 and 2001. Collective agreements may make provision for additional or exceptional representations (BetrVG art. 3).

Works Councils are set up in all establishments with at least five permanent employees (Arbeitnehmer) with voting rights, three of whom are eligible for election (BetrVG art.1); and also isolated and autonomous sections of establishments (BetrVG art.4). Joint Works Councils for several establishments owned by one and the same company and other variations can be set up by collective agreement (BetrVG art. 3).

Neither the public sector (BetrVG art. 130) nor religious institutions and their charitable or educational organisations are included in the scope of application (BetrVG art. 118.2). However, a similar representational system (Personalrat) exists in the public sector and is governed by the Federal Act on workers’ representation of 5 August 1955 (Bundes-Personalvertretungsgesetz), revised on 15 March 1974 and the respective Acts of the Länder. The provisions are similar to those in the private sector, with

122 Research by Büro für Sozialforschung, Kassel (15). 123 Institut der deutschen Wirtschaft (14) and (30);. According to estimates (14), 33.000 members of Works Councils about 10% of members do not declare their membership when asked. 124 BAG, 20.4.1999 (Burda), AP Nr. 89 Art. 9 GG. See also (24).

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workforce participation, co-decision and joint action in social matters, in matters concerning the workforce and in organisational matters, however, being more common and less differentiated. Civil servants form a separate group alongside blue and white-collar workers. Representation in religious establishments excluded from the Works Council Act (BetrVG) is regulated by Church Law of the Catholic and Protestant churches which provide for representative structures (Mitarbeitervertretungen, representation of staff) similar to those in the public sector.

Restrictions on codetermination rights, especially in economic matters, apply to political, religious, charitable, artistic, educational and research organisations, as well as the media: these restrictions are supposed to protect the political, religious, etc. freedoms within those organisations (tendency protection, Tendenzschutz BetrVG art. 118.1). There are specific provisions for flight personnel (BetrVG art. 114).

3. Capacity for representation German Works Councils cannot manage assets (BetrVG art. 42). Their role is to represent the entire workforce and to advance their interests. They do not have the capacity to represent individual employees before the employers or before the courts.

4. Compostition A works council is elected, for four years (prior to 1989: three years) (BetrVG art. 21), and made up solely by employees, over 18 years of age. The definition of an employee (Arbeitnehmer) used in BetrVG art.5 differs from the general definition of an employee. Managerial staff (Leitende Angestellte )are excluded according to BetrVG art. 5.3. Since 1988, the Sprecherausschussgesetz (SprAuG) provides for a specific representation of managerial staff (hardly elected and established in practice).

The number of works council representatives varies as follows (BetrVG Art.9; art.38):

N° of full-time representatives N° employees with N° of representatives on (exempted from voting rights the Works Council occupation on their job) 5-20 1 - 21-50 3 - 51-100 5 - 101-200 7 - 201-400 9 1 401-500 11 1 501-700 11 2 701-900 13 2 901-1000 13 3 1001-1500 15 3 1501-2000 17 4 2001-2500 19 5 2501-3000 21 5 3001-3500 23 6 3501-4000 25 6 4001-4500 27 7 4501-5000 29 7 5001-6000 31 8 6001-7000 33 9 7001-8000 35 10 8001-9000 35 11 9001-10000 37 12

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N° of full-time representatives N° employees with N° of representatives on (exempted from voting rights the Works Council occupation on their job) more than 10000 + 2 for each additional 3,000 + 1 for each additional 2,000

Elections are by secret ballot, organised by a specific employee’s election committee (election can also be initiated by a trade union, BetrVG, art. 16). Elections take place between 1 March and 31 May every four years (1990, 1994, 1998, 2002, 2006, etc.) (BetrVG art. 13), and when the works council is first established.

Under BetrVG art. 8 and 14), voters employed in the establishment for more than 6 months are eligible and candidates may also be proposed by the unions or by a group of 50 voters or 20% of the voters (at least 3 voters). The distribution of seats is proportional (BetrVG art. 14). Since the 2001 reform, the minority gender is to be represented according to the percentage in the workforce (BetrVG, art. 15.2). The percentage of women representatives rose to 25.9% in 2006, representing their share in the workforce (25%) 125.

Young workers (under 18 or under 25 years of age and in training) are elected to participate in Works Council activities and in decisions of specific concern to them (BetrVG art. 60 et sequ.: Managerial staff can elect the “representatives’ committee” (Sprecherausschuss) at the same time as the Works Councils (BetrVG art. 18a). Representatives for disabled workers may participate in works council meetings in an advisory capacity (BetrVG art. 32, SGB XI art. 94).

The union representative in the establishment may take part in works council meetings in an advisory capacity at the request of one quarter of the members within the works council (BetrVG, art. 31). BetrVG, art. 2 in general obliges the employer works council to cooperate with the trade unions and the employers’ association represented at the establishment. Union representatives are not regulated by law; trade unions associated to the DGB have their members elect representatives (so-called Betriebliche Vertrauensleute, “trusted members of the establishment”) in large companies.

5. Protection granted to the members Works Council members must not be prevented from carrying out their duties and must not be favoured or placed at a disadvantage. They are entitled to the same pay rises as would apply to their original job. A period of protection of one to two years, including training, is granted to members exempted from work (BetrVG art. 37 and 119). All these rights can be enforced before the labour courts. Works Council members may not be dismissed without the prior agreement of the Works Council. Candidates also enjoy special protection for six months (BetrVG art.103). Dismissals contrary to these provisions will be considered null and void.

6. Working of the body and decision-making A works council elects its Chair and his/her deputy from among its members. The Chair represents the Works Council when decisions taken by the latter are submitted to the employer. When a works council has at least nine members, it elects a works committee (Betriebsausschuss) to deal with day-to-day matters (BetrVG art. 27). In establishments with more than 100 employees, the works council may establish other committees or working groups and assign special duties to them (BetrVG art. 28, 28a).

Under BetrVG art. 29 et sequens, works council meetings are convened by the Chair, who sets the agenda and presides over the discussions. These meetings take place during working hours on the initiative of the

125 Bispinck, Reinhard/WSI-Tarifarchiv, Wie flexibel sind Tarifverträge? Eine Untersuchung von Tarifverträgen in über 20 Wirtschaftszweigen und Tarifbereichen. Reihe: Elemente qualitativer Tarifpolitik, Nr. 60, Düsseldorf: 2005

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Chair or of one quarter of the members. Minutes of the proceedings must be drawn up. Decisions must be taken by a majority of the members present, bar occasional exceptions. Employers must be given prior notice of the dates of works council meetings but they participate only in those held at their request or those to which they are expressly asked to attend. In such cases a representative of the employers’ organisation of which they are members may attend on their behalf. Employers and works councils shall meet at least once a month (BetrVG art. 29 and 74). In some cases, provision is made for representatives of the unions, young people and disabled workers to attend these meetings and take part in decisions; in matters severely affecting young people or disabled workers, their representatives have a right to a suspensory veto.

Once every three months126, the works council must, during working hours, convene a staff meeting (Betriebsversammlung) for all employees of the establishment (or meetings on department level) to which it submits a report on its activities. The meetings may deal with matters directly concerning the establishment or its employees, including matters regarding collective agreements or social and economic policy (BetrVG art. 42-45). Employers must be invited to attend these meetings and may take the floor. Once a year, employers must submit a report on the situation of and developments in the establishment. In addition, an employer or one quarter of the workforce may ask for a meeting on any given subject (BetrVG art. 43 and 44).

Works councils may set times at which they may be consulted during working hours (Sprechstunden) (BetrVG art. 39). Independently of specific and legally guaranteed powers, works councils’ elected representatives are often in direct daily contact with the employees (they are present on the work premises and can move about freely and mix with the workers).

7. Means The cost of works council activities are borne by the employer. Where necessary, employers must provide the works council with premises, material facilities and office staff for meetings, consultations and day- to-day administration (BetrVG art. 40). In 2005, works councils’ operating costs (including wages) were assessed by an IW-study (24) at 650 Euro per year and employee. However, among these costs, costs for establishment meetings are included at 147 Euro. Costs for the arbitration committee were estimated at 60 Euro, leaving 338 Euro for the direct activities for the works councils. A study by INFO-Institut counted around 260-397 Euro for for SMEs.

Members are not paid for their activities on the works council, but are allowed time off work to carry them out (for which they may also be paid overtime). The number of Works Council members allowed full exemption from work depends on the size of the establishment. The works council elects these people by secret ballot after consultation with the employer (BetrVG art. 37 and 38). Works council members also get time off work for training when that training is needed for the performance of their duties on the works council. Also, during his/her term of office, each works council member is entitled to three weeks (four weeks for newly elected members), for training “approved by the Land central authorities” (BetrVG art. 37.6 and 37.7). The cost of such training is borne by the employer127.

With the special approval of the employer, a works council may call on experts when this is deemed necessary for the performance of its duties (BetrVG art. 80.3). The arbitration committee (v.cf) may also call for expert assistance in the event of a disagreement between the employer and the works council concerning economic information: “the arbitration committee may consult experts when this is necessary to enable to enable a decision to be reached” (BetrVG art. 109). The experts’ fees and all other costs incurred by works council activities are borne by the employers, who must agree to the expenditure in advance. This expertise is provided by union experts, or by researchers or other independent advisors (e.g. legal advisors or economic consultants).

Works council members must respect the confidentiality of the information provided. In other words, they must not reveal or use confidential information about the business obtained through their membership of the Works Council, which the employer has with due right expressly classified as

126 In practice 2 to 3 times a year (101). 127 Training courses increased in the nineties (101).

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confidential (BetrVG art. 79). This duty of confidentiality also applies to experts and to other representatives attending Works Council meetings.

8. Role and rights The employers and the works councils work together in mutual trust for the welfare of the employees and the smooth running of the establishment within the framework of the applicable collective agreements, and in cooperation with the trade unions and employers’ organisations represented in the establishment (BetrVG art. 2.1). The rules applicable thereto are contained in the legislation which states that employers and works councils must meet at least once a month for discussions. They must show a willingness to reach agreement on contentious matters and submit proposals to try and resolve their differences. Actions which could lead to industrial disputes between the employer and works council must be avoided (BetrVG art. 74.1 and 74.2). However, this does not impede members of a Works Council who are also trade union members to exercise their rights as trade union members and/or activists.

Works councils’ general duties are (BetrVG art. 80): to ensure that legislative provisions, rules and regulations, and agreements are complied with; to propose to the employers measures that are useful for the establishment and the workforce; to promote equal rights for men and women; to promote compatibility of family and employment (work-life-balance); to transmit to the employer suggestions put forward by the workforce and the young workers’ representatives and, where these seem justified, to conduct the relevant negotiations and inform the parties concerned of the results; to promote the assimilation of disabled people in need of protection; to prepare and promote representation for young workers; to promote jobs for the older workers in the establishment; to promote the integration of foreign workers in the establishment and work towards greater understanding between them and German workers and to propose measures to fight racism; and to promote health and safety at work.

Works councils enjoy the following rights: a) information and consultation rights: These include rights to information (Information or Unterrichtung depending on the degree of formality), rights to make proposals (Vorschlag), and rights to make their opinion known (Anhörung) or even to be consulted (Beratung); b) cooperation or participation rights (Mitwirkung): These include rights of approval (Zustimmung), rights of veto (Veto), and rights to protest (Widerspruch). c) codetermination rights (Mitbestimmung), under which the works councils have the power to participate in the decision-making process and in the design of employer’s decisions.

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The areas to which these rights extend are stipulated in the legislation (BetrVG).

CONSULTATION AND CODETERMINATION APPROVAL AND OBJECTION OPINION INFORMATION (BetrVG art.85, 87, 91, 94, (BetrVG art. 99, 102 and (BetrVG art. 90, 92, 97 & (BetrVG art. 106). 95, 98 & 112) 103) 111) Rules of procedure, discipline Individual recruitment, Reconciling interests in the Economic and financial Working time, holidays classifications, transfers, event of changes. situation etc. New working procedures and Production and sales situation Rules and methods of Individual dismissals methods remuneration Production and investment Workforce assessment Dismissal of a protected Change in establishment’s programme employee organisation or aims mechanism Rationalisation plans Establishment mergers Health and safety Various processes and projects rules/Infringement of Establishment transfers likely to seriously affect ergonomic data Company cut-backs and the interests of the workforce Complementary systems and closures organisation of social Building and improvement of activities premises Allocation of housing Technical facilities Employee demands not Work places or processes amounting to “rights” Requirements in terms of staff Questionnaires concerning and vocational training workforce

Workforce selection rules (recruitment, transfer, dismissal) Organisation of vocational training. Training officers Social plan in the event of changes

a) Information and consultation Information is the basis of all the works council’s other rights. “In order to fulfil its role under the terms of current legislation, the works council must be fully informed in good time by the employer. The documents enabling it to perform its duties must be made available upon request at all times” (BetrVG art. 80.2). (For confidentiality of information provided see above.)

Provision is made for the economic committee to be fully informed (but not consulted) in good time on “economic matters” (i.e. economic and financial situation, production, plans, programmes and changes, etc.) (BetrVG art. 106).

The works council or its bodies must also be informed “in good time” prior to being consulted on employment planning, working methods and “changes likely to have very unfavourable effects on all or large sections of the workforce” (BetrVG art. 111). An agreement on the “if” and “how” of changes may be concluded (reconciling interests, Interessenausgleich).

In establishments with more than 20 employees, the head of the undertaking, in the event of basic changes being planned that are likely to have serious implications for all or a large part of the workforce (Betriebsänderung – BetrVG art. 111), is obliged to give full information in good time and enter into prior consultation with the works councils. The term “changes to the establishment” with possibly serious implications for all or large sections of the workforce is broadly defined, including, for instance:

- Reduction in the size or closure of the establishment or large parts of it,

- Transfer of the establishment or of large parts of it,

- Establishment mergers or demergers,

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- Basic changes in the establishment’s organisation, aims, installations or facilities,

- The introduction of new working methods and procedures.

- When a plan to make changes in an establishment is proposed, negotiations must be held on two aspects:

- Decisions on how and when the proposed changes will be introduced. The parties (Works Council and employer) must try to arrive at a “reconcilement of interests” agreement (Interessenausgleich).

- Decisions on the compensation of economic losses for the workforce or part of the workforce; a social plan (Sozialplan) aimed at compensating for or mitigating these effects must be negotiated.

Should the works council and the employer fail to agree on one of these two aspects, there is a common procedure. In the event of disagreement between the Works Council and the head of the company, the Chair of the Land labour office may first intervene. In a second stage, the arbitration committee can be called to intervene, with each party submitting proposals for settling differences (BetrVG art. 112). Should disagreement persist, the decision of the arbitration committee will replace the social plan agreement. The decision must seek to:

- reduce the workforce’s economic losses,

- take into account opportunities available to the workers on the labour market,

- ensure that the company’s future is not jeopardised.

In the case of failure of negotiations, the arbitration committee cannot decide, but only conciliate.

There is yet another difference between the two negotiations: While the social plan is enforceable before the labour courts, non-compliance with an agreement on reconciliation of interests, only obliges the employer to compensate the workers concerned (“compensation for losses” – Nachteilsausgleich) (BetrVG art. 113).

Requirements for applicability of works councils competences in art. 111-112a BetrVG

Reconcilliation of interest and Reconcilliation of interest and Notification of local social plan with decision-making social plan not and regional labour power of arbitration committee enforceable/voluntary office (KSchG, art. 17) (art. 111, 112) (BetrVG, art. 112a) Change is limited to collective redundancy without subsequent organisational changes not in first four years In companies with: Changes affecting 21-59 employees 6 persons 20% or 6 persons 6 persons 60-249 employees 10% or 26 persons 20% or 37 persons 10% or 26 persons 250-499 employees 10% or 26 persons 15% or 60 persons 10% or 26 persons 500 employees and more 31 persons 10% or 60 persons 31 persons

In addition, the Protection against Redundancies Act (Kündigungsschutzgesetz) states that the employer must determine the order of the redundancies on the basis of a number of social, occupational and family criteria. The guarantees concerning individual dismissals also apply. If an agreement on reconcilliation of interests contains a list of names to indicate who is to be dismissed, the selection will only be challenged legally if there are serious and obvious misjudgments (KSchG, art. 1.5).

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b) Cooperation/participation Where there are intermediate forms of participation (between codetermination and consultation), in cases explicitly provided for in the legislation, the Works Council “may oppose” measures planned by the employer. These rights of veto cover decisions concerning individual employees such as hiring, wage classification or transfer of employees (BetrVG, art. 99). The employer may not take the measure where there is a (reasonably founded) veto. However, these rights are limited to veto and do not amount to codetermination.

In the case of a works council’s objection to the dismissal of an employee (BetrVG, art. 102), the dismissal is not barred. However, should the employee take the employer to court asking for dismissal protection, the objection will guarantee the employee’s right to continued occupation in the firm for the time of the labour court process.

Works agreements (Betriebsvereinbarungen) Works councils may negotiate with employers with a view to concluding Works Agreements or Works Agreements (Betriebsvereinbarung)128. This is a kind of collective agreement at establishment level, with binding and normative force (BetrVG, art. 77). It is however subordinate to collective agreements concluded by trade unions and employers/employers’ associations. A Works Agreement may not regulate working conditions usually stipulated in collective agreements unless these contain respective opening clauses. It is possible to resort to the labour court for ultra vires action (v. BetrVG, art. 77.5).

Under codetermination powers, the agreement is enforceable (erzwingbar). In the event of a deadlock in negotiations, an arbitration committee may be established, the decision of which replaces agreement. Voluntary agreements (freiwillige Betriebsvereinbarung) are often concluded on social matters such as health and safety, social institutions and shareholdings in the company (BetrVG art. 88). Organisational matters concerning the representation bodies (e.g. number of members in a Company Works Council, BetrVG art. 47.4 and 47.5) may also be negotiated.

9. Other representation bodies

Arbitration committee (Einigungsstelle) Should the Works Council and management fail to reach agreement in codetermination matters, the matter is decided by the arbitration committee (Einigungsstelle)129. The arbitration body is established for the event of each such disagreement. It may also be established on a permanent basis by way of a Works Agreement or collective agreement. Decisions are binding. The arbitration committee must take decisions in all fairness, bearing in mind the interests of the establishment and the workers concerned (BetrVG art. 76.5). The Committee comprises an equal number of assessors designated by the employer and the Works Council and an impartial Chair. The number of assessors as well as the Chairperson is to be agreed upon by the two parties (BetrVG art. 76.2). Negotiations failing, these decisions can (in codetermination matters) be taken by the labour court (ArbGG, art. 98).

Economic committee (Wirtschaftsausschuss) and economic matters The establishment of an economic committee is compulsory in companies with more than 100 permanent employees. The committee’s role is “to discuss economic matters with the head of the company and to inform the Works Council (BetrVG art. 106.1). These duties are carried out at company level, not at establishment level.

An economic committee must comprise between 3 and 7 members, belonging to the company, at least one of whom must be a Works Council member. Management and/or managerial staff are not expressly

128 In the public sector, an “office agreement” (Dienstvereinbarung) is equivalent to a Works Agreement. 129 Employers avoid appealing to the arbitration committee, not least because this could lead to a lawsuit, which is expensive; an IW-study (16) calculated an average cost of 60 Euro per year and employee.

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excluded. Members of the Economic committee are appointed by the Works Council or the company Works Council (if there is one) for the duration of its mandate (BetrVG art. 107)130.

The economic committee must meet once a month. The meeting is attended by the head of the company or by his/her representative. The economic committee must report to the Works Council on these meetings. The company’s annual report must be submitted and explained to the economic committee. The Works Council also participates in this discussion.

Codetermination powers are limited to so-called social matters. The law only guarantees information and consultation on economic matters. These are mostly to be given to the Works Council. The Economic Committee as an accessory body is entitled to more detailed information.

There is also a very specific power of the Economic Committee worth mentioning. According to BetrVG art. 106, when information on the economic situation is not made available in good time and is not sufficiently complete, contrary to the request of the economic committee; or when there is disagreement between Works Council and head of company on these questions, an arbitration committee may be established and can make a decision. Its decision replaces an agreement. The arbitration committee may consult experts when this is necessary to enable it to take a decision

Company Works Council and Group Works Council The company Works Council (Gesamtbetriebsrat) is responsible for matters concerning the whole of the company or several establishments of one company, which cannot be settled by the individual works councils in each establishment (BetrVG art. 50.1). A company Works Council is made up of two delegates per Works Council. A Works Agreement may specify the number of members. The company Works Council elects a Chair and a Company Works Committee. A works councils’ general meeting, comprising the Chairs and members of the various works committees, must be convened at least once a year.

Group works councils (Konzernbetriebsrat) are empowered to deal with matters concerning a group or several companies within a group. It is particularly oriented towards economic matters: production, investments and organisation. The work of a group economic committee can provide back-up information and monitoring skills, in other words, it can influence policies decided at this level. The exercise of prerogatives on matters subject to codetermination and the conclusion of Works Agreements may, in rare cases, allow workers’ interests to be represented at the group’s economic and financial management level. The setting up and administrative procedures for these group councils are similar to those of the company works councils.

European Works Council As part of the move towards the internationalisation, the European Works Committees Act (Gesetz über Europäische Betriebsräte EBRG) of 28 October 1996 transposed Directive 94/45/EC. A European Works Council may be established in companies or groups with at least 1000 employees, 2x150 of which work in at least two Member States (Act on European Works Councils, EBRG, art. 3). There is no specific election. Employees are represented in the negotiations (as well as in the European Works Councils to be established in the event of a failure of negotiations) by delegates of the company Works Council and group Works Council (EBRG, art. 11, art. 22).

10. . Protection of rights Works Councils’ rights are enforceable before the labour courts. There is a specific procedure before the labour courts (Beschlussverfahren), according to the Act on Labour Courts (Arbeitsgerichtsgesetz, ArbGG, art. 80 et sequ.).

130 The Works Council may decide to transfer the duties of the economic committee to a Works Council committee.

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11. . Codetermination rights For matters dealt with by codetermination (Mitbestimmung), the works council’s participation in the decision-making process is compulsory. An agreement (Einigung) in the form of a Works Agreement must be reached (Betriebsvereinbarung). In the event of deadlock in negotiations, the parties may take their case to an arbitration body whose decisions can substitute the agreement.

An employer must not take a decision which is contrary to the opinion expressed by the Works Council. Any measure taken by the employer before having reached an agreement with the works councils can be stopped via an injunctive action before the Labour Court. Codetermination also gives the Works Council a right of initiative (Initiativrecht): They may also propose decisions and measures in the codetermination matters.

Rights to codetermination exist in the following matters and affairs:

- in “social” matters (reorganisation of working time, working conditions, health and safety, the provision of vocational training, additional pay, leisure activities131, etc (BetrVG art. 87, 98 and 91),

- in the event of changes to the establishment, to enable a social plan to be prepared (BetrVG art. 111 to 112a).

With regard to workers’ individual complaints/grievances: Under BetrVG art. 85, a Works Council may submit any disagreement to the arbitration committee, provided that there is no “right” involved (in which case the matter is due to be decided by the labour courts and not by arbitration).

The following table gives an overview over the variety of information and consultation rights guaranteed by the Works Constitution Act (BetrVG). Transposition and implementation of Directive 98/59/EC on collective redundancies has not led to any changes and the same is true of Directive 2002/14 on information and consultation.

Frequency/ BetrVG Addressees Object Social partners deadlines reference INFORMATION Entire workforce Report on establishment’s economic Once/year By employer or his/her Art. 43.2 of establishment situation and development trends representative during Report on social situation and on establishment meeting workforce situation Entire workforce Information on company’s economic Once every By employer following written Art. 110 situation and trends three months agreement of economic committee (or Works Council where appropriate) in companies with more than 1000 permanent employees Economic Presentation and explanation of Once/year During a meeting of the Art. 108.5 committee and annual report economic committee with Works Council participation of Works Council Works Report on workforce, social and At least By the head of the company Art. 53.2 committees economic situation and the once/year during a meeting of all Works development of the company Councils when there is a company Works Council Works Council Documents essential to the to the Fully and in By employer at Works Art. 80.2 Works Council in the performance of good time Council’s request its duties. Works Council has right to inspect gross salary and wage accounts

131 A Works Council does not itself manage social and cultural activities (canteens, rest homes, company relief and pension funds, etc.). These services are either presided over by their own management bodies (chair, board of directors and management committee), whose membership is established by agreement between the company management and the Works Council, or the employer runs the services and requests the Works Council’s approval for every administrative measure.

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Frequency/ BetrVG Addressees Object Social partners deadlines reference Economic Submission and presentation of Fully and in By the head of the company to Art. 106.2 committee necessary documents on company’s good time the economic committee. In and 106.3 economic situation, with indication of case of disagreement, decision effects of this on workforce planning, of the arbitration committee e.g.: (v.cf). company’s economic and financial situation Art. 109 production and sales situation production and investment programme rationalisation plans manufacturing & working methods, including introduction of new working methods scaling down, closure or transfer of establishments or sections of an establishment mergers or splitting of establishments changes in establishment’s organisation or aims processes and projects likely to seriously affect interests of workforce Workforce Information on changes in the In good time By employer Art. 81 concerned workplace, the measures envisaged as part of technical installation plans, working procedures and cycle of operations or changes in employment patterns, and their effects on jobs, the workplace environment, and the level and nature of the activity. Local Works Information and consultation By European Works Council EBRG, Council or undertaken according to the art. 35 employees of the information/consultation rights of the establishment European Works Council INFORMATION AND CONSULTATION Works Council information on present and future Full Information provided by employer Art. 92 requirements in terms of workforce as informat-ion together with pertinent documents well as on the measures resulting in good therefrom and vocational training time, prior measures consultat- Consultation of the Works Councils ion on the nature and scope of required measures and on ways of avoiding excessively harsh consequences Works Council may submit to the employer proposals aimed at determining workforce requirements Employer and Depending on issues pending At least Discussions with a strong Art. 74.1 Works Council once a determination to reach agreement month on contentious matters and the submission of proposals with a view to settling differences European Works Structure of the company or group Once a year in European Works Councils EBRG, Council Economic development of the established by law art. 32 company or group in the past and future Investments fundamental changes collective redundancies European Works Exceptional circumstances with Full in European Works Councils EBRG, Council possible effects on employees’ informat-ion established by law art. 33 interests, such as in good Transfer of the establishment or of time, prior large parts thereof consultat- closure of the establishment or large ion parts thereof collective redundancies

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III. EMPLOYEES’ REPRESENTATION IN CORPORATE BODIES

1. Legal basis and scope Large German companies132 have a two-tier structure. The supervisory board (Aufsichtsrat) makes decisions on general company policy, monitors the work of management and has to approve major decisions, in line with the company statute. The Supervisory Board, which usually meets four or five times a year, elects the management board (Vorstand), which deals with the day-to-day running of the company. This management board usually comprises a technical manager, a marketing manager and a personnel and social affairs manager (called Arbeitsdirektor – labour director).

Depending on the sector and the size of the company, the German system provides for minority, equal or almost equal workers’ representation on the supervisory boards of joint stock companies, cooperatives and mutuals. This representation takes place at company or group level and not at establishment level as in the case of works councils. This participation or “codetermination at company level” (Mitbestimmung im Unternehmen) is additional to the codetermination by works councils or “codetermination at establishment level” (Mitbestimmung im Betrieb). The system is applied both in the private and public sectors.

Excluded from participation are religious institutions and their charitable or educational organisations as well as political, denominational, charity, artistic, educational and research organisations and the media (protection of tendencies)133.

In cases of codetermination, the shareholders elect their representatives at the general meeting. Trade unions and works councils organise the election of employees’ representatives on the Supervisory Board. Often works councils members also sit on the Supervisory Board.

Codetermination trends in the private sector

As a percentage of the workforce 1984 1996 “Two-tier codetermination”: WC and joint or almost-joint participation 30.5% 24.5% “One-tier codetermination”: WC and, possibly, minority participation 18.9% 15.0% No codetermination: neither WC nor participation 50.6% 60.5% Source: vorher Kommission Mitbestimmung, Mitbestimmung und neue Unternehmenskulturen – Bilanz und Perspektiven, Bertelsmann Stiftung/Hans-Böckler-Stiftung, Gütersloh, 1998

The if and how of codetermination depends on the sector, legal organisation and size of the company. The following Acts regulate codetermination on supervisory boards:

- Codetermination Act of 4 May 1976 (Mitbestimmungsgesetz);

- Act on Codetermination in the coal, iron and steel sectors, of 21 May 1951 and the supplementary Act of 7 August 1956, amended in 1981, 1985 and 1988134, on co-decision in the mining and steel industries (Montan-Mitbestimmungsgesetz);

132 The most common type of company is the GmbH (Gesellschaft mit beschränkter Haftung – plc). A GmbH with more than 500 employees has to have a two-tier structure (supervisory board and board of directors or management board). A GmbH may be associated with a company in partnership (GmbH & CoKG). The AG (Aktiengesellschaft – ltd) is the system used by relatively large companies which have recourse to the capital markets and must have a two- tier structure (supervisory board, management board). Limited partnerships with share capital (KgaA Kommanditgesellschaft auf Aktien) are less common. Participation also applies in cooperatives (Erwerbs- und Wirtschaft Genossenschaft) and mutual insurance companies (Versicherungsverein auf Gegenseitigkeit). 133 According to the Mitbestimmung Commission report in 1998 (94), about 75 undertakings with more than 2,000 employees are excluded from participation because of Tendenzschutz.

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- Act on one-third-participation (Drittelbeteiligungsgesetz) of 18 May 2004, codifying respective provisions previously contained in the Works Constitution Act of 11 October 1952 (Betriebsverfassungsgesetz 1952).

Workers’ representation on Supervisory Boards

Codetermination in coal, 1976 Codetermination Act One-third participation iron and steel more than 2,000 employees more than 1,000 employees. more than 500 employees legal form: capital companies Mining and steel companies Legal form: GmbH (plc) and (AG, GmbH, KgaA, GmbH related groups with 20% of their cooperatives &CoKG), cooperatives (eG) Companies output in the sector AG (ltd) and KgaA and groups concerned Mutual insurance companies with a supervisory board. Controlling companies if the group’s total workforce exceeds 500 persons ½ of workers’ representatives ½ of workers’ representatives on 1/3 of workers’ representatives on on Supervisory Board: Supervisory Board Supervisory Board Workers’ In case of stalemate: casting one neutral member elected with representatives on vote by one of the representatives’ approval. Supervisory shareholders’ representatives Workers in associated groups: 7 Board workers’ representatives and 1 neutral member on a 15-member Supervisory Board

Management There must be a labour The labour director is elected with No specifications on membership of director. the approval of the workers’ management board Board representatives Coverage in 2004 746 50 3,500 (17)135

2. Composition The supervisory boards must be made up by an equal number of shareholders’ and workers’ representatives. For a workforce of up to 20,000, the workers elect two external employee representatives, and for a workforce of over 20,000, they elect three external employee representatives. Elections are by direct ballot for a workforce of fewer than 8,000; above that number, electoral colleges are used (about 1 for 90 workers). Candidates for these seats are proposed by the unions and are often trade union officials. The other employee representatives, occupying four, six or seven seats depending on the size of the company are employees of the company and are elected by proportional representation. Employee representatives must include at least one senior manager: Managerial staff separately elects at least one representative, the number depending on the representation of managerial staff among the workforce (MitbG art. 11.2).

Supervisory Boards elect their Chair and Vice-Chair by a two-thirds majority. If this majority is not attained, the shareholders’ representatives elect the Chair and the workers’ representatives the Vice-Chair. In this case, the Chair, one of the shareholders’ representatives, has the casting vote. A Supervisory Board elects the management board which must include a labour director, but workforce representatives do not have to approve his/her appointment, unlike the system used in the mining and steel sector. The presence of a senior manager among the workers and the possibility of the casting vote being on the shareholders’ side suggest a representation system with less than equal power on both sides.

134 Passed to ensure continued joint participation in the restructuring of mining and steel activities, parts of this Montanmitbestimmungs-Sicherungsgesetz were declared unconstitutional in 1999. 135 As far as codetermination mechanisms according to the Codetermination Act of 1976 are concerned, coverage had reached the number 767 in 2002 and is since slowly declining. In 2005, there were only 729 companies (18).

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Codetermination according to the 1976 Codetermination Act

Members on the employees' representatives Supervisory Board

trade Employees of union altogether election the company representa tives > 2000 - 8000 employees 12 6 4 2 Direct < 10.000 employees 12 6 4 2 Indirect 10.000-20.000 employees 16 8 6 2 Indirect > 20.000 employees 20 10 7 3 indirect

In 2005, there were 729 companies under codetermination according to the Act of 1976, giving a total of 5,200 employees’ representatives. Of these 3,760 were members of a DGB-affiliated union: 2,120 employees of the companies involved and 1,640 external trade union representatives) (27).

The workers propose to the general meeting of shareholders (which must ratify their proposals) the same number of candidates for appointment to the Supervisory Board as the shareholders do in the coal, iron and steel sector. One extra “neutral” member, acting as mediator, is appointed jointly by both parties, or if negotiations fail, by the court.

Supervisory Boards elect the entire management board. However, the “labour director”, who answers to the management board on matters relating to work and the workforce, while at the same time participating on an equal footing with the other managers in making decisions of a general nature, cannot be appointed or dismissed without the consent of a majority of workers’ representatives. Thus, although this person’s duties are those of an employer, he/she must rely on the workforce for election.

In companies having a Supervisory Board and fewer than 2,000 employees, one third of members of the Supervisory Board are workforce representatives. There is no specific provision concerning labour directors. The number of persons on the Supervisory Board depends on the legal form of the company and the Statute regulating its governance. A stock corporation (Aktiengesellschaft) can have a Supervisory Board of 3, 6, 9, 12, 15, 18 or 21 members. Employee representatives are elected by direct ballot by the workforce. The candidatures are put forward by the works councils (or by 10% (or 100) of the employees with voting rights), not the unions. In Supervisory Boards with at least 9 members (3 employee representatives), an external permanent union representative may be elected.

Codetermination according to Act on One-third participation

Number of employees' employed in the company representatives

at least 1 Depending on legal one third form and Statute in case more than 2 have to be elected: at least 2

3. Functions Workers’ representatives on a supervisory board are full members of the board, taking part in all discussions and decisions. A priori, they have a right to information and can influence the company’s policy decisions.

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Various studies on participation systems and the conclusions of the Mitbestimmung Commission have led to the following assumptions:

- Workers’ representatives’ influence on decision-making depends on the Supervisory Board’s position in the decision-making process - a position that has been weakened by restructuring and globalisation.

- Informality is an important aspect of the contacts between workers’ representatives and shareholders, i.e. the ways in which the information is provided and the “arrangements” made prior to meetings and voting. This informality provides the workers’ representatives with opportunities to influence decisions but, also, links these representatives to the decisions taken and limits the dissemination of information.

- Workers’ representation has now become an activity in its own right, the consequences of which may be perceived positively (competence) or negatively (remote from the “rank and file”).

- The presence of workers’ representatives on the Supervisory Boards does not slow down decision- making or reduce companies’ economic efficiency. On the whole, German supervisory boards are no less competent than the management bodies in companies in countries where there is no system of participation. Also, participation has allowed companies to negotiate structural adaptation.

- There is a connection between the economic decisions and the social repercussions of these decisions on which workers’ representatives focus their efforts. Participation in Supervisory Boards is, in fact, used to broaden the works councils’ room for manoeuvre rather than to influence economic strategy.

- The relationship between collective bargaining, codetermination within the establishment and participation is made more complicated by the decentralisation and differentiation of the negotiation system.

- Participation declined in importance in quantitative terms in the eighties and nineties as its room for manoeuvre in economic terms diminished, capital markets became increasingly important and pressure was stepped up in an effort to reduce decision-making times in a context where much was at stake in terms of jobs.

4. Representation of employees in the boards of European Companies There have not been important changes due to the implementation of Directives 2001/86/EC and 2003/72/EC (on employee involvement in the European Company) and 2003/72/EC (on employee involvement in the European Cooperative Society), but discussion on possible reforms of the German system has been more intense. The report of the scientific members of the newly-installed Codetermination Commission (Mitbestimmungskommission) which was delivered in December 2006 opted for greater flexibility, simplification of elections136 and the possibility of negotiating procedures and frameworks between the social partners, especially as far as the size of the supervisory board is concerned. A new and specific instrument of collective bargaining would have to be introduced for these objectives137.

136 In large firms such as Siemens, Daimlerchrysler or Deutsche Post election costs amount to 4 or 5 million Euro (17). 137 Hoffmann, Jürgen, Co-ordinated Continental European Market Economies under Pressure from Globalisation: Germany's "Rhineland capitalism”, 5 German Law Journal No 8 (1 August) /2004

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V. EMPLOYEE INVOLVEMENT IN DECISIONS THAT AFFECT THE UNDERTAKING

Recovery or bankruptcy procedures The Act on Insolvency (Insolvenzordnung of 1994 – InsO), which was passed in 1994 and entered into force on 1.1.1999, improved recovery and bankruptcy procedures. The following are the main provisions concerning employees’ rights and participation of employees’ representatives:

- As part of the procedure, the employees, in their capacity as creditors, are directly asked to give their opinion on the proposed plan to the general meeting and to the creditors’ committee (InsO art. 240). The Works Council and the Sprecherauschuss (managerial staff representation) are informed and consulted (InsO art. 218) about the plan. They are then asked to give their opinion (InsO art. 232) after consulting the employees (InsO art. 234/235). The decision on the plan is taken by the creditors organised into groups, one of which is the employees (InsO art. 222).

- Employment relationships continue to be valid. In case of dismissal, the provisions of the Protection against Redundancy Act (Kündigungsschutzgesetz) are retained (each single dismissal must be objectively justified), as are the provisions governing special protection for Works Council members, pregnant women and the disabled. The only change is that the period of notice for individual dismissals provided for in legislation, agreements and contracts is reduced to a maximum of 3 months in cases of an insolvency (InsO art. 113). In the case of a suspension of activities, closure gives legitimate grounds for dismissal, but does not dispense with the need to comply with procedures applicable to dismissal for economic reasons and to collective redundancies.

- Re-negotiation and termination of Works Agreements (maximum period of notice 3 months) is made easier (InsO art 120). The agreements mainly dealt with here are the voluntary ones (see BetrVG art. 88) which cease to have effect upon termination. The arbitration committee may amend agreements relating to codetermination rights.

- The rules for consultation and codetermination in cases of changes to the establishment (Betriebsänderung – see above) are slightly modified, with a view to speeding up procedures. On request of the administrator as well as the Works Council, the arbitration committee may immediately intervene for “reconciling of interests” (Interessenausgleich) without going through the regional labour office (InsO art. 121). If an agreement with the Works Council on reconciling of interest (if and how of the changes) is not reached within three weeks, the administrator may ask the court to decide on these questions (InsO art. 122). Where redundancies are planned, efforts must be made to reach an agreement with the Works Council on the names of employees to be dismissed (InsO art. 125). In the event of failure to reach an agreement within 3 weeks, or if there is no Works Council, the administrator may ask the court to decide on these questions as well (InsO art. 126).

- When a social plan has to be drawn up after the declaration of insolvency, compensation may not exceed 2½ months’ wages. Compensation under such a social plan takes priority over other debts, up to a total amount of one third of the bankrupt’s (company’s) assets (InsO art. 123).

2. Transfers, conversions and other changes affecting the enterprise The transfer of all or part of an undertaking may come under the works councils’ codetermination rights in the event of “changes in an establishment” (Betriebsänderung – see above). However, the transfer as such is not considered a “change”, as this requires possible changes in the organisation of the workforce which are not necessarily associated to transfer of undertaking138. In the event of a transfer not constituting a change of the establishment, only information and consultation rights apply according to the provisions mentioned above.

138 Federal Labour Court, BAG, 17 March 1987, AP No 18 § 111 BetrVG 1972; BAG, 25 January 2000, EzA No 106 § 112 BetrVG 1972.

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In the case of transfers, on-going work contracts must be maintained under transposed Directives 77/187 and 2001/23/EC (BGB art. 613a). In addition, the employer is obliged to give written information to each employee on time and reasons of the transfer, the legal, economic and social consequences for the employees as well as the measures planned to be taken (BGB art. 613a.5). Within one month of the information, the employee can object to the transfer (BGB art. 613a.6), which, however, does not protect him or her from an eventual redundancy at the old employer.

The Act on legal conversion of companies (Umwandlungsgesetz, UmwG) makes provisions on mergers, splits, asset transfers, and the change of legal forms of enterprises. It makes the following provisions regarding employee representation:

- The employees and their representatives are to be informed about the effects of the conversion on the employees and their representatives and about the measures proposed in the conversion contract. In this context, the contract or draft contract must contain information on the possible effects for the workforce and must be forwarded to the Works Council at least one month before the final decision (UmwG, art. 5.1 No 9, art. 5.3, art. 126.1 No 11, art. 126.3).

- The provisions of BGB art. 613a.5 on the information to be given to the employees are applicable, according to UmwG art. 324.

- Even in the case the newly created enterprise does not fulfil the requirements for codetermination on company level, employees’ representatives continue to sit on the supervisory boards for five years after the conversion (UmwG art. 325) – provided the number of remaining employees is still at a quarter of the minimum number required for codetermination.

In the event of a division of an establishment between companies, the existing Works Council will have a transitional mandate (Übergangsmandat) (BetrVG art. 21a).

In all cases of the legal conversion of companies, the general rules on protection against redundancies apply. However, as in the case of a transfer of undertaking, the legal conversion as such will not constitute an organisational change to the establishment, and will not set off the consultation and codetermination procedures of BetrVG art. 111-112a.

State aid The nineties saw the signing of various types of “employment pacts” between social players at all levels. These regularly included public assistance:

- Bavaria’s employment pact (Beschäftigungspakt), signed in 1996 between the Land, the employers’ organisations and the unions, renewed in 1998, makes provision for regional assistance for employment, innovation and training alongside flexible working hours, the promotion of part-time work and measures to prevent companies getting into difficulties, - The employment alliance in East Germany, concluded in 1997 and terminated in 1998, included the Government, the unions, the employers’ organisations and private banks, and made provision for federal assistance, increased investment and special provisions governing collective bargaining geared to employment, - Similar pacts were also concluded with local authorities, in the event of restructuring of companies. - Some kinds of State aid relating to employment and training come under the works councils’ responsibilities: - aid for social plan measures (SGB III art. 254 et sequ), training (SGB III art. 48), - aid for the use of short time working (Strukturkurzarbeitergeld), for skills improvement and for work with other employers, provided for in the Arbeitsförderungsgesetz until 2006 (SGB III art.175). State aid has been used for one important instrument in employment policies, the “work and employment companies” (Beschäftigungsgesellschaften). The first of these were established in West Germany in the

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1980s. Their success story however started with reunification and the mass redundancies in East Germany. Many of these work and employment companies were established in 1991139. In this construction, in the event of a restructuring, a social plan will not guarantee individual compensation, but rather financial support for the establishment of a work and employment company. Instead of being dismissed, employees may be offered employment in this bridging institution, in many cases getting the opportunity of further vocational training or training for job applications. State aid can be guaranteed according to SGB III art. 254.

139 IW Köln, Betriebsratswahlen 2006: Votum gegen Klassenkampf iwd 40, 5 October 2006

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GREECE

Greece faced a civil war in the 1940s (parallel to the destruction of the Second World War) and has had three dictatorships during the 20th century, the last of which ended in 1974. Despite the fact that since 1974, the country has enjoyed an unprecedented period of more than 30 years of political and economic stability, many aspects of its economic and labour relations landscape, such as heavy state control of the economy or the centralised system of its labour relations can be explained to a large degree by reference to this tumultuous political background and the wish of the political powers to control every aspect of the social and economic sphere (including trade union activity) in order to assure that no serious social unrest occurs.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Political stability and entry to the European Union in 1981 and the Euro Zone in 2001 have permitted the economy to develop considerably over the last two or three decades. The annual GDP increase in the years since 2001 (entry to the Euro Zone) has been as follows: 140

2001 2002 2003 2004 2005 2006 GDP increase % 5,1 3,8 4,8 4,7 3,6 4,2 INE-GSEE-ADEDY REPORT 2006

Since 1996, the growth rate of the economy has been steadily above the average growth of the EU-15 by a margin of +2 to 3.7%. The average growth for the period from 1996 to 2005 has been 3.9%, second only to Ireland whose average increase growth rate has been 7.4% (Labour Institute of the General Confederation of Workers of Greece, Supreme Union of State Employees’ Unions Report, 2006,2006 INE GSEE-ADEDY Report.).

Labour productivity per employed person has steadily increased in recent years. With EU25 being the 100 basis in 1999, Greece had the following increases in labour productivity:

1999 2000 2001 2002 2003 2004 2005 2006 EU25 100 100 100 100 100 100 100 100 EU15 108,5 108,0 107,6 107,1 106,8 106,5 106,4 106,4 Greece 87, 90,8 92,1 97,2 99,8 98,4 101,4 102,4 IOBE-2007 *estimate

Greece’s agricultural sector has traditionally been more extensive that western European countries and the services sector has developed more recently than in those countries. In the last decade, there has been a big decrease in the percentage of gross value added produced by the agricultural sector and a corresponding increase in that of the services sector:

Agricultural, Industry (incl. Services, public fisheries, forestry Construction) administration 1996 14.2% 23.8% 62% 2005 5.2% 20.8% 74% Eurostat (for 1996)-Greek Ministry of Economy and Finance (for 2005)

140 The 2006 GDP figure was obtained from press releases of early 2007.

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The firms are small-sized firms and this is important to understand the underdevelopment of several collective labour law institutions, such as works councils. According to the most recent statistics, 64.6% of firms employed 1-9 people while less than 17% are employed in companies with at least 50 people.

Labour Market The labour market has been characterised by a slow but steady increase of employment which has not, however, been accompanied by a corresponding decrease in unemployment.

The percentage of the active population (15-64) which is employed has developed as follows in recent years:

1999 2000 2001 2002 2003 2004 2005 EU25 61.9 62.4 62.8 62.8 62.9 63.3 63.8 EU15 62.5 63.4 64.0 64.2 64.3 64.7 65.2 Greece 55.9 56.5 56.3 57.5 58.7 59.4 60.1 Institute of Economic and Industrial Research (IOBE) 2007

It is impressive to note the big difference between the percentages of employed men and women:

Greece 1999 2000 2001 2002 2003 2004 2005 Men 71.1 71.5 71.4 72.2 73.,4 73.7 74.2 Women 41.0 41.7 41.5 42.9 44.3 45.2 46.1 Total 55.9 56.5 56.3 57.5 58.7 59.4 60.1 IOBE-2007

The sector distribution of employment is as follows:

Agricultural, fisheries, Industry (incl. Services, public forestry Construction) administration 1996 20,3% 22,9% 56,8% 2005 13,5% 23,3% 63,2% National Statistics Agency of Greece (ESYE) 2006

A comparison of this table with that of the GDP contribution shows that the decrease of employment in the agricultural sector and the increase in the services sector are not so impressive as the respective decrease and the increase in their GDP contribution.

As for unemployment, the rate does not always follow that of employment:

1999 2000 2001 2002 2003 2004 2005 2006 EU25 9.1 8.6 8.4 8.7 9.0 9.1 8.8 7.9 EU15 8.5 7.6 7.2 7.6 8.0 8.1 7.9 7.3 Greece 12.0 11.2 10.7 10.3 9.7 10.5 9.8 N/A IOBE-2007

As for gender distribution of unemployment, the data shows that women have constantly an almost triple ratio of unemployment as against men:

Greece 1999 2000 2001 2002 2003 2004 2005 Men 7.9 7.4 7.1 6.8 6.2 6.6 6.1 Women 18.1 17.1 16.1 15.6 15.0 16.2 15.3 Total 12.0 11.2 10.7 10.3 9.7 10.5 9.8 IOBE-2007

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A rather alarming factor concerning unemployment in Greece is that long term unemployed (more than 12 months) account constantly for half of the total percentage of employed.

Long Term Unemployed as a Percentage of unemployed 2002 53.23 2003 56.68 2004 54.99 2005 54.21 2006 56.10 ESYE-2007

Of those employed, the percentages of salaried and self employed people are as follows:

1993 2004 2005 Salaried 53.3 63.4 63.6 Self-employed without personnel 27.4 22.2 22.1 Self employed with personnel 19.3 14.4 14.3 INE-GSEE-ADEDY 2007

Part-time employment is rather limited. In contrast, fixed-term contracts constitute a substantial share of the labour market in Greece, and estimated at 13-14% of employees. However, one should not draw comparisons with other European countries because, in Greece there is a peculiar phenomenon: the vast majority of fixed contracts are found in the public sector where public agencies and local authorities try to avoid the strict provisions of legislation concerning hiring of public employees by hiring employees with fixed contracts. The fixed-term contracts which are found in the private sector and represent the modern tendencies for flexible forms of employment are significantly lower that the overall 13-14%.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues Article 12 par. 1 of the Greek Constitution protects the general right of association: “The Greeks have a right to establish unions and associations of non-profit character, abiding by the laws, which however, may not affect the exercise of this right upon a prior permit”. This means that the law may establish formal procedures for the establishment of an association (e.g. minimum number of members, publicity requirements, and judicial control of legality) but nothing more than that. Par. 2 of the same article provides that an association may be dissolved only by a court’s decision and only if it has broken the law or breached an important provision of its by-laws. This article has been the constitutional basis for the formation, among others, of employers’ associations. Trade unions are further protected by a more specific provision: art. 23 par. 1 of the Constitution says: “The State takes all appropriate measures to ensure the freedom of syndicalism and the unimpeded exercise of the relative rights against any intrusion, within the limits of the law.”141

On a legislative level, the operation of trade unions is governed by law 1264/1982 (“Gia ton ekdimokratismo tou syndikalistikou kinimatos kai tin katoxyrosi ton syndikalistikon eleftherion ton ergazomenon”), while the operation of employers’ associations is based on Civil Code provisions

141 This article, is further supported by articles 22 par. 2 which says that “General conditions of employment shall be determined by law, supplemented by collective labour agreements contracted through free bargaining and, in case of their failure, by rules stipulated by arbtitration” and 23 par 2 which provides that “Strike constitutes a right and is being exercised by legally established trade unions for the protection of the economic and labour interests of the workers”.

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concerning generally the associations as well as law 1712/1978 which concerns the professional associations of craftsmen and traders.

2. Social partners Unions

The structure of the trade unions can be briefly summarised as follows:

At the first level, are the associations (“somateia”). These associations may be created a) at enterprise level, b) sector level or c) in a certain occupation.142 At sector level are the federations which may be formed by at least two federations and may cover the same occupation or the same sector of the economy. These do not have collective bargaining rights. At the third level, there are the confederations, which are created by at least two federations and/or Labour Centres.

For all practical purposes there is one confederation of workers: the General Confederation of Workers of Greece (GSEE). Although the law does not specifically name this confederation as the workers’ confederation that negotiates national collective bargaining agreements, it is the GSEE that is the undisputed representative of the workers when such agreements are being negotiated. GSEE covers employees in the private sector as well as employees of state-owned enterprises. The other big confederation is ADEDY (these initials stand for the rather odd full title: “Supreme Administration of State Employees’ Unions”) which represents state employees (“civil servants”).

From a political perspective, socialists are the main power in both confederations with percentages a little below 50%; conservatives come second and communists third. Trade union officials are usually politically affiliated, but at the same time, they exercise a considerable degree of autonomy towards the political party to which they are affiliated.

It is not easy to independently assess union membership in Greece. The only sources available are the unions themselves which publish the numbers of people who vote in each election, but it may be assumed that there is some exaggeration in these numbers. The latest data stems from the 2004 conferences of GSEE and ADEDY (election conferences are held every three years): 766,000 people voted in the elections for these confederations. Union density is estimated at somewhere between around 16% and 28%, depending on the way it is calculated.

Union density is much lower in the private sector than in the public sector. Even more, within the GSEE, it is the unions who represent state-owned companies (electricity, water, national airline etc) which have more members and thus the density is not equally distributed.

There are also two other factors which are crucial in understanding trade union membership in Greece. Firstly, most Greek enterprises employ less than 20 people, which is the minimum number required by law for a union to be established. Second, employees enjoy the benefits of collective agreements (and especially salaries) regardless of whether they are members of a trade union or not, which weakens motivation to join a union.

142 Of lesser importance are the above-mentioned associations of persons (“enoseis prosopon”) which may created by at least 10 persons and have very limited capacity (no bargaining or strike power) and the local branches of associations (“ergatika kentra”) which cover more than one region or even the whole country and they also have very limited authority. Recent legislation has given them the right to conclude the so-called local employment contracts, but this new instrument of labour relations has rarely been used in practice.

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Employers´ organisations

At national level, there are employers’ associations which sign a national labour collective agreement with the GSEE:

- The Association of Greek Industries (SEV)143, - The General Confederation of Small and Medium Sized Businesses, Craftsmen and Traders of Greece (GSEVEE.) - The National Confederation of Hellenic Commerce (ESEE.). SEV was created in 1907 and is composed of individual enterprises as well as sectoral associations. It does not only include the manufacturing sector but also large enterprises in the service sector (supermarket chains, public relations, advertising, transport, insurance etc.). In the last twenty years, its administration has passed from the hands of the enterprise owners to the hands of high managerial staff. The elections are not contested since the officials of SEV try and reach a consensus before the elections about the new President and the members of the new Executive Board. Thus, there is only one ticket in each election.

GSEVEE was created in 1919 and is composed of 70 federations, which represent 1350 associations. It is estimated that 110.000 people are represented through of the GSEVEE.

ESEE was created in 1994 and it was a successful transformation of earlier attempts to unite on a national level the powerful commercial associations which existed in major towns for many decades. It is composed of 14 commercial federations (one sectoral and 13 organised on a regional basis), which represent 180 commercial associations; the latter mainly established on a city-by-city basis.

Many aspects of the employers’ right of association are regulated by law 1712/1978 which specifically covers the professional associations of craftsmen and traders. Only people rather than organisations may become members of these associations; they may be employers or even people who have no employees in their businesses. The law establishes the proportional electoral system; just as law 1264/1984 did for the trade unions and regulates many aspects of their internal organisation. There were strong challenges to the law’s constitutionality and conformity with international protection of the right of association but the law has so far survived and has contributed to a more democratic internal operation of the trade and professional’s associations and the relevant confederations, namely GSEVEE. and ESEE.

The following table sets out the main union and employer organisations:

Union Details of membership Number of members Organisations

GSEE Main union confederation covering private and 766,000 (for both GSEE and ADEDY) public sector ADEDY Represents civil servants 766,000 (for both GSEE and ADEDY) Employer Details of membership Number of members Organisations SEV Association of Greek Industries Membership includes individual enterprises and sectoral associations in manufacturing and the service sector GSEVEE Confederation of Small and Medium Sized 70 federations consisting of 1350 Enterprises associations and 110,000 people ESEE Commercial associations 14 commercial federations representing 180 commercial associations

3. Joint bodies Tripartite bodies have been a feature of industrial relations in Greece, since the early 1990s. It was at that time that the Organisation of Mediation and Arbitration was created, administered by representatives of the government, trade unions and employers’ associations. The Organisation is responsible for appointing mediators and arbitrators who may intervene in a collective bargaining negotiation if an agreement is not

143 As of June 2007, the new name of the Association is Association of Enterprises and Industries with the same Greek initials (S.E.V.).

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reached. At the same time, the Economic and Social Council of Greece was created, which is composed of three groups (employers, employees, and farmers/other professions) with no government intervention in its administration, The Council issues opinions on draft laws concerning economic and social policy and may also issue opinions on its own initiative on matters of general interest. There is also a large number of committees in the area of social policy (employment, social security, social care etc) in which representatives of the so-called social partners participate, along with representatives of the central and local administration in the planning and/or implementation of economic and social policies.

4. Collective bargaining Collective bargaining is highly centralised. The collective bargaining system may be seen as a rhombus, at the top of which lies the national collective bargaining agreement which is signed every two years by the national confederations of employers and employees; in the middle are the sectoral and professional agreements (covering a particular industry or a particular profession respectively) and at the bottom are the enterprise-level agreements (covering a particular enterprise). A lower level collective agreement may contain only more favourable terms for the employees than those of an applicable higher level agreement. The only exception is the enterprise level agreement which may deviate from the terms of a professional agreement even if the first sets lower standards and terms for workers than the second one. A collective agreement, once it is signed is binding for the two parties, as well as for the members of the two parties. A worker may claim rights against the employer and go to court to enforce these rights provided that he is a member of the signatory trade union and that the employer is either the other party (enterprise-level collective agreement) or is a member of the employers’ association which has signed the agreement. Individual labour contracts may deviate from the collective agreements only if this provides better terms for the individual employee.

The relationship between the law and the collective agreements can be summarised as follows: the substantive rules of labour relations are set by collective agreements whereby the procedural rules (authority to negotiate, mediate and arbitrate, right to strike or not during mediation/arbitration etc.) are mostly set by the law.

However, there are two points where this distinction is weakened. When an industry or professional level agreement is signed, the Minister of Labour has the authority to sign a ministerial decision by which the agreement becomes applicable for all the employees of the particular industry or profession, even if their employees have not signed the agreement. A basic prerequisite for this is that the agreement covers employers who employ at least 51% of the labour force of that particular industry or profession. When a national collective agreement is signed, the government usually enacts its provisions into law, thus strengthening the legal force of the agreement.

The collective agreement would be legally binding and is binding for both the signatory parties and all third parties (e.g. non-union members, employers not represented etc). But the enactment of certain provisions gives them additional importance which is not just symbolic. For example, a law may be changed only by a new law. Therefore, a new collective agreement may not include a provision breaching the law which enacted the old collective agreement, unless the new provisions are more favourable for the worker.

According to law 1876/1990 (“Eleftheres syllogikes diapragmatefsis kai alles diataxis”), art. 6, only the most representative in each field of the collective agreement may bargain for an agreement. The basic criterion is arithmetic: representativeness is based on the number of people who have voted in the last election for the administrative board of the unions. The employer or a competing trade union may challenge the claim of representativeness by a particular union, and any resulting dispute is resolved by a tripartite committee of the Ministry of Labour. Bargaining is postponed until the committee issues its decision. The decision has to be issued within 10 days from the day of the challenge. A non- representative union may join the agreement after it is signed.

The employer (art. 2 of the law), on his part, has an obligation to bargain with the most representative trade union. If he refuses to do so, or if negotiations fail, the trade union may ask the Organisation and Mediation Board to initiate the mediation and arbitration procedure which is described below.

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Main features The latest data on the level of collective agreements signed every year are as follows:

Level 2000 2001 2002 2003 2004 2005 National 1 1 1 Occupational 85 59 80 74 86 78 Industry 83 57 73 67 50 51 Enterprise 165 134 195 182 217 212 Source: OMED

The main principle governing the relationship between collective agreements of different levels is that the employee will enjoy the rights given to him by the most favourable collective agreement. In this way, the national collective agreement sets the minimum wage, then the sectoral or professional agreements set higher minimum wages in the fields that they cover, and the enterprise level agreement sets higher wages for the employees of the relevant company. The only exception to this principle (art. 10 par. 2 of law 1876/1990) is that an industry or enterprise level agreement may set a lower minimum wage for the employees they cover than the professional agreement which may cover some of the same employees. In other words, if an engineer in a cement company is entitled by the relevant professional collective agreement for engineers to a minimum wage of 1,500 Euros, but the industry level agreement for the cement companies is 1,400 Euros, he will not be able to take advantage of the 1,500 minimum wage but only of the 1,400.

Because of the national collective labour agreement, all employees are covered by at least a collective agreement, the national one. It is estimated that 60-70% of employees are covered by a lower level of collective agreements.

Law 1876/1990, which was passed by broad social and political consensus, established, among others, the employer’s duty to bargain at enterprise level on the following issues (article 2):

• the signing, operation and termination of individual labour contracts;

• the exercise of the right to unionise,

• the facilitation of the trade union in the fulfilment of its activities and the manner of collecting union fees directly from the salary of the employees;

• social security excluding pensions, to the extent that they do not contradict the constitutional order and the policy of the public organisations of social security;

• business policy matters to the extent that they affect labour relations;

• interpretation of existing collective agreement provisions;

• those which fall within the authority of the works councils (see below), if such a works council does not exist or if the issue has not been dealt with by the works council;

• the respective rights and obligations of the two parties;

• issues relating to the procedure and the terms of collective bargaining, mediation and arbitration;

• a clause for industrial peace during the term of the collective agreement; and

• those relating to partial employment.

In practice, collective bargaining agreements do not contain all of the above issues. They mainly include issues relating to wage increases, days of paid leave for various reasons (annual leave, education-related leave, parental leave, computer-use leave etc) and provision of certain rights to union representatives.

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Since only a small percentage of collective bargaining is at enterprise level, most of the collective bargaining agreements do not touch on business policy issues or issues related to works councils.

5. Collective disputes According to art. 15 of l. 1876/1990, if the two parties in a collective bargaining procedure do not reach an agreement, either of them may seek the mediation services of OMED. The mediator is appointed by common agreement and if there is no agreement, he is appointed by OMED. The mediator proposes ways to solve the problem. If the two parties do not reach an agreement with his mediation efforts within 20 days, the mediator officially files his own proposal which he has the right to publish in the press. If either of the parties do not expressly agree to his proposal within five days, the proposal is considered as rejected.

Arbitration is the next phase if mediation fails. According to art. 16 of law 1876/1990, arbitration may begin if both parties agree to it, it is sought by the party who has asked for mediation but the other party has not agreed to go to mediation, or the other party has not agreed to the mediator’s proposals or the trade union unilaterally asks for it. The arbitrator is appointed by common agreement and in the absence of that, he is appointed after a draw. He issues his decision within 10 days – if mediation has proceeded – or 30 days if no mediation has taken place before. His decision has the legal status of a collective agreement.

The One Member First Level Court (“Monomeles Protodikeio”) of each town is the court authorised to solve issues arising out of the interpretation and application of collective agreements, as well issues related to strikes. It adjudicates cases with a special procedure which is quicker than the standard one. In cases of real urgency (e.g. a pending strike) it uses another procedure, the temporary injunction procedure by which it can issue a decision within one day after an expedited trial. Disputes arising during the negotiation procedure itself, are solved by the mediation and arbitration procedure described above.

Strikes Strikes are regulated by law 1264/1982 and may be called only by legally established trade unions. A first level trade union may decide a strike only by a decision of the General Assembly. A strike of a few hours may be called by a decision of the Executive Council of the first-level union. Federations and Confederations (second and third level unions) may go on strike after a decision of their Executive Councils, unless their by-laws determines differently. The employer must be given written warning at least 24 hours before. The trade union must provide the necessary security personnel so that damages or accidents are prevented during the work stoppage. In public utilities, the security personnel required is more than that: it must be sufficient to secure that the public’s basic needs in electricity, water etc. are safeguarded.

The law does not specifically prohibit a strike during the term of a collective agreement. It only says (art. 2 par. 9) that the collective agreement may include a “peace clause”. However, the courts tend to consider a strike which erupts during the term of a collective agreement as “abusive” if it concerns issues which have been expressly agreed. Strikes are allowed during the negotiations or the mediation process. They are not allowed during the arbitration period of ten days, if the arbitration has been called by the trade union. Courts have generally been inclined to declare strikes as either illegal (e.g. in breach of the procedures which should be followed according to the law in order to call a strike) or abusive (e.g. the procedures were followed but the strike seriously harms the public), especially in the public utilities’ sector.

Strikes are usually called during the period that negotiations are about to begin or are underway to put pressure on the employer. However, in the private sector they are not frequent and they do not attract much participation nor much public attention. Strikes in the public sector and the public utilities are much more frequent, are massive and, naturally, attract much more public attention.

Strikes do not last for long in Greece because trade unions do not have the financial means to cover the salary losses of their members. But there have been long strikes in the banking sector in the past (when most banks were state owned) and in education. Another characteristic of strikes in Greece is that in most

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cases there is a strong political element. Since most of the strikes are in the public sector (ministries, state owned utilities) the target of the demands is the government and its income policy.

The trend over the last twenty years has been a decline in the number of strike. With the exceptions of 1990-1993 (when a conservative government tried unsuccessfully to impose a strict austerity program) and in 2001-2002 (when an unpopular socialist government unsuccessfully tried to change the social security system), strikes in Greece are declining. As for lock outs, they are not allowed in Greece (art. 22 par. 2 of law 1264/1982).

III. EMPLOYEES’ REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues Employees’ representation in the workplace is underdeveloped in practice. Most Greek enterprises are so small that it is not easy for workers to develop a union activity without provoking the employer’s focused hostility. Most of the Greek enterprises fall well under the 20 member threshold for the creation of a trade union or the creation of a works council (see below). Therefore, everything discussed in this chapter has limited importance in practice and it either concerns a few large companies in the private sector (e.g. cement industry, banks etc) heavy industry or state-owned enterprises (the number of which is declining).

2. Legal basis and scope Existing legislation concerning the election of workers’ representatives can be summarised as follows. The employees of a given undertaking or establishment have the options of a) constituting a trade union if there are at least 20 employees to sign the petition to the Court and/or b) constituting a works council. The latter may be constituted in enterprises with at least 50 employees or at least 20, if there is no trade union established in that particular company. The works council has in theory a lot of power, according to the law. According to art. 12 of law 1767/1988 (“Symvoulia Ergazomenon kai alles ergatikes diataxeis- Kyrosi tis Diethnous Symvasis Ergasias”), an employer must “co-decide” with the works council of his enterprise on the following issues:

– The publication of a internal company policy;

– The publication of a health and safety company policy;

– The formulation of information programmes on new methods of organising the enterprise and the use of new technologies;

– The programming of training, life education and re-training of the workforce, especially after technological changes;

– The method of monitoring the presence and behaviour of the workforce in the context of protecting the employees’ privacy, especially in relation to audio-visual means of monitoring;

– The programming of annual paid leave;

– Rehabilitation after work accidents; and

– The programming and review of cultural, entertainment and social events.

A works council may not be established in maritime companies; maritime workers are excluded and do not have a right to establish a works council (art. 1 par. 5 of law 1767/1988).

A trade union or a works council may be established in any undertaking or establishment, as long as the conditions described above are met. There are no exclusions for non-profit organisations, political parties, religious organisations or relevant institutions. In practice however, there is no trade union activity or

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works councils established in such organisations. Enterprise trade unions were not provided for by law (although some unions were created in practice at company level after the fall of the dictatorship in 1974) until law 1264/1982 allowed their creation. They may be established by twenty people, as all associations in Greece. The law says that they have the right to have an office in the workplace (given by the employer), a notice board, to hold general assemblies within the workplace. Law 1876/1990 specifically gave them the right to seek collective bargaining and collective agreements.

Relations between enterprise trade unions and works councils are not easy in practice. In fact, trade union officials do not favour the creation of works councils where there are enterprise trade unions. Labour legislation itself, which is usually the result of tripartite discussions (not in the sense of collective bargaining but as a matter of political bargaining) between trade unions, employers and the government gives precedence to the enterprise trade unions over the works council. For example:

– Article 14 of law 1988 establishes a duty of the employer to consult with the works councils over collective dismissals only when there is no enterprise trade union;

– Par. b of the same article provides that whenever a specific law provision gives the right of consultation to the employees’ representatives, the works council may be consulted if there is no trade union; and

– Article 15 of the same law allows the works council to raise an issue concerning the proper application of an existing collective agreement (which in any case may be signed only by a trade union) only when there is enterprise trade union.

3. Capacity for representation The works council does not have a legal personality of its own. It may not sue in a court, although it may file a complaint to the Labour Inspectorate and argue the case in front of the Inspector.

4. Composition Article 12 of law 1264/1982 defines the electoral system by which enterprise trade union elections are held. The system is the so-called representative system (as against the majoritative) according to which each ticket elects the same proportion of representatives as the proportion of the votes it gains. Article 4 of law 1767/1988 provides that elections (for works councils) are held every 2 years, that a majority of two thirds of the union’s general assembly’s votes may adopt a different electoral system (than the one established by l. 1264/1982) and that any employee with at least two months employment in the company may vote and be voted for.

All employees in a company who are employed for at least two months in the company may vote or get elected in a works council regardless of the exact type of contractual relationship they have (part-time, fixed term etc.). Trainees may vote but cannot stand for election (art. 4 par. 2). It is unclear whether temporary employees may participate in the process since the law does not specify this, and the issue has not risen in practice.

A works council is composed of three members in companies with up to 300 employees; five members in the case of 301-1000; and seven in the case of 1001+ employees. The numbers are calculated based on the number or employees at the time of elections. Works councils are uniquely employees’ bodies. Management does not participate in the bodies. Trade union officials do not participate, unless of course they are elected independently of their trade union capacity.

The law does not provide for any different structures of works councils in the case of groups of companies. This may be attributed to the fact that law 1767 was enacted in the late 1980s, a time when the notion of companies’ groups was not well developed in the academic labour law theory, not least in case law. The only provision made in the law was art. 16 par. 1 which allows the works councils of different enterprises with a common administration of their economic policies – a very primitive definition of groups of companies – to appoint “common representatives in order to coordinate issues of

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common interest”. It also provides that if there is one works council in one of these enterprises, it may represent the workers of the other enterprises towards the common management.

5. Protection granted to the members The members of the works councils enjoy the same protection against dismissal that trade union officials are afforded (art. 9 par. 1 of law 1767/1988 which refers to art. 14 and 15 of law 1264/1982 about trade unions): Articles 14 and 15 of law 1264/1982 provide that trade union officials may only be dismissed for certain reasons set out in the article144 and only after a decision of a tripartite committee composed by a judge, a representative of the employers’ associations and a representative of the employees’ national confederation. The protection is provided for a year after the expiration of a member’s term.

Generally, he may not discriminate against an employee on the basis of his activities related to a works council (art. 10, par. 3). Such discrimination may either lead to a court invalidation of his discriminating decision or/and to civil damages for the employee against whom he discriminated.

6. Working of the body and decision-making The council elects its president who convenes the meeting every month (at least) or any time that a third of the body’s members request one. The meeting takes place at a place that the employer has an obligation to provide. The body has a quorum if more than half of its members are present. A decision is taken with the majority of those who are present.

The Council is accountable to the General Assembly which must be convened at least every six months. The Council presents an account of its activities in its regular assembly. The law does not specify any further the obligations of the Council towards the General Assembly and the employees.

7. Means The law does not refer in detail to the financing of the Council, leaving the issue of the dues to be regulated by the Council and the Assembly. However, it does specify that the expenses for the election of the Council’s members are covered by the employer. The President of the Works Council has the right to two hours per week paid leave and the members may participate in educational programmes for up to 12 days during their two years tenure with full salary payment.

The law does not make any reference to the possibility that the works council may hire an expert. This means that the works council may hire such an expert, but it may not claim financing from the employer. Generally, Greek labour law (with the exceptions imposed by E.U. directives) does not favour the financing of labour bodies by the employer. Article 14 par. 2d forbids the employer from supporting a trade union by any financial or other means. A breach of this prohibition may lead to imprisonment of up to five years and a fine of up to 15,000 Euros. Of course, this criminal provision may not be applied by analogy to the works councils’ case but it does reflect the general tendency of Greek labour law.

8. Role and rights In the exercise of their duties, the members of the Council may enter all workplaces, but in a way that does not disturb the normal operation of the enterprise.

144 The reasons for which a union official may be dismissed – after a decision of the above mentioned committee- are the following: the employee has presented false documents in order to get hired or receive a higher salary; he/she employee has revealed industrial or commercial secrets or asked or accepted unethical benefits, especially commissions by third parties; he/she has caused body injuries or has used serious libellous words or threatened the employer or his representative; he/she has insistently and unjustifiably refused to do the job for which he has been hired.

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The employer has to meet with the Council every two months and any other time if he or the Council asks for such a meeting. Each party notifies the other about the issues it wants to raise in the next meeting, at least five working days before the date of that meeting.

The employer has to inform the works council on the following issues:

– change of the legal status of the company;

– total or partial relocation, expansion or contrition of the company’s size;

– introduction of new technology;

– change in the structure of the personnel or increase of the employees’ number or rotation in the employment of the personnel;

– annual budget for health and safety;

– any issue which is related on the issues of codetermination (see below);

– programming of overtime work (if any);

– the general trends of the company in the economic field and the programming of production; and

– the account balance of the company.

The employer may refuse to provide information to the works council for issues which “are characterised as confidential by existing legislation, such as bank secrets, attorney’s privilege, national interest matters, patents.” The Works Council may not reveal such secrets to the employees without the employer’s consent, nor can they reveal “information with particular importance for the enterprise, if the dissemination of such information would have harmful effects for the enterprise’s competitiveness”.

The works council may issue opinions to the employer on any matter “relating to the amelioration of the working conditions of the employees and in connection with the enterprise’s development.” They may also advise the employer on ways to ameliorate the productivity of all agents of production.

Law 1387/1983 (“Elegxos omadikon apolyseon kai alles diataxis”) established a procedure of consultation with the employees’ representative in the case of collective dismissals (at least 2% or at least 30 employees a month). More particularly, the employer has a duty to inform and consult when planning to proceed to collective dismissals, with the purpose of “searching ways to avoid or limit the dismissals or their negative effects”. The employees’ representative to be consulted is the enterprise trade union, if it represents at least 70% of the employees. If there is no union with such representation power, the existing trade unions may appoint in common their representatives, provided that they represent, in total, 70% of the employees. If there are no trade unions meeting the above threshold, then consultation takes place with works council. If there is no such council, ad hoc elections take place, on the initiative of the employer, to elect a committee consisting of three members for 20-50 employees, or five members for 51+ employees. At least 51% of the employees must vote in order for the election to be valid. If no representatives are elected in this way, then the members of the committee are appointed by the local trade centre. The consultation procedure has had limited effect in practice. Both employers and employees know that the Prefect or the Minister will, in most cases, not allow the dismissals to proceed and thus, no serious consultation takes place. The employers try to circumvent the law by extending the time schedule of the dismissal.

Presidential Decree 178/2002 (“Metra gia tin prostasia ton dikaiomaton ton ergazomenon se periptosi metavivasis epixiriseon, egatastaseon i tmimaton egatastaseon I epixiriseon, se symmorfosi pros tin odigia 98/50/EK tou Symvouliou”) has implemented Directive 98/50/EC in Greek Labour Law. The former and the new employer have to consult with the employees’ representatives on the legal, economic and social consequences of the transfer, merger etc. on the employees and the measures that he intends to undertake. The employees’ representatives are considered to be the members of the works council if there is such in the undertaking. In the absence of such a council (either because it has not been established in

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practice or because it may not be established because of the small number of employees) a three member committee is elected ad hoc, with the same procedure for the works council.

9. Other representation bodies The other body of representation which may be created in a Greek workplace is the health and safety committee, under law 1568/1985 “Hygieni kai asfalia ton ergazomenon”. Such a committee may be established in workplaces with more than 50 employees. Workplaces with 20-50 employees may have one workers’ representative on health and safety issues.

The committee or the representative meet with the employer every three months (at least) and discuss working conditions related to health and safety, work accidents, new working methods, technologies etc. which may affect the health and safety. The committee is composed of two members when there are 51- 100 workers, three members for 101-300, four members for 301-600, five members for 601-1000, six members for 1001-2000 and seven members for more than 2000 workers.

The members of the committee are appointed by the works council, if it exists, or by a direct vote of the workers in the absence of a council.

European Works Council Directive 94/45 was transposed in Greece by Presidential Decree 40/1997 (“Dikaioma ton ergazomenon stin enimerosi kai diavoulefsi se koinotikis klimakas epixeirisis kai omilous epixeiriseon se symmorfosi pros tin odigia 94/45/EK, (Official Gazette 39A’/20.3.1997).

It is estimated that there are 170 multinational corporations which are operating in Greece and fulfil the requirements of this Decree (none of them has its headquarters in Greece145. Of these companies, the following have established a European works council: 38 companies in the chemical industry, 26 in the services sector, 25 in the metal industry, 16 in the food industry and 22 in other sectors.

It is interesting to note that among the Greek representatives who participate in these European works councils (80% men and 20% women) 64% belong to a trade union (94% of them to an enterprise level union and the rest to a sectoral union)

10. Protection of rights The employer (art. 10 par. 2 of l. 1767/1988) may not interefere in any way in the work of the General Assemblies of the workers, nor may he influence the employees to abstain from exercising their rights. He must also abstain from supporting financially or otherwise any candidate for the works council. If he breaches these provisions, he is punished by a fine of 59 Euros for each breach.

There is no criminal penalty provided for where the employer refuses to consult with the works council or if he undertakes a decision about which the works council has a codetermination right. However there is an administrative fine146 provided for such a failure to comply with the duty to bargain (in the case of codetermination). The works council may inform the Labour Inspectorate and the latter has a duty to warn the employer to fulfil this duty. If he fails to do this within 10 days, a fine is imposed on the employer. Such a fine is not provided in the case of failure to consult.

In addition to this, if he undertakes unilaterally a decision about which he had a duty either to consult or to co-decide, this decision may by annulled by the employee (not the works council which may not file a suit in the courts) concerned in the Civil Courts.

145 See Enimerosi, Issue 101 (2003) (a monthly publication of INE GSEE-ADEDY), www.inegsee.gr 146 Art. 17 par. 2 in connection with art. 12 of law 1767/1988 and art. 16 par. 8 of l. 1264/1982.

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11 Codetermination rights Under art. 12 par. 4 of law 1767/1988, the works council has a codetermination right – in the absence of an enterprise-level trade union - on the following issues, which means that the employer may not proceed on these matters unless he obtains the agreement of works council:

– the issue of an internal rule;

– the issue of a health and safety rule;

– the drafting of information programmes about a new method of company organisation and the use of new technology;

– the scheduling of life-long training and re-training of the workforce, especially after any technological change;

– The means of controlling the presence and the behaviour of the workforce, while respecting their privacy, especially as regards audio-visual means of control;

– The scheduling of regular paid leave;

– Rehabilitation of employees following work accidents; and

– The scheduling and control of cultural, entertainment and social activities.

Any such agreement must be in writing and takes effect from the time of its deposition in the Labour Ministry. If the two parties do not reach an agreement, then they may follow the procedure of mediation and arbitration provided for the case of collective bargaining disputes.

In practice, only one case has been reported for mediation and arbitration in OMED since this provision was enacted. This lack of cases is as a result of: a) the limited number of works councils in Greece generally, b) the fact that in the majority of the cases where there is a works council there is also a trade union at the enterprise level and, therefore, bargaining will have to take place with the union, and c) in the very few remaining cases, the issue is resolved with no need for mediation and arbitration.

IV. EMPLOYEES’ PARTICIPATION IN CORPORATE BODIES

There are no Supervisory Boards in Greek companies. Greek company law has certain similarities with the French system of “sociétés anonymes” and there is a unitary management system. There is no employee representation in the management boards in Greek private enterprises.

By contrast, employees are represented in the Board of Directors of state-owned companies, with the exception of those with shares traded through the Stock Exchange. Article 3 par. 2 of law 3429/2005 (“Dimosies epixirisis kai organismi (DEKO)”) provides that 1-2 representatives of the company’s employees can participate in the Board of Directors of the company with full rights.147 They are elected directly by the employees; the elections are organised by an electoral committee which is appointed by the most representative trade union of the company. The law stipulates that the electoral system is the representative one (as against the majoritative where the winning ticket wins all seats).

The absence of any employees’ representation to the corporate boards (whether supervisory or not) and the traditional lack of any interest in such a scheme in the private sector, strongly indicates that 2001/86/EC which has been implemented in Greece by Presidential Decree 91/2006 will not have any

147 Whether there will be 1 or 2 representatives is determined for each state enterprise by the Interministerial Committee of Public Enterprises and it is related to the actual size of the board (a board may not have more than 9 members) and the number of those employed. These two criteria are not written in the law but they are taken in account in practice.

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effect on corporate board participation. As for the Directive 2003/73/EC, it has not been implemented yet, but there is no doubt that it will not change the existing lack of participation.

V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

Greek law traditionally did not favour employees’ participation in the undertaking’s affairs. It was only in 1990, with law 1876/1990, that enterprise collective bargaining was envisaged in the Greek industrial relations system. The scope of collective bargaining covers the issues mentioned above. As may be seen from these issues, the term “business policy matters, to the extent that they affect labour relations” is the key for employee involvement in the decisions affecting them in the undertaking. However, as already stated above, enterprise collective bargaining is not well developed in Greece and therefore this form of participation has had limited effect in practice.

There is no special consultation procedure in cases of insolvency or bankruptcy. Greek law follows the path of Directive 80/987/EC as amended in more recent years. Presidential Decree 151/1999 (“Rytmisi thematon gia tin prostasia ton ergazomenon se periptosi aferegyotitas toy ergodoti se symmorfosi pro tin Odigia 89/987/EOK) which amended Decree 1/1990, provides that the works council participates with the employer in the liquidation procedure of any fund that exists within the company in the context of a professional insurance scheme. If there is no such council, an ad hoc three member committee is elected by secret vote among the employees.

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HUNGARY

The Republic of Hungary is a landlocked country in the Carpathian Basin of Central Europe, bordered by Austria, Slovakia, Ukraine, Romania, Serbia, Croatia, and Slovenia. Its capital is Budapest. Hungary has been a member state of the European Union since May 1, 2004.

After the Second World War, a Stalinist rule was established in the country with forced collectivisation and a planned economy. In the late 1980’s, Hungary led the movement to dissolve the Warsaw Pact, and shifted toward multi-candidate democracy. The last Soviet soldier left the country in 1991, thus ending Soviet military presence in Hungary, and with the Soviet Union gone the transition to a market economy began.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Since this political transformation, there have been three stages in the development of the Hungarian economy and its labour market: transformation and stability (1990–1997), rapid economic development (1998–2000) and economic slow down and increasing imbalances (2001–). The rate of economic growth in Hungary goes hand-in-hand with that of the international economy, which is greater than the average index of developed countries. At the same time, it lags behind the 7% rate of increase in some Asian countries. The general feature of development is that it is catalysed by technology transfer, with an increase in capital spending and improvement in productivity. Parallel to the European boom, the Hungarian economy was characterised by stalling to some degree, yet on the whole by a 4% rise in the first three quarters of 2006. Also owing to the significant improvement in external conditions, in the first quarter the economy grew by 4.9%. The rate of growth, however, slackened in the middle of the year – in the second and third quarter the rate of growth was 3.8%, due to the fall in (manufacturing and governmental) investment and decreasing consumption .

Considering the production side of GDP, the increase in services fell behind the growth of the total GDP to some degree, while the production of agriculture dropped by 7.4%, and that of the manufacturing sector by 2%. In the first three quarters of 2006, the catalyst of growth was industry (the added value of industry grew by 9.2% from January to September). The volume of gross industry production rose by 10.3% according to preliminary data in the first eleven months compared to the previous year, which was higher by 3% than in 2005.

Regionally, a significant division has developed between the west and the east in Hungary. The most dynamic region, free of crisis, is Central Hungary (which includes the capitol city) as well as Western Transdanubia (including Gyr-Moson-Sopron and the Vas County) with which Central Transdanubia is now catching up. After the transformation era, a crisis remained in the eastern parts of the country. The north eastern countries were most affected by the collapse of heavy industry and agricultural mass production, which had relied on eastern markets.

With respect to wages, by 2002 Hungary had managed to make up for the recession, due to the radical economic changes of 1990 (as for GDP, this had already taken place in 1999). Between 2002 and 2005, productivity in GDP rose by 14%, whereas gross real wages increased by as much as 26%. In the first nine months of 2006, the monthly gross average income of those employed full time in the national economy was 166,561 forints, which is a 7.7% nominal rise on the same period of the previous year. As far as sectoral differences of wages are concerned, in agriculture the average gross wages were only 65% of national average. Industry lagged behind by around 4–5%, while in the service sector, wages were 6% higher than the national average.

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Labour market In the 1990, parallel to the economic transformation there were also significant changes in the labour market. At the very beginning of the decade, owing to the influence of the transformation, with the drop in employment and activity, the rate of employment rose in a parallel fashion. Employment and activity reached its lowest rate in 1996/97 at 46.5% and 51%, then due to the effect of increasing economic stability and investments, started to rise considerably until 2000 (0.7–0.8% growth). The period between 2000 and 2002 was characterised by a temporary stagnation. In 2003 — partly due to the increase in employees in the public sector, and partly due to the boom in the construction industry — employment rose by 0.7%, activity by 0.9%, yet the momentum had stalled by 2004, and employment stabilised at 50.5%, whereas activity was at 53.8%. The rate of unemployment in 2004 was an average of 6.1% but in 2005 it rose significantly.

At the very beginning of the 1990s, agriculture provided more than 11% of employment, but this decreased to 5% in 2005. Between 1992 and 2005 the total share of industry decreased from 35.5% to 32.4%. Contrary to agriculture, this change was far from steady, as at the end of the 1990s, sectoral restructuring (also significant within the industrial sector) caused a temporary increase. In the decade investigated, the significance of the energy sector dropped by half (2%) (mainly because of the decline in mining), yet the food and textile industries also lost significance – the number of employees in these sectors dropped by about 170,000. Significant growth was only evident in the areas of machine manufacturing, other processing industry, and especially the construction industry. The latter —especially following the boom in the construction industry after 1998 — increased its number of employees by 98,000 compared to 1992. At the same time, in the service sector — with the exception of the transportation sector (where despite the growth in telecommunications, the number of those employed decreased by 61,000) — the number in all sub sectors grew dynamically, and owing to this, the significance of the sector has increased from 53% to 62.6% since 1992. The number of employees also grew by 105,000 in the heaviest service sector, trade. Also, sectors in the public sphere (public administration, defence, education, health) increased their numbers by more than 100,000. The great majority of this has taken place in the last eight years, although the growth of the sector stopped in 2005.

In 2005, the average number of unemployed people was approximated 304,000, a 7.2% unemployment rate within the 15–74 population. According to the data of the Public Employment Service, there were however around 410,000 registered unemployed in 2005. The number and ratio of unemployed people according to all data surveys increased significantly compared with the previous year, yet it is related mainly to the growth in activity. A further discouraging change is that while until the middle of 2000, the number of registered unemployed career starters was significantly dropping, it has begun to rise in the past few years. As a result of this, 9.4% of the registered unemployed were career starters and around 16.5% were under the age of 25 (this age span includes career starters). Another potential problem may be caused by the fact that in recent years, the proportion of those close to retirement age (men over 55, women over 50) has increased significantly (close to 11%) within the registered unemployed.

The increase in the rate of unemployment started slowly in the spring of 2004, significantly accelerated in 2005, and reached its peak in February 2006. Although the rate of unemployment has slowed down somewhat since then, the third quarter index is still very high. Parallel to this — although slowly and owing to seasonal reasons — the rate of employment is increasing.. In addition to the difficulties of finding a job, there are signs of vacancies. According to the Public Employment Service, there are consistently 80,000 – 90,000 vacant jobs, and there is a requirement for foreign workers.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues In Hungary, no law regulates the organisations of social dialogue, despite the fact that there have been attempts to introduce a draft law in this respect. In a ruling by the Constitutional Court, the draft was announced unconstitutional.

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As a result of the social and economic transition, the law of association (1989/II) made it possible for independent trade unions and employer organisations to be founded and operated. At that time numerous new trade unions and employer organisations were set up, or separated from former ones. The autonomy of the actors is secured by the 87 and 98th convention of the International Labour Organisation (ILO). This is also backed up by the fact that Hungary maintains traditional good relations with the ILO. The Central and Eastern European Sub Regional Office of the ILO has its headquarters in Budapest, and is in official contact with 17 countries in the region.

Hungary has joined four ILO agreements and the number of effective ratifications has recently reached 60. Between 2002 and 2005 the government completed 64 reports in total, according to the requirements of the ILO, on the fulfilment of agreements determining the most important principles on fundamental human and employee rights, employment, social policy, labour management, labour relations, labour conditions, social security, and so on.

2. Social partners Unions

One and a half decades after the beginning of the reform of the trade union movement, the Hungarian trade union movement appears to be weaker than ever. According to numerous experts, due to internal problems, trade unions are not only unable to influence national politics, but it is also unclear how much they are able to fulfil their interest representation role at the workplace. In this respect the number of organised employees is not an insignificant factor. According to the estimated data of the KSH (Hungarian Central Statistical Office) union density is 19.7% compared with 16.8% in 2004.

According to the data, more women are members of trade unions, although the difference has decreased. In 2001, 22.4% of women and 17.3% of the men were trade union members, while in 2003, this ratio was 18.7% (women), 15.3% (men). The surveys of the KSH indicate that the membership is ageing. The members are four years older on average than non-members. In 2004, the greatest percentage (23.3%) of members was in the age group 50–59, while the density of the younger age group (15–19) was only 8.5%. In 2004, 13% of manual workers, and 23% of non-manual workers were trade union members. As for employment groups, most members were from “professionals” and “technicians and associate professionals”. The following groups have the lowest level of members in trade unions: “skilled agricultural and forestry workers”, and “unskilled workers”.

Trade Union Confederations

Currently there are six trade union confederations in the National Interest Reconciliation Council (OÉT):

- the largest is the one representing the private sector: the National Association of Hungarian Trade Unions (MSZOSZ, Magyar Szakszervezetek Országos Szövetsége) - the Trade Unions’ Co-operation Forum (SZEF, Szakszervezetek Együttmködési Fóruma) representing the public sector - the Alliance of Autonomous Trade Unions Confederation (ASZSZ, Autonóm Szakszervezetek Szövetsége), - three smaller trade union associations, the Confederation of Unions of Professionals (ESZT, Értelmiségi Szakszervezeti Tömörülés), the Democratic League of Free Trade Unions (LIGA, Független Szakszervezetek Demokratikus Ligája), and the National Federation of Works Councils (MOSZ, Munkástanácsok Országos Szövetsége), which identifies itself as a Christian trade union. The power relations between them are well indicated by the membership data in the table below, which is based on self-reporting. All Hungarian trade union confederations are members of the European Trade Union Confederation (ETUC), and, with the exception of ÉSZT and SZEF, the International Trade Union Confederation.

After the transformation era, a heated debate began between the reformed post-socialist and the newly established trade unions. In 2000, there was an unsuccessful attempt at unification. The organisation of the confederations does not really favour unification, as the areas represented by the trade unions are not clearly separated. The decentralised, company-level organisation of the trade union movement also developed during the transformation. It was then that trade unions were registered according to the still

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used application of the “one company–one trade union” principle, which was made binding for all by the 1989/II law on association forming.

As a result of decentralisation, the trade union centres receive less and less membership fees, which limit their activities and the hiring of quality and skilled staff. The number of employees in full-time and part- time jobs at the confederations is not more than 10 to 20 people. The fall in membership has forced trade unions to decrease their spending and staff.

Employers

In the socialist system, there were five national organisations, which formed the basis of the freshly established employer organisations after transformation. The peaceful transformation made it possible for these monopoly organisations — just like the trade unions — to restructure into voluntary membership, autonomous organisations.

Employer organisations

The National Interest Reconciliation Council, which was established in 1990, had nine employer organisations.

- The Confederation of Hungarian Employers and Industrialists (MGYOSZ, Magyar Gyáriparosok és Munkáltatók Országos Szövetsége) is one of the largest employer organisations: it has 54 professional associations, 18 regional confederations, and 72 direct membership economic associations in membership. This way, MGYOSZ represents around 6000 companies, which employ approximately 1.2 million employees. - The individual and corporate membership of the National Association of Entrepreneurs and Employers (VOSZ, Vállalkozók Országos Szövetsége) is 7,934. Its members employ 26% of the workforce, and their contribution to GDP amounts to 31%. Adding the 28,862 member companies registered in their member associations, the companies represented by VOSZ employ 43% of of the workforce, and provide 64% of the GDP. - The National Association of General Consumer Co-operatives (AFEOSZ, Általános Fogyasztási és Értékesítési (Országos) Szövetség) has 1255 associations, 62 school association groups, amounting to a total of 2,000 shops and a further 5000 independent and franchised shops and catering facilities (e.g., restaurants, clubs, etc.). The member associations of AFEOSZ set up 17 independent and self-reliant county level associations. The interest representation work of the organisation affects a total of 250 associations and around 130,000 employees. - The National Association of Craftsmen’s Corporations (IPOSZ, Ipartestületek Országos Szövetsége) represented around 50,000 companies through its 280 member associations (2003). The great majority of these (229) are general industry associations, which operate in county centres and larger towns. The association operates 31 national sectoral–professional organisations. - The National Association of Retailing and Catering Entrepreneurs (KISOSZ, Kereskedk és Vendéglátók Országos Szövetsége) represents 22 legally independent member associations, and coordinates their activities. Currently it has 35,000 members, 85% of whom run individual or family businesses. KISOSZ represents around 270,000 part-timer traders or caterers, and involves 1 million people. - The Hungarian Industrial Association (OKISZ, Magyar Iparszövetség) had approximately 980 member associations, which are united by 22 regional and professional, and six joint professional associations. Its members employ 354,000 employees (2005). - The National Federation of Agricultural Co-operators and Producers (MOSZ, Mezgazdasági Szövetkezk és Termelk Országos Szövetsége) is the interest representational organisation of agricultural associations. The number of its direct members is 600, and through county organisations, it represents another 400–500 associations. The number of associations directly linking through sectoral associations is around 2000. The direct members employ half of the sector (around 48,000 people), and provide half of agricultural production. MOSZ represents the interests of the 300,000 members of the co-ops and their legal successors as well as their 100,000 owners. - The members of the Union of Agrarian Employers (AMSZ, Agrármunkaadók Szövetsége) are individual entrepreneurs, economic associations, educational and training institutions, agrarian research and development centres, universities, water regulating associations, self-employing entrepreneurs, and farmers. - The National Association of Strategic and Public Utility Companies (STRATOSZ, Stratégiai és Közszolgáltató Vállalatok Országos Szövetsége) was established in 1994, and only became a member of OÉT in 1999. In 2002 STRATOSZ had three alliances and 36 member companies; its members provide 38% of GDP.

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Similarly to trade unions, employer associations are also marked by a divided pluralist organisational structure, but have avoided internal strife. The employer associations are basically divided on the basis of ownership form. The size of employer organisations is difficult to judge. The associations are not keen on publicising their membership data. The structure of employer associations has solidified, integrated well in the developed institutional system, and found the functions and economic resources, which secure their operation on the long run. Problematic aspects include the division between the employer associations, as a result of which their influence on economic policy is much weaker than in developed market economies.

The following table provides details of union and employer organisations

Trade union Details of membership Number of members 2003 organisations

SZEF Trade Unions’ Co-operation Forum – one of 270 000 largest union conferderations, public sector membership (70% women)

MSZOSZ National Association of Hungarian Trade Unions 240 000 – one of the largest union confederations, private sector membership (48% women) ASZSZ Alliance of Autonomous Trade Unions 120 000 (35% women) Confederation LIGA Democratic League of Free Trade Unions 100 000 (30% women) ÉSZT Confederation of Union Professionals 85 000 MOSZ National Federation of Works councils – Christian 56 000 trade union confederation (35% women) Employers Details of membership Number of members 2003 Organisations MGYOSZ Confederation of Hungarian Employers and 54 professional associations,18 regional Industrialists, one of largest employers confederations, and 72 associations. Represents organisations around 6000 companies VOSZ National Association of Entrepreneurs and 7934 individual and corporate members plus 28,862 Employers member companies registered in member associations AFEOSZ National Association of General Consumer Co- 1255 associations, 62 school association groups, operatives 2000 shops and 5000 independent shops and catering facilities (eg restaurants) IPOSZ National Association of Craftsmen’s Corporations 5,000 companies through 280 membership associations KISOSZ National Association of Retailing and Catering 35,000 members Entrepreneurs OKISZ Hungarian Industrial Association 980 member associations MOSZ National Federation of Agricultural Cooperatives 600 direct members and Producers AMSZ Union of Agrarian Employers STRATOSZ National Association of Strategic and Public 36 member companies Utility Companies Source: (union membership details) EIRO (2003).

3. Joint bodies The most important organisations in Hungarian labour relations are the tripartite National Interest Reconciliation Council, the multipartite Economic and Social Council, the National Labour Council of Public Servants (KOMT), the bilateral collective agreement system and its organisations, the sectoral dialogue committees.

There is no overall law on the National Interest Reconciliation Council (OËT), although some of its rights — such as the right of consent in the government decree on the minimum wage — are mentioned in laws.

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The operation of OÉT is based on the agreement of its participants, the Charter. The National Interest Reconciliation Council has undergone several changes since its establishment in 1988, following the political structure in place at the time. It restructured in 2002, and has been operating in this format since then. The members of OÉT are: employees are represented by six trade union confederations; the employers are represented by nine national employer associations. The 6-plus-9 structure characterises all platforms of the OÉT. At the same time, there is no regulation on the conditions that would allow an interest representation to become a member of OÉT.

The Economic and Social Council (GSZT, Gazdasági és Szociális Tanács) was established on 24 August 2004, when it reported on the national development plan being prepared. Its second meeting took place on 25 February 2005, when it dealt with the national development plan again, and agreed to its conception. Additionally, it accepted the Charter of the Council. GSZT is the high level forum of consultation on national economic and social policy strategies. The objective of its establishment, in accordance with the norms of the European Union, is to facilitate the harmonious and balanced development of economy and a suitable social model with the incorporation of the representation of organised civic society. Its task is to provide a regular investigation of macroeconomic and social problems that affect the whole of economy and society, the evaluation of the current state of the economy and society, and the discussion of the national strategies recommended to tackle these issues.

The National Labour Council of Public Servants (OKÉT) was set up on 20 December 2002, and deals with wage policy, labour policy and employment issues related to all public service workers (public servants, civil servants, members of the armed forces, including contracted soldiers). OKÉT is a tripartite forum – its members are the delegated members of the government, national trade union associations, confederations connected to several public service sectors that have a participation right in at least two sectoral forums, and the national interest representation organisations of local government.

Sectoral dialogue committees (ÁPB, Ágazati Párbeszéd Bizottság) provide a bilateral interest reconciliation forum: sectoral employer interest representations and sectoral trade union are eligible to become members. A dialogue committee can be established at sectoral and sub sectoral level. Since all committees are autonomous, there are no hierarchical relations between the committees at the various levels. Accordingly, when we talk about sectoral dialogue committees, we are also referring to sub sectoral committees. The aim of establishing ÁPBs is to strengthen the direct dialogue between employers and trade unions, the development of sectoral policies, the promotion of sectoral collective bargaining and the strengthening of relations with European sectoral dialogue committees.

4. Collective bargaining

Legal basis and key issues The Hungarian Labour Code (Munka Törvénykönyve - Mt., 1991. évi XXI., 194 – 202) does not stipulate a compulsory collective bargaining agreement, but it does state the obligation of cooperation, since neither of the bargaining parties is allowed to refuse a call for negotiation. In the negotiation all the trade unions that are represented at the company can participate, and the employer is obliged to cooperate with them to promote its effectiveness. A trade union becomes entitled to negotiate a collective bargaining agreement if its candidates receive more than 50% of all votes cast in the works council election (which take place once every three years). If there are more trade unions represented in the company, the collective bargaining agreement can be negotiated by all of them together (including the non- representative unions), providing that the candidates of these unions together receive more than the 50% of all votes cast in the works council election.

According to Hungarian labour law, a trade union is considered to be representative if its candidates receive at least the 10% of all votes cast in the works council election, or it lists as its members at least the two thirds of employees belonging to the same profession at the company. If the representative trade unions cannot negotiate a collective bargaining agreement together, the agreement can be negotiated with the employer by the trade union whose candidates together received more than 65% of all votes cast in the works council election. If the trade union or its candidates cannot obtain more than 50% of the votes cast in the works council election, the negotiation of a collective bargaining agreement can still be effected, but in this case its validity is subject to the employees’ approval. Employees have to vote on it.

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Voting is valid if more than half of all the employees who are entitled to elect works council members participate in it.

The scope of the collective bargaining agreement can be extended to the whole industrial sector (or sub sector) by the Minister of Employment and Labour if jointly requested by the contracting parties, providing that these contracting parties are representative in the given sector. An employers’ representative organisation is considered to be ”representative” if it is the most significant one in its own sphere of action based on its membership, its economic weight, and the number of employees affected. A trade union is considered to be representative if it is the most significant one in its own sphere of action based on the number of its members, and the degree of its employee support. To judge the degree of support given to a trade union by the employees, the results of the last works council election preceding the negotiation of the collective bargaining agreement need to be taken into consideration in case of employers where a collective bargaining agreement is in effect. If the collective bargaining agreement was negotiated by more than one trade union, to extend its scope, the combined representativeness of those trade unions need to be considered.

Main features As of 31 December 2004, 3,404 collective agreements were handed in for registration.

Type number employees competitive involving one employer 1.295 637.500 sphere involving more than one employer 79 263.800 institutional involving one employer 2.020 250.500 involving more than one employer 10 2.100 total 3.404

Some of the most important aspects with respect to the type of collective agreements are the following:

– collective agreements involving one employer affect 888,000 employees nationally, this is 28.7% of the total number of employees;

– collective agreements involving more than one employer affect 265,900 employees (10.2% of all employees); and

– collective agreements involving one or more employers cover 41.8% of the total number of workers.

The majority of collective agreements are contracted at the workplace. For this reason, there have been significant efforts to solidify the sectoral bargaining system recently. The objective of the sectoral dialogue committees formed with PHARE support was to increase the number of sectoral level collective agreements and expand collective agreements involving more employers. There has not yet been a breakthrough in this respect, but the number of registered agreements at the Ministry is slowly rising: 2002: 3,370, first half of 2005: 3,445 of which there were 27 agreements involving more than one employer. Currently, the following sectors have expanded collective agreements: electricity, baking industry, hotel and catering. The frequency of collective bargaining shows a close correlation with the size (number of employees) of the given company.

The notion of sound employment relations means something different for Hungarian trade unions than for those in Western Europe. For Hungarian trade unions, orderly labour relations are manifest primarily in company-level collective bargaining, which offers a lot of room for manoeuvre for one-sided employer decision. The reason for this is that during the shaping of the Labour Code in 1992, they wanted to minimise informal bargaining between employer and employee as much as possible, and aimed for rigid regulations, rigid wage tariffs and job descriptions. Company management techniques that evolved as a result of this and the “Japanisation” of labour organisation presented, and continue to present, serious challenges for traditional trade union interest representation strategies.

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The most important role of sectoral collective bargaining in this situation is to limit local flexibility and maintain minimum solidarity so that the trade unions, by mobilising the members, might be able to enforce those demands on which no agreement could be reached at company level. Experience, however, shows that even a flexible trade union agreement initiative like this is often too rigid for employers, who find the objective of trade unions to raise wages, and other particular work conditions-related issues unacceptable. It frequently happens that managers oppose even a minimal amount of restriction and try to marginalise trade unions and displace them from the company. The continuous decrease in trade union membership in the private sector dashes trade union hopes that in the narrowing labour market, employers themselves will be interested in creating strategies that are based on the satisfaction and commitment of employees.

5. Collective disputes In Hungary, labour disputes are regulated in the Labour Code. It distinguishes between collective labour disputes, mediation, arbitration, and labour-related legal disputes. The National Interest Reconciliation Council established the Labour Mediation and Arbitration Service (MKDSZ, Munkaügyi Közvetít és Döntbírói Szolgálat) as of 1 July 1996. Social control over the Service is carried out through the National Interest Reconciliation Council without compromising the independence of the Service. The Service contributes to settling collective labour disputes (disputes of interest) at the request of the parties in dispute. The service to be provided may be mediation or arbitration. In the event of labour disputes the Service will offer the arbitrator or mediator that best matches the needs of the parties, has the best qualifications, and is the most experienced. If required by the parties, the Service will render technical assistance, and provide information concerning issues of industrial relations in the hope of preventing labour disputes. MKDSZ promotes mediation and arbitration to help these new services take root in Hungary. The aim of the mediator/arbitrator is to restore a sense of trust and communication between the parties in dispute; preventing and/or terminating the labour dispute; safeguarding, and/or restoring industrial peace at the workplace.

Strikes Strikes have been allowed since the Covenant on Economic, Social and Cultural Rights by Law-Decree No. 9. of 1976. In addition, the following legal instruments are considered indicative for Hungary: resolutions of the ILO; the European Convention on Human Rights, and the European Social Charter. With respect to all three, the Hungarian government is accountable by international proceedings for the implementation of the provisions of the covenants. Under the Hungarian Act on Strike, the right to strike is a legal right of the workers [Act VII of 1989, §1(1)], and in the course of exercising that right, the employers and the employees shall co-operate with one another [§1(3)], and it is the legal right of the trade unions to initiate a sympathy strike [§1(4)]. The legal regulation grants the right to initiate a strike to the workers and to the trade unions. Under Hungarian Law, the right to strike is a so-called collective legal right. It is a major deficiency of the Hungarian Act on Strike that it does not define the term ‘strike’. On the basis of the European Social Charter, a strike is one form of the employees’ right to so-called collective action, the essence of which is the complete termination of work. Collective action, however, may take other forms, too, such as the refusal to work overtime, excessive compliance with work regulations, the slow-down of work, or the occupation of the workplace.

Only eight strikes were organised in 2004, which affected 6,275 employees and lead to a loss of 116,000 working hours. This is partly due to the weakened state of the trade union movement, and partly to the vulnerability of employees in the labour market.

Hungarian law includes a no lock-out regulation, given the fact that, owing to the position of the employer in the employment relationship, employers have other means to exercise pressure at their disposal in work-related disputes, such as, for example, the termination of the collective agreement or the enforcement of the legal consequences of a strike declared unlawful. In more than one decade of Hungarian labour law history following transition, the employers experienced no need to apply or regulate the institution of lock-out on their side.

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III. EMPLOYEES’ REPRESENTATION SYSTEM IN THE UNDERTAKING

1. General issues The two-channel system developed in which the representation of employees is doubled at the workplace. For this reason, in many cases both the employer and the trade union consider the works council as futile, even harmful. However, changing governments, partly due to political considerations, frequently altered the rights of the workplace interest representatives, or strengthened the status of the works council; sometimes they gave preference to the company trade unions over the council.

The legal framework of Hungarian works councils is more restricted than in the German model – joint decisions are only possible concerning corporate social policy. However, the legal framework binds the works councils to the trade unions too closely. The trade union is interested in putting its candidates into the works council, as its right to contract collective agreements depends on this. However, the right of the council to make joint decisions is restricted to the utilisation of the company’s welfare fund, which is regulated in the collective agreement contracted by the trade union. In this system, it is important for the trade union to elect the works council, but not necessarily to operate it. Although law regulates the setting up of the council, there are no guarantees for its operation and in many workplaces where there is no trade union, there are no councils either.

2. Legal basis and scope Institutional systems like those in developed market economies were established only after the political transformation. It was the new Labour Code (1992/XXII) that regulated the representation rights of the employees, according to the following: Chapter I: activity of the National Interest Reconciliation Council (Országos Érdekegyeztet Tanács); Chapter II: Trade union rights at the workplace; Chapter III: The system of the collective bargaining agreement and Chapter IV: Employee participation rights.

There are basically five types of employee interest representation bodies in undertakings. Local trade unions remain the key actors at workplaces although their level of organisation has dropped significantly. Their rights are regulated by the Labour Code (Act XXII of 1992). The establishment of works councils is also made possible by the Labour Code. The Act on European Works Councils (Act XXI of 2003) came into force on the day of Hungary’s accession to the EU (1st May 2004.). This Act is the transposition of Directive 94/45. In undertakings hiring more than 200 employees, works councils are entitled to delegate one third of the members of Supervisory Boards under the Act on Business Associations (Act IV of 2006, Sections 38–39). Finally, since 1st May 2004 employees have the right to elect health and safety representatives in parallel to the election of works council representatives, who can form safety committees (Labour Code, Point 70/A, Section 3).

In the view of the government of the time, the problems of trade union pluralism and the decrease in density warranted the division of sectoral level collective agreements from interest representation exclusively at the workplace. Since the trade unions were firmly against the recommendation which endangered their role in the workplace, the compromise that was reached in the Council also preserved the opportunity of collective bargaining at the workplace. In addition the trade unions could keep, with some limitations, the rights they had formally enjoyed during socialism.

3. Capacity for representation The participation/representation rights of Hungarian works councils apply to every employee employed (by the employer) at a given workplace. More specifically, these rights include the right to publish/receive information, the right of consultation (reporting) and of codetermination, regulated under the Labour Code. The relationship of the works councils and the employer is regulated under the so-called operative agreement which it is not mandatory to conclude. Under this document, the parties agree to the procedural and financial terms and conditions of the operation of the works’ council.

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4. Composition Any employees fit to act (and only employees) and having been employed for at least six months at the company can be nominated as works council candidates. All employees are entitled to elect works council members. To manage the nomination and election processes, the works council sets up an election committee out of the employees entitled to vote at least eight weeks before the election takes place. In absence of a works council, the election committee must be composed of the representatives of the active trade unions at the company, and the representatives of the non-unionised employees. A candidate can be proposed by at least 10%, or at least 50, of the employees who are entitled to elect members.

The members of the works council are elected by direct secret ballots. Elected members of the works council are those employees, who have secured the most, but at least 30%, of all valid votes cast. In case of equal number of votes secured by more than one employee, the lengths of their employment terms need to be taken into consideration. The election is valid if more than half of the entitled employees participated in it. In case of invalidity, the election needs to be repeated within ninety days.

5. Protection granted to the members In Hungary, the provisions set out under §28 of the Labour Code pertaining to elected trade union officials shall be duly applied for the protection of works council members under the labour law. Accordingly, the prior consent of the works council is required for the transfer/assignment of an employee who has been elected as an official to another workplace, as initiated by the employer, for a period of 15 days or more, or transfer to another employer according to Para (1) of §150, or transfer to another workplace, and the termination of the employment of such employee by the employer by ordinary dismissal. The works’ council shall convey its opinion in connection with the employer’s planned action in writing, within eight working days of the receipt of written notification by the employer. If the works council disagrees with the proposed action, the statement shall include the reasons why. Labour law protection is given to the members of the works council for the term of their mandate and for another 12 months following its termination, provided that they fulfilled that position for at least six months.

6. Working of the body and decision-making The works council makes its decisions by simple majority voting, and its decisions are valid if at least half of its members participate in the meeting. In case of tied votes, the president has the casting vote. So that the works council can practice its co-decision rights, the votes of at least two thirds of the members present are required. The detailed operational procedures of the works council are described in its procedural manual.

7. Means Works council members are entitled to get an allowance of 10% of his/her monthly working hours, while the president is entitled to a 15% allowance on the same basis. The president of a works council at an company with more than a thousand employees carries out his/her duties for a consideration.

The Labour Code does not explicitly cover the training of works council members. Clause No.63 ordains that: ”the employer covers the necessary and reasonable costs of the election and functioning of the works council. The amount of such costs is set together by the employer and the works council. In case of disputes, negotiations should be held.” In Hungary there exists an institution specialised in training of works council members: Representative Counsel Service (Érdekvédelmi Tanácsadó Szolgálat, ÉTOSZ)

The Hungarian practice of works councils backs up the hypothesis that for the smooth operation of the participation institute, there is a need for stable financing, which can only be secured effectively if the participation institute has its own budget. However, in reality, only 19% of the councils have an annual budget, which among other things, covers the cost of operation, training, and paying advisors. According to the surveys, 29% of the works council have no saying whatsoever in the target figures of the budget. Financial independence of participation organisations is typical in places that employ a lot of people, and whose president is independent and works full-time in this post.

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The effect of the lack of an independent budget can be felt in other areas. It also adversely affects the organisation of training programmes for the members of the works council. The councils and the employers agree that lack of preparation is one of the most significant obstacles to the effectiveness of works council representation. Problems primarily occur in the legal, economic and financial areas, as well as in communication and negotiating skills. All these are especially important because the correlation between skills and the effectiveness of working relations with the employer and satisfaction with rights is very close. One reason for this is that the more skilled can make a better use of the opportunities the law provides them with, and so they feel to a lesser degree that legal factors adversely affect the effectiveness of their activities.

8. Role and rights

Information Employers shall notify the works council at least bi-annually regarding the fundamental issues affecting the employer’s economic situation, and regarding the plans for major decisions pertaining to a significant modification of the employer’s sphere of activities and improvement projects. At the least, it must inform bi-annually on the trends in wages and salaries, liquidity related to the payment of wages, the characteristic features of employment, utilisation of work time, and the characteristics of working conditions, and also on the number of distance workers employed by the employer and on the name of their respective jobs.

Consultation(Espace à supprimerentre le sous-titre et le début du texte)Employers shall consult the works council prior to passing a decision in respect of:

– plans for action affecting a large group of employees, in particular those related to proposals for reorganisation, transformation, the conversion, privatisation and modernisation of an organisational unit into an independent organisation;

– proposals for setting up a personnel records system, the set of data to be recorded, plans for the contents of the data sheet specified in Section 77 and staff policy plans;

– plans connected with employee training, proposals for the appropriation of job assistance subsidies for the betterment of employment conditions, and drafts of plans for early retirement;

– plans for action pertaining to the occupational rehabilitation of people whose capacity to work has been reduced;

– the plan for the annual holiday schedule;

– the introduction of new work organisation methods and performance requirements;

– plans for internal regulations affecting the employees' substantive interests; and

– tenders announced by the employer offering financial reward or recognition of exemplary performance.

9. Other representation bodies Safety representatives are often discussed as part of the employee participation structure. The employees elect safety representatives at the same time as they elect the works councils. The safety representatives deal with health and labour safety issues at company level together with the works councils and trade unions. Since 1 May 2004, the role of employees has strengthened in practicing rights and representing interests in relation to work types that are classified as safe. Occupational safety is traditionally an important are in the interest of trade unions. As a result of their decades of struggle, the law now regulates this important area for employee interest. Practicing their rights provided by the Labour Code, their primary interest is that their representatives become their safety representatives, integrating the participation and interest representation rights into health and safety.

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In Hungary, from the day of joining the EU, there have been significant changes to the Labour Code. The previous regulations of the Code had made it “only” possible that the employees elected a safety representative who would represent their rights in health and safety issues. According to the amendment, in companies that come under within the scope of the Labour Code and employ at least 50 workers, the election of safety representatives is compulsory. (In the public sector and civil service the election still remains a possibility, but is not compulsory.) According to the Act, it is the employer’s obligation to provide the conditions for the election and arrange it.

If for some reason, no safety representative is elected, the employer must discuss safety issues with the employees (Labour Code, §70). If the number of safety representatives reaches three, they can form a safety committee which will then act out the rights of the safety representatives if they affect all employees. The elected representatives148 or the safety committees, have a wide range of rights to obtain information on safe working and to preliminarily discuss employer decisions. Another new aspect of the modified law is that in companies where the number of employees is at least 50, and they have elected safety representatives, there must also be a parity safety body at corporate level.

10. European works councils The 2003/XXI Act that implemented the 94/45 guideline came into effect in Hungary at the same time as the country joined the EU. The Act follows the European guidelines and is limited to the following topics: special negotiating body and the content and operation of the European works councils where the headquarters of the company are in Hungary, the special negotiating body representing Hungarian employees and the method of selecting the members of the European works council, gagging order rulings, the defence of Hungarian representatives, the sanctioning of unlawful behaviour, and information and consultation rules to be applied if the European works council was not formed.

The members of the Hungarian European works council are usually satisfied with the operation of these councils, but they sometimes experienced inadequacies and offending reception. Serious problems were caused by rigid schedules, formal information giving, and frequent gagging orders/disclosures. In spite of the large number of reports, they received little new information in the meetings and they had relatively little influence on such strategic decisions as factory closures or transfers. The representatives regarded the opportunity for relation-building rather more positively.

11. Protection of rights If the works council experiences a breach of its rights, it may bring the case to the labour court. This happens most frequently for the breach of the right to consultation. In this case, the labour court may annul the employer’s decision upon the request of the works council. If the employer violates the right of the works council to express its opinion on a mass redundancy case, it may only request the court to declare a breach of the law, without any other consequence. The works councils often object to the application of the Act on the ground that, in the absence of co-operation on the part of the employer, it is difficult to assert the rights concerned and hence often neither is an attempt made to do so. All in all, works councils rarely file cases with the court because of weak sanctions.

12. Codecision rights The works council has co-decision rights with regards to spending welfare funds, as well as the utilisation of welfare facilities and properties, as set out by the collective bargaining agreement (Labour Code 1992/XXII. Para (1) of § 65). The Labour Code leaves the meaning of the right of co-decision right undefined. The Act merely lists the cases in which it should be applicable.

148 According to the Labour Code (70/A, §3)s, for the election of labour safety representatives, the rulings for works councils and works delegates must be applied.

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IV. EMPLOYEES’ REPRESENTATION IN CORPORATE BODIES

In addition to works councils, employees have the chance to participate in supervisory boards of economic corporations. This right is provided for works councils in companies with more than 200 employees. They have the right — after consultation with the trade unions — to nominate one third of the members of the board, according to the Act on Economic Corporations (2006/IV, §§38–39)

The employee representative on the board is obliged to inform employees, through the works council, about the workings of the supervisory board (except on matters like trade secrets). The employee representatives have the same rights as the other members in the supervisory board, and the same obligations. If the opinion of the employee representatives is unanimously different from the majority opinion of the board, the minority view of the employees must be reported in the meeting of the highest body of the company. The employee representative is entitled to the right of labour law protection of the works council as provided by the Labour Code. Where the employee representative’s employment ceases, his/her membership in the supervisory board also ceases. The employee representative can only be recalled by the highest body of the company on the recommendation of the works council, unless, despite the reason for disqualification stated by the law, the council does not satisfy its obligation for recalls and nomination of new representatives in the deadline given by the corporate agreement.

In Hungary, it is the Act of 2004/XLV (§§15–17) that regulates the inclusion of employees in the decision-making order of the European Company (SE), which is the Hungarian transposition of directive 2001/86/EC.

V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

Recovery and bankruptcy procedures The Act of 1991/XLIX regulates the rights of employees in the case of bankruptcy proceedings and liquidation as follows. The head of the company must inform the employees, the co-operatives, the trade unions and the works council about the bankruptcy proceedings without delay. The receiver or the bankruptcy trustee must inform the employees, the trade union and the works council as well as the regional labour centres within 15 days on the issues affecting the employees during the proceedings.

In case of legal succession, the successor and predecessor employer, a maximum of 15 days before the succession, must inform the trade union, or where there is no trade union, the works council, or where there is not works council, the committee of representatives formed from non-organised employees about the date or planned date and the reason for the succession, its legal, economic and social implications concerning the employees and, for the sake of agreement, they must initiate a consultation about other planned measures affecting the employees.

State aid Under the new provisions of §15 of Act XXXVIII of 1992 on Public Finances (the Áht) which came into force on 1 January 2006, access to support from the central budget or the appropriated state funds is conditional, in addition to the other conditions specified under the law, on the party submitting the request complying with the general and special requirements of clear labour relations.

The Áht specifies as a special requirement that the labour relations of the employer shall qualify as clear if, (among other things), no public administration fine has been levied on the employer for breach of compliance with the requirement of equal treatment based on Act CXXV of 2003 on Equal Treatment and the Promotion of Equal Opportunities in the two years preceding the date of the request for support by the effective and enforceable administrative decision of the Equal Treatment Authority. Furthermore, the regulation provides an itemised list of the documents required to evidence clear labour relations.

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ICELAND

Iceland is located in the North Atlantic between Norway, Scotland and Greenland. It is the second largest island in Europe and the third largest in the Atlantic Ocean, with a land area of some 103 thousand square kilometres. Only around 20% of the total land area is classified as arable land, most of it located in the southern and western part of the country and several fertile valleys stretching from the coast. With only 2.9 inhabitants per square kilometre, Iceland is one of the least densely populated countries in Europe. On December 31, 2005, the population of Iceland was 299,891. The annual rate of population growth 1994- 2004 was 1.0%. Around 62% of the populations (nearly 190,000) live in the capital city of Reykjavík and its surrounding municipalities.

Iceland has a tradition of political stability. Since Iceland gained autonomy from Denmark in 1918, governments have normally been formed by a coalition of two or more political parties that have held a majority in parliament. Iceland has also participated actively in international cooperation. It belongs to a group of Nordic countries that includes Denmark, Sweden, Norway and Finland – as well as Greenland and the Faroe Islands. The Nordic countries have established wide-ranging cooperation in a variety of fields, including economic affairs and international representation.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Iceland is endowed with abundant natural resources. These include the fishing grounds around the island and abundant hydroelectric and geothermal energy resources, which are still a long way from being fully harnessed. From the beginning of last century until 1975 Iceland was a relatively poor country whose economy was based on a fragile agriculture, with almost two thirds of the labour force employed in agriculture. With the development of fisheries among other things, Iceland transformed into one of the Western countries with the highest standards of living.

This development was primarily made possible by Iceland gradually regaining, from 1944 to 1975, its sovereignty over the fishing grounds around the island, as well as technical developments in vessels and through favourable trends in world fish prices. The exploitation of hydroelectric and geothermal energy sources and, more recently, the expansion in tourism, have allowed this development, which is a provider of foreign currency, to be established.

Iceland experienced rapid economic growth during the late 1990s, but high domestic spending led to a widening deficit that peaked at 10% of GDP in 2000. The economy went into recession in 2001, and inflation rose. The government tightened monetary and fiscal policy that brought inflation down, but GDP growth remained negative in 2002. The government adopted a floating exchange rate for the króna in March 2001. Gross external debt amounted to 130% of GDP at the end of 2002. The government is currently looking at diversify exports, which is expected to stabilise the economy. The current largest- ever investment wave in Iceland' s power-intensive industries, and structural changes in the financial markets that have resulted in a deficit in the national budget (about 16% in 2005 and 18.7% 2006). The Central Bank of Iceland has been aggressively tightening monetary conditions, but the depreciation of the króna (ISK) since the beginning of 2006 continues to fuel inflation way above target.

The rate of growth of Gross National Income in 2005 was a little higher owing to a slight improvement in terms of trade and a reduction in the net outflow of primary income. The growth in GDP in 2005 can mainly be explained by 12.3% growth in household final consumption and 37.6% growth in fixed capital formation. This was mainly offset by a considerable growth in imports, which increased by 28.9% in real terms, with the consequence that the balance of payments went into the red by 161 billion ISK, 15.9% of GDP. The developments of the main aggregates of GDP in 2005 were in many ways similar to those of the year before.

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The yearly average growth of Gross Domestic Product GDP was 7.5% in 2005 and average growth per person was 5.2%.

The growth of GDP in Iceland Average growth Average growth Average growth % of GDP in population GDP per person 1995- 5.1 1.0 4.1 2000 2005 7.5 2.2 5.2 1955- 4.0 1.3 2.6 2005

While the marine sector is the most important source of export revenue, its share of Iceland’s GDP has declined considerably in recent years, from 16% in 1980 to around 8% in 2005. Agriculture contributes only 1.4% of the country’s GDP. These developments reflect a transformation in the utilisation of natural and human resources. Scope for expanding marine harvesting has been limited in recent years, while the utilisation of hydroelectric and geothermal power potential has intensified. At the same time, the growth of service industries such as tourism and knowledge-based activities such as information technology and communications and financial services has continued unabated.

Labour market The Icelandic labour market has one of the highest participation rates among OECD countries. Over the past 10 years it has consistently been well above 80%. This is explained partly by the fact that the rate of unemployment has normally been one of the lowest among OECD countries. The participation rate of women has also been very high by international standards. In 2005, female participation was in fact one of the highest in the OECD countries, with women accounting for 47% of the labour force. Participation rates among the young and the elderly have also been quite high. Furthermore, Icelanders tend to work long hours. The participation rate and number of hours worked are positively correlated with economic growth, thereby dampening cyclical movements in unemployment.

Import of labour has enhanced the resilience and flexibility of the Icelandic labour market. In spite of a vigorous recovery of GDP growth in 2003 and 2004, wage drift has been muted in historical terms, even in sectors that have experienced labour shortages. In 2005 the effects of excess demand for labour intensified. Unemployment fell by 1.2 percentage points during 2005 to an average of 2.1%. Wage drift increased when employers, unable to meet all domestic labour shortages with foreign staff, needed increasingly to compete for labour with wage-bidding, which resulted in a rise in the wage-index by 6.8% between annual averages for 2004 and 2005.

The standard of education is high in Iceland and public education is compulsory between the ages of six and sixteen.. A good command of English and the Scandinavian languages is widespread. In 2003, 20.5% of the workforce held a university degree. Roughly one out of every four university degrees held by Icelanders is obtained in other countries.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues The organisation of the Icelandic labour market is characterised by an independent and strong labour movement with the power to regulate employment terms through collective bargaining with its main negotiating partner, the Confederation of Icelandic Employers (Samtök atvinnulífsins; SA). The Icelandic labour market is for the most part regulated by means of collective bargaining and collective relations in Icelandic enterprises focus on the relationship between the trade union and the employer. The trade

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unions are independent and are not subject to government authority; and all communication between workers and unions and union representatives is confidential.

Labour legislation is also an important instrument, both as a means to provide the legal framework for trade unions and collective agreements and various employment issues such as pensions, maternity and paternal leave, health and safety at work, rights and obligations of foreign companies posting their workers in Iceland and other aspects of the employment relationship. Fundamental rights of workers are respected in various ways. The Constitution of the Republic of Iceland protects the right of freedom of association as well as the right not to be a member of an association (Article 74).

The State plays an important part in relation to collective bargaining and it also plays a major part through the tripartite consultation which takes place when economic and social policies are framed. Several public institutions deal with labour market issues such as the Administration of Occupational Safety and Health in Iceland (Vinnueftirlit ríkisins), the Directorate of Labour (Vinnumálastofnun), and the Centre for Gender Equality (Jafnréttisstofa).

2. Social partners Unions

The Act on Trade Unions and Industrial Disputes No. 80/1938 (Lög um stéttarfélög og vinnudeilur) stipulates the right to establish trade unions and federations of trade unions for the purpose of working jointly for the interests of the working class and wage earners in general. Trade unions are open to all those working in the trade concerned within the district of each union in accordance with the rules contained in their statutes. Applicants may not be denied membership based on gender, national origin or on other similar grounds. The general level of unionisation is very high in Iceland compared to most countries, around 88%.

The Icelandic trade unions had 147,240 active members in 2004. This high rate is accompanied by a system of priority clauses – numerous contracts specify that union members should be given priority in recruitment – and by a close link with occupational insurance/unemployment and retirement funds. Union organisation is essentially based on the trade or profession and this may involve a multiplicity of unions within one and the same undertaking.

Union organisations in Iceland.

The Icelandic Confederation of Labour (Alþýðusamband Íslands; ASÍ) is the main organisation and represents approximately 65% of all union members in Iceland. The role of ASÍ and its constituent federations is to promote the interests of trade unions and workers by providing leadership through the co-ordination of policies in the fields of employment, education, environment and labour market issues. ASÍ furthermore represents the trade union movement at government level in various matters such as the development of labour law, occupational safety, social policy etc.

ASÍ is built up of local trade unions of general workers, office and retail workers, seamen, skilled construction and industrial workers, electrical workers and various other professions. These trade unions are affiliated to five national federations, which are affiliated to ASÍ.

In addition there are seven national unions which are directly affiliated to ASÍ. The two largest trade unions are Efling with approx. 19,000 members and Reykjavik Shop and Office Workers’ Union (VR) with approx. 23,000 members. Efling covers all areas of unskilled labour in Reykjavík and its suburbs, except for workers in commerce and trade. VR aims to improve and defend the position of shop and office workers in the region by working to secure better rights, educational opportunities and wages and other terms of service for wage-earners in Iceland. ASÍ covers workers in the private sector almost exclusively, but also parts of the public sector. In 2004 approximately 93,500 members were active and 47% of them were women.

Public sector employees are organised into various unions which in turn belong to three different federations:

- The Confederation of Workers of the State and Communities (BSRB) is the biggest union of employees in the public services. In 2004 BSRB had approx. 19,000 members, 70% of them women. Its members work in the fields of postal services, customs, police, fire resistance, health care, education of pre-school children to name but a few. BSRB members are employed by local government as well as the state. BSRB is grouped into 27

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confederation unions which have a bargaining right. Sometimes the unions bargain individually but often under the auspices of BSRB.

- The Confederation of Academic Workers (BHM)

- The Teachers Union (KÍ)

Approximately three quarters of the workforce belongs to the private sector, and a quarter to the public sector.

Employers

The Confederation of Icelandic Employers (SA) was established in 1999 as a unified organisation to represent and promote the views of employers and service Icelandic businesses. SA projects include negotiations of collective agreements with unions on wages and working conditions, the advocacy of an internationally competitive legal and regulatory environment, and the interpretation and communication of decisions by governmental authorities that directly affect the businesses environment.

SA constitutes a comprehensive confederation of Icelandic employers that combines the forces of eight member associations. A business acquires SA membership by joining one of its confederation members and thus holds dual membership status. The eight SA member associations annually distribute among themselves the 100 seats on the SA board of representatives unless businesses opt to claim their seats on the board directly. Responsibilities of the board of representatives include annually electing a 20-member board of directors. The member associations operate on the basis of the different industrial activities involved and each of them has the initiative in company matters within its own, separate industrial sphere.

The eight member associations are: Association of Financial Institutions in Iceland (SFF), Federation of district heating, electric utilities, and waterworks (Samorka), Federation of Icelandic Electrical and Computer Employers (SART), Federation of Icelandic Fish-processing Plants (SF), Federation of Trade and Services (SVÞ), the Federation of Icelandic Fishing Vessel Owners (LÍÚ), the Federation of Icelandic Industries (SI) and the Icelandic Travel Industry Association (SAF). SA and its member associations include about 2,000 businesses. The organisation accounts for about 50% of all salaried workers on the Icelandic labour market.

For the public sector, the State negotiation committee and the committee for local government employees (Legal Advice & Salaries and Wages Division) are the representative bodies while the city of Reykjavík negotiates separately. Iceland’s local authorities function under the Local Government Act, No. 45/1998. While tasks that the local authorities are required to do by law are defined in various items of separate legislation, the Act sets out their rights and obligations. The Act on the Collective Agreements of Public Servants No. 94/1986 (Lög um kjarasamninga opinberra starfsmanna) covers the action of the State negotiation committee.

The following table sets out the Union and Employer Organisations in Iceland:

Union Number of Details of membership Organisation members

ASI Main trade union confederation with 5 national 65% of union federations and 7 national unions affiliated to it members Mainly private sector membership VR Shop and office workers union 23,000 Efling Unskilled labourers in Reykjavik and its suburbs 19,000 BSRB Largest public sector union 19,000 BHM Confederation for Academic Workers KI Teachers union

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Employers’ Number of Details of membership Organisation members SA Confederation of Icelandic Employers – has 8 member 2,000 businesses associations representing different sectors

3. Joint bodies According to Act No. 80/1938 (Article 44) the Labour Court (Félagsdómur) passes judgments in cases arising on account of charges concerning breaches of the Act on Trade Unions and Industrial disputes and loss sustained due to unlawful stoppage of work. Félagsdómur consist of five people appointed for terms of three years as follows: One by SA, one by ASÍ, one by the Minister of Social Affairs from three persons nominated by the Supreme Court and two by the Supreme Court, one of whom shall be specially nominated to be the President of the Court. If an employer involved in a case is not a member of SA, the judge nominated by the Confederation vacates his seat and the employer nominates a judge to take his place in the case. If the employer does not do this in time, the President of the Court nominates a judge. The same applies as regards the judge appointed by the Icelandic Federation of Labour when a party to the case is a trade union or federation of trade unions standing outside the overall workers’ organisation. (Article 39)

The Joint Consultation Committee of ASÍ and SA deals with matters regarding foreigners. It shall seek ways to collect information concerning cases referred to the committee in accordance with the above rules and to settle the dispute through discussions.

4. Collective bargaining Collective bargaining in Iceland is governed by Act No. 80/1938 and empowers trade unions to negotiate agreements with employers concerning the wages and other terms of employment of their members. Act No. 94/1986 applies to the public sector. One of the peculiarities of the Icelandic system is that the collective agreements between trade unions and employers relating to workers' wages and terms are legally binding as the minimum right of the worker according to the Act No. 55/1980 (Lög um starfskjör launafólks og skyldutryggingu lífeyrisréttinda). The worker can negotiate for better wages and terms, but all agreements with less right than the collective agreement states are by law invalid. This applies to all workers and employers, regardless of their membership in unions.

Each national federation negotiates at least one general collective agreement with SA which applies to work and other employment terms within its occupational area. Additional agreements are also negotiated by individual trade unions where local conditions are taken into account. Collective agreements fulfil both their primary function of establishing workers minimum terms of employment as well as establishing a level playing field for companies, and at the same time are flexible enough to take into account special circumstances and needs of companies. Every worker and employer is bound by law to respect the applicable collective agreement, regardless of whether they themselves are members of the unions or associations of employers which undertook to negotiate the agreement.

Priority clauses are included in collective agreements concluded on the Icelandic labour market. The content of the most common is as follows: “Employers undertake to allow workers who are full members of the relevant trade union to have priority regarding all general work when this is demanded and union members who are fully capable of doing the work involved are available.” If there are no workers available who are members of the respective trade union the employer is free to hire non-union workers. Priority clauses are deemed to be compatible with Article 74 of the Icelandic Constitution, on freedom of association.

In Iceland only one level, of national or local, bargaining exists. The most common form of collective agreements is joint collective agreements negotiated on behalf of several or all unions belonging to the same national federation. General collective agreements are, in several occupational sectors, supplemented with agreements negotiated by individual trade unions at local-level with particular companies, where special conditions and working arrangements are taken into account. The period of validity of these types of agreements is usually linked to the validity of the general collective agreement

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which it adheres to. There is no distinction made between different types of collective agreements in the sense of definition or legal status, according to their source, content or scope.

In Iceland, as in most other Nordic countries, bargaining has usually been a case of centralised bargaining involving the employees and employers confederations in the private and public sector and the state/local government. So-called national multi-industry negotiations are where the framework and the matters for negotiations are decided by the central organisations, and within this framework certain tasks are dealt with at more decentralised level. However, the Icelandic model was not corporatist until the 1990s, even though some co-operation can be observed through the last century between the actors in the labour market. Like in many countries, in recent times, the bargaining structure is shifting towards more company level bargaining.

Employers are required to deduct membership fees from workers’ wages and return the fee to the respective union. All employers are also required to pay a fee to the respective union sickness fund, holiday allowance account and education funds according to the terms of collective agreements. These are calculated as a percentage of wages. These fees are a remuneration for negotiating a collective agreement on wages and other working terms, and it will cover the cost of daily services to all contributing employees and members and support the care taking of union interests towards employers. All the fees are payable irrespective of the employees full membership of the respective union. The trade union representatives ensure that employers abide by the collective agreements and that the social and civil rights of workers are not breaches. Workers must contact the union representative at their place of work with their complaints against the employer

Main features Trade unions enter into collective bargaining agreements regarding the wages and other terms and working conditions for employees. Collective agreements have provisions for daytime and overtime wages, they regulate the payment of wages and the issue of pay statements (pay-slips), paid sickness and accident leave, maximum working time and daily time of rest, holiday allowance and special holidays, conditions in the workplace, notice of termination, contributions to union sickness funds, holiday allowance accounts, occupational education funds, pension funds, and other contributions. The provisions of collective agreements regarding these issues are minimum working terms, irrespective of gender, nationality or period of employment for all employees in that particular industry. Contracts of employment between individual employees and employers stipulating worse working conditions than those provided for in the collective agreements are void.

The content of collective agreements can in general be divided into three main categories. The first category involves rates of pay depending on various factors, divided into day-time and over-time rates, and the influence of other factors such as type of work, age, work experience etc. The second relates to holiday payments, working hours, minimum daily and weekly rest, shift-work, workers’ health and safety in the workplace, meal and coffee breaks, payments in cases of illness and work-related accidents, arrangement of working clothes, payment of union fees, choice and duties of trade union representatives etc. The third part concerns term of the agreement and in some cases dispute resolution of the negotiating parties and the impact of changes in underlying economic factors such as price increases, inflation levels which can influence the expected outcome of real-wages during the time of validity of the agreement and its period of validity.

5. Collective disputes The Section III of Act No. 80/1938, as revised by Act No 75/1996, is the cornerstone of the system. A specific person occupies a central place: the public mediator. He is appointed for five years by the Minister for Social Affairs (Article 20) and is responsible for reconciling the parties in a dispute (Article 22). The social partners must inform him of the progress of negotiations and he can make it compulsory for the parties to negotiate, take charge of the discussions himself and can formulate proposals for settlement which will be put to the vote. Against a background of conflicting relations, the public mediator has contributed towards ending deadlocks and easing situations. When it “seems obvious that a

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dispute is going to bring about very serious consequences for the government” the government can appoint a special negotiating committee (Article 20).

The government has sometimes intervened when strikes have been prolonged and mediation by the public mediator not succeeded. A long fishermen’s dispute was thus brought to an end by government intervention in 2001 (Act No. 34/2001) as well as a strike by teachers and school-directors in 2004 (Act No. 117/2004).

Strikes Since 1986 the unions have had the right to strike, although their right is subjected to more restrictions in the private sector.

Trade unions and employers' associations are authorised to declare strikes and lockouts for the purpose of working for the advancement of their demands in industrial disputes and for the protection of their rights under Act No. 80/1938, subject only to the conditions and limitations which are laid down in law (Article 14).

Act No. 80/1938 establishes an important restriction on the right to call a strike, namely that it is not permissible to call a strike where there is a dispute between workers and their employer that only concerns items on which Félagsdómur is empowered to decree (Article 17). One of the functions of Félagsdómur is to pass judgments in cases arising from charges concerning breaches of a collective agreement, or due to disagreement relating to the interpretation of a collective agreement or its validity. This in fact means that when a collective agreement has been signed, the negotiating trade union or unions waive their right to strike in as much as the conditions established in the collective agreement are fully respected. Under normal conditions strikes are therefore only used as a bargaining tool by the trade union when negotiating a new collective agreement. Strikes are in those circumstances permitted under the law, only if the decision to call a strike has been taken by secret ballot with the participation of at least 20% of those on the voting and/or membership list, and the proposal receives the support of the majority of votes cast. The Act on the Collective Agreements of Public Servants No. 94/1986 states that a negotiating trade union is authorised to declare strikes and lockouts for the purpose of working for the advancement of their demands in industrial disputes and for the protection of their rights under the Act No. 94/1986, subject only to the conditions and limitations which are laid down in law (Article 14).

III. EMPLOYEES’ REPRESENTATION IN THE UNDERTAKING

1. General issues The issue of information and consultation within the workplace is a relatively new aspect of Icelandic industrial relations, which is due to many reasons,, for example, the economic fabric has been largely made up of small and medium-sized enterprises (SMEs), with the result that informal channels are very important. The changes in this area in recent years are primarily based on EU- directives that have been transposed into Icelandic law, although since 1938 there has been a general system of worker representation at the workplace (union representatives) based on the Act on Trade Unions and Industrial Disputes, and further developed in collective agreements. The provisions concerning union representatives have not been amended since the law was enacted. For the public sector there are provisions concerning union representatives in Act No. 94/1986. Some collective agreements specify the prerogatives of union representatives and the resources available to them to carry out their tasks. Union representative’s represent trade unions on the one hand; and workers at the workplace on the other.

Bearing in mind the particularly high level of unionisation in Iceland, the system of employee representation mainly operates via a single channel, namely the trade union and their union representatives. The union representatives, present in most enterprises in Iceland, are virtually the sole representatives of the workers. If the workers are not represented by a union representative they are entitled to choose their joint representative instead, according national legislation deriving from the EEA- agreement, which grant employee’s the right to information and consultation, and sometimes the

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legislation stipulates that if there is no union representative at the workplace, its workers shall be informed and consulted under the law (cf. the Act on the Rights of Employees at Transfer of Undertakings).

2. Legal basis and scope Two texts support the representation system: Act No. 80/1938 and for public Servants, Act No. 94/1986.

In addition, the Act on information and consultation in undertakings, No. 151/2006 (lög um upplýsingar og samráð í fyrirtækjum), has transposed Directive 2002/14/EC. The objective of the Act is to ensure the right of employees to information and consultation in undertakings, and encourage workers’ representatives and undertakings to work in a spirit of cooperation when implementing practical arrangements for information and consultation, taking into account the interests both of the undertaking or establishment and of the workers (Article 2). The Act applies to undertakings with at least 50 employees, but does not apply to seagoing vessels (Article 1). However, until 1 March 2008 its scope was limited to undertakings with at least 100 employees (Temporary provision of the Act). 'Workers representatives' are defined in the Act as union representatives and/or a mutual representative of those employees in the undertaking which not are represented by a union representative, unless collective agreements stipulate a different provision or if there is an agreement about a different provision in an undertaking (Article 3, para 1).

3. Capacity for representation The union representatives only represent members of their union at the workplace. They do not have legal rights to sign agreements with the undertaking or to go to court to represent employees.

Act No. 80/1938 stipulates that at each place of work, where at least five people are employed, the executive committee of the local trade union in the trade concerned are entitled to nominate two people to act as union representatives out of the group working at the workplace. As a general rule, as is stipulated in the applicable collective agreements, the nominees are elected by the employees before hand. The employer shall approve one of them in the capacity of trade union representative at the workplace. The term of office of union representatives is not regulated under the Act on Trade unions and Industrial Disputes. The union that has appointed a union representative may also dismiss him from his post and replace him if it considers that he has neglected his duties (Article 12 of Act No. 80/1938).

There is a similar system of union representatives in the public sector, but the provisions of Act No. 94/1986 on union representatives are different in some aspects. In a workplace where there are at least five employees they are entitled to elect one union representative from their group. If there are fifty workers or more, two union representatives may be elected. The term of office is two years (Article 28 of Act No. 94/1986).

4. Protection granted to the members Union representatives are provided with special protection under the law. Employers and their representatives are not permitted to terminate the employment of union representatives on account of their activities or suffer any detriment for carrying out their functions. Where an employer wants to reduce the number of workers, a union representative shall, other things being equal, have priority in retaining their job (Article 11 of Act No. 80/1938). A union representative in the public sector also enjoys special protection under the Act (Article 30 of Act No. 94/1986).

5. Working of the body and decision-making Union representatives generally carry out their tasks during working hours. There are no provisions in legislation concerning their day to day operation, meetings with managements, decision meetings and so on, and collective agreements only deal with this in a very limited manner.

According to collective agreements from 1977, which apply to the private sector, union representatives are entitled to meet with the workers twice a year at the workplace during working hours. Collective

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agreements in the public sector (BSRB) also contain provisions concerning the right of union representatives to set up meetings at the workplace, on condition that such meetings do not disrupt the operation or service of the institution concerned.

According to the collective agreements of bank employees, a meeting of the board, the personnel manager and the workers representatives, concerning general interests of the employees, shall be held if requested by either of the parties. Meetings with managers, chiefs of divisions and the board and/or employee representatives, especially concerning the organisation and operation of the bank, shall be held when needed, if requested by one of the parties.

6. Means According to Collective agreements, a union representative in the private sector is entitled, in cooperation with his manager, to paid time to carry out his/her functions. In the case of dispute, union representatives are entitled to review documents and working reports concerning the matter. They should have access to a locker and phone, in cooperation with the manager.

A union representative in the public sector is entitled to carry out his duties during the working hours, but shall inform his employer about his activities each time. (Article 29 of Act No. 94/1986). According to collective agreements there shall be no reduction of pay for carrying out these activitities. They should also be provided with a facility at the workplace for private conversation with co-workers, be permitted to meet with them in coffee-breaks or at the end of the working-hours, if possible, and be provided with access to phone etc. (Article 29 of Act No. 94/1986 and collective agreements).

According to collective agreements, both in the private and the public sector, union representatives are entitled to attend conferences, meetings and courses on behalf of their union up to one week a year without reduction of pay. Similar provisions are in collective agreements in the bank sector. According to collective agreements union representatives in the private sector are entitled to attend courses which are intended to make them more qualified to carry out their functions. Union representatives are normally entitled to one week off for this purpose without reduction of pay.

Provisions concerning external assistance from experts can only be found in legislation deriving from EU-directives, like the Act on European Work Councils No. 61/1999 (Lög um evrópsk samstarfsráð í fyrirtækjum), the Act on Collective redundancies No. 63/2000 (Lög um hópuppsagnir) and the Act on information and consultation in undertakings, No. 151/2006 (Lög um upplýsingar og samráð í fyrirtækjum). Undertakings are usually not obliged to finance external assistance by experts, although under the European Work Councils Act funding by the central management is limited to the work of one expert.

7. Role and rights The union representative should ensure that work agreements are adhered to by the employer and his representatives and that the workers’ social or civil rights are not curtailed (Article 9 of Act No. 80/1938). This provision does not, however, extend to agricultural workers or the crews of vessels or boats. In addition, the law gives union representatives two prerogatives. Firstly supervision and secondly handling of complaints: Workers can apply to the trade union representative with their complaints about the employer and his representatives. As soon as a union representative has received a complaint from a worker, or he considers himself to have reason to assuming that the right of a worker or a trade union at his workplace has been infringed by the employer or his representative, he can investigate the matter. Where he comes to the conclusion that the complaints, or his suspicions, have been substantiated, he can approach the employer or his representative with a complaint and demand corrective action. Trade union representatives shall as soon as possible provide a report to the trade union that selected them about workers' complaints. They shall also produce a report to the union setting out why they consider an employer or his representatives to have acted against workers and their unions (Article 10 of Act No. 80/1938).

Union representatives in the public sector have a supervisory function: They ensure that the employer and his representatives adhere to the collective agreement in every aspect, especially as regards holidays

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and health and safety at the workplace. They also deal with complaints from employees (Article 29 of Act No. 94/1986).

Information and consultation According to Act No. 151/2006, employers shall give workers’ representatives information concerning: the recent and probable development of the undertakings’ or the establishments’ activities and economic situation; the situation, structure and probable development of employment within the undertaking or establishment, and any anticipatory measures envisaged, in particular where there is a threat to employment; and decisions likely to lead to substantial changes in work organisation or in contractual relations, including those based on provisions of the Act on the rights of employees at the transfer of undertakings and Act on collective redundancies.

Information shall be given (in relation to timing, fashion and content) to enable employees’ representatives to be able to adequately examine it and where necessary, prepare for consultation (Article 4).

Workers representatives shall be given the opportunity of consultation by having a meeting with the employer and obtaining a response, and the reasons for that response, to any opinion they might formulate. Consultation shall take place in such a way as to ensure that the timing, method and content are appropriate on the basis of information supplied by the employer and of the opinion given by the workers’ representatives. The consultation shall take place at the relevant level of management and representation, depending on the subject under discussion. Consultation on decisions which may lead to substantial changes in work organisation or in contractual relations shall take place with a view to reaching an agreement (Article 5). Decisions on the practical arrangements for informing and consulting workers can be made by collective agreements or agreements between employers and workers’ representatives and under the circumstances these agreements may move aside the provisions of the Act on information and consultation, subject to the condition that the objective of the Act is respected( Art. 2 (Article 6)).

The employer is not obliged to communicate information or undertake consultation when the nature of the information is such that, according to objective criteria, its communication would seriously harm the functioning of the undertaking or would be prejudicial to it (Article 7). Workers representatives may be bound by confidentialily if this is in the legitimate interest of the undertaking. The workers’ representatives, and any experts who assist them, are not authorised to reveal to workers or to third parties confidential information given to them in the legitimate interest of the undertaking. This obligation shall continue to apply after expiry of their terms of office (Article 8). Workers’ representatives enjoy the same protection as union representatives according to the Act on Trade Unions and Industrial Disputes and the Act on the Collective Agreements of Public Servants regarding carrying out their functions under the law (Article 9). Breaches of the provision on confidential information, when information is revealed to third parties, can lead to penalties, unless a heavier sanction is established under legislation. Breaches of the provisions concerning information, consultation, and the protection of workers’ representatives can lead to penalties (Article 10).

According to Act No. 63/2000, an employer contemplating collective redundancies shall as soon as possible consult the union representative, or if there is no union representative, another representative chosen by the workers, with a view to reaching an agreement and providing them with the opportunity of making suggestions on how to avoid the dismissals, or limit the number of dismissals and alleviate their consequences.

Also transposing EC legislation, the Act on rights of employees at Transfer of undertakings, No. 72/2002 (Lög um réttarstöðu starfsmanna við aðilaskipti að fyrirtækjum), establishes that both the old and the new employer are required to inform union representatives or employees, if there are not union representatives, of the following: The date or proposed date of the transfer; the reasons for the transfer; the legal, economic and social implications of the transfer for the employees; and any measures envisaged

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in relation to employees. The transferor must give the above information to the union representatives or employees in good time, before the transfer is carried out. The transferee must give such information in good time, and in any event before his workers are directly affected by the transfer as regards their conditions of work and employment. Where the transferor or transferee envisages measures in relation to their employees, they are required to consult the union representatives or the workers representatives, if there are no union representatives, in good time on such measures with a view to reaching an agreement (Article 6).

8. Other representation bodies According to the Act on Working Environment, Health and Safety in the Workplace, No. 46/1980 (Lög um aðbúnað, hollustuhætti og öryggi á vinnustöðum), there is a special form of representation in the area of health and safety at the workplace, that of safety representatives and safety committees. In enterprises employing 10 people or more, the employer shall appoint one person as a safety officer on his or her behalf, and the employees shall appoint another from their group as a safety representative. Their prerogatives are to ensure cooperatively that the working environment and health and safety at the workplace is in accordance with this Act (Article 5). In enterprises employing 50 people or more, a safety committee shall be established.

European Works Councils The legislation on employees' participation deriving from EU-directives which have been implemented in Icelandic law has made significant changes to the legal situation concerning employee’s right to information and consultation. However, it should be pointed out that some of the legislation has limited effect in Iceland since only few, if any, enterprises in Iceland are covered by it.

The Act No. 61/1999 implemented Council Directive 94/45/EC, in Iceland. The purpose of the Act is to improve the right of information and consultation of employees in Community-scale undertakings, and groups of undertakings which operate in at least two states in the European Economic Area. To that end a European Works Council shall be established, composed of employee’s representatives, or a decision made on rules in every undertaking, and group of undertakings, concerning information and consultation, in accordance with the law (Article 1). The central management is responsible for creating the conditions and means necessary for the setting up of a European Works Council or an information and consultation procedure (Article 9). The central management shall initiate the arrangement of a special negotiating body, for the purpose of establishing a Works Council or rules on information and consultation (Art 10 - 11).

9. Protection of rights Breaches of the Act No. 80/1938 are, in addition to damages, subject to fines (Article 70). Félagsdómur has ruled on the issue of the protection of union representatives and case law has developed.

Disputes concerning the provisions of Act No. 94/1986 go to the general courts (Article 26, para 1) but if the dispute is about the interpretation of collective agreements on workers representatives in the public sector it can be referred to Félagsdómur (Article 26, para 3). Breaches of Act No. 94/1986 are subject to fines.

In Act No. 61/1999, there are provisions for the special protection of members of the special negotiating bodies, members of European Works Councils and workers representatives exercising their functions under the law. They enjoy the same protection as union representatives under the Act on Trade Unions and Industrial Disputes, and are guaranteed the right to take time off during working hours so they can carry out their duties under the Act (Article 31). There are penalties for breaches of provisions of the Act (Article 34 and 35). Breaches of the provisions on information and consultation under Act No. 63/2000, can lead to fines (Article 12).

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Under Act No. 72/2002, an employer, transferor or transferee, who by intention or carelessness breaches the Act, is liable for damages according to the general rules of laws (Article 8).

Breaches of the provisions concerning information, consultation, and the protection of employees’ representatives in the Act on information and consultation in undertakings, No. 151/2006, can lead to penalties (Article 10).

IV. EMPLOYEES REPRESENTATION IN CORPORATE BODIES

Employees are normally not entitled to representation on the boards of companies according to legislation or collective agreements, neither is there a custom of such arrangement. The only exemption from this is the legislation concerning workers involvement in European Companies and European Cooperative Societies.

Representation of employees in the boards of European Companies or European Cooperative Societies The objective of the Act on the involvement of employees in European Companies, No. 27/2004 (Lög um aðild starfsmanna að Evrópufélögum), is to secure employees’ rights as regards involvement in cases and decisions concerning the European Company where they work, and ensure that employee rights in force before the establishment of the European Company should provide the basis for employee rights of involvement in the European Company (Article 1). As in the Directive, the term “involvement of employees“ means any mechanism, including information, consultation and participation, through which employees' representatives may exercise an influence on decisions to be taken within the company. The term ”participation“ means the influence of the body representative of the employees and/or the employees’ representatives in the affairs of a company by way of:

- the right to elect or appoint some of the members of the company’s supervisory or administrative body, or;

- the right to recommend and/or oppose the appointment of some or all of the members of the company’s supervisory or administrative body.

The Act follows closely the provisions of Directive 2001/86/EC and establishes the right of participation of employees in conformity with the Directive. The same applies to the Act concerning involvement of employees in European Cooperative Societies, No. 44/2007 (Lög um aðild starfsmanna að evrópskum samvinnufélögum) which aims to secure employees rights as regards involvement in cases and decisions concerning the ECS where they work, and ensure that existing rules concerning employees’ involvement neither diminish or disappear because of its establishment (Article 1). The content of these two Acts is very similar.

V. EMPLOYEE INVOLVEMENT IN EXTERNAL DECISIONS THAT AFFECT THE UNDERTAKING

Insolvency or bankruptcy procedures There are no direct provisions on the right to information and consultation in the case of insolvency or bankruptcy procedures. However, some of the laws mentioned above include provisions on employers’ duty to inform and sometimes consult union representatives and/or other workers’ representatives about substantial changes in undertakings, such as the economic situation and the situation, structure and probable development of employment within the undertaking or establishment, and on any anticipatory measures envisaged, in particular where there is a threat to employment (Act No. 151/2006, Article 4). An European Works Council is entitled to information on economical and financial situation of the undertaking or establishment, cutting down or closing of the undertaking, or Community-scale group of

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undertakings or establishments (Act No. 61/1999, Article 23). Provisions on consultation concerning such matters can also be found in the Act on involvement of employees in European Companies concerning the right of the representative body to receive information (Article 15) and the Act on involvement of employees in European Cooperative Societies (Article 17).

Information, consultation and participation relating to operations affecting shareholders Under Act No. 72/2002, the transferor and the transferee are required to inform union representatives or the employees about the following:

• the date or proposed date of the transfer;

• the reasons for the transfer;

• the legal, economic and social implications of the transfer for the employees; and

• any measures envisaged in relation to the employees.

The transferor must provide this information in good time, before the transfer is carried out. The transferee must give such information in good time, and in any event before his workers are directly affected by the transfer as regards their conditions of work and employment. Where the transferor or transferee envisages measures in relation to their employees, they are required to consult the union representatives or workers in good time on such measures with a view to reaching an agreement (Article 6). Provisions on consultation concerning such matters can also be found in Act No. 27/2004 concerning the right of the representative body to receive information (Article 15) and Act No. 44/2007 (Article 17).

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IRELAND

Ireland seceded from the United Kingdom in 1922. The state was troubled by poverty and emigration until the early 1990s but these problems virtually disappeared over the course of that decade, which saw the beginning of unprecedented economic growth, in a phenomenon known as the "Celtic Tiger".

The industrial relations model operating in the Republic of Ireland has evolved significantly over the last thirty years as a result of political, economic, legal and social change from a centralised (national) wage bargaining model to a corporatist /partnership model involving government, employers, trade unions and other interest groups.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data Ireland is a small, open, trade-dependent economy and is one of the fastest growing economies in the developed world. Its openness is reflected both in the international mobility of its labour and capital reflected by strong migratory flows and high levels of foreign direct investment. In recent decades, the Irish economy has transformed from being agrarian and traditional manufacturing based to one increasingly based on high technology and an internationally-traded service sectors and in response to the Lisbon Strategy in becoming a knowledge economy.

The Irish economy felt the impact of the global economic slowdown in 2001, particularly in the high-tech export sector but growth is expected to continue at more than 4 per cent (2006 onwards).

The productivity of the Irish workforce as measured by GDP in Purchasing Power Standards (PPS) per person employed was 29.2% higher than the EU 25 average in 2005, with Ireland having the second highest productivity rate among EU 27 states. In terms of GDP, productivity per hour worked in Ireland has been higher than the EU 15 average since 1997.

The Irish economy's secondary and tertiary sectors are of a similar size in fiscal terms however in terms of labour, the tertiary sector is far larger. The primary sector constitutes 5% of Irish GDP, and 8% of Irish employment. The secondary sector constitutes 46% of Irish GDP — but only 29% of the labour force. And finally, the tertiary sector constitutes 49% of Irish GDP and 64% of Irish employment. The tertiary sector is by far the largest driver of modern Irish economic growth.

Labour market The employment rate for people aged 15-64 was 67.5 in 2005, and continued to rise in the year to the first quarter of 2007 from 68.0% to 68.6%. The rate for women increased from 58.6% to 59.8% while the rate for men remained unchanged at 77.2% over the year. From an age perspective the highest employment rate, 81.9%, relates to the 25-34 age group, where 87.7% of men and 75.9% of women were in employment.

The unemployment rate was 11.9% for both men and women in 1996. In 2006, these rates had decreased to around one-third of the 1996 levels at 4.5% for men and 4.1% for women. This drop was reflected in all age groups. The unemployment rate for both men and women tended to decrease with age in both 1996 and 2006.

The importance of Agriculture has diminished, with the sector accounting for less than 5% of total employment in 2006 compared with over 50% in 1926. The growth in employment in the services sector has been particularly pronounced with 58% of the increase of 953,000 occurring in the last ten years. Services now account for around 70% of total employment. While industrial employment increased by over 50% between 1991 and 2006, its share of total employment has declined to 27% in 2005.

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Self employment increased to 17 % of total employment in Ireland in 2006, while only 3.7% have fixed term contracts. The number of people in part-time employment –16.8% of total employment in 2004 increased by 13,000 (3.8%) in the twelve months to the first quarter of 2007. Women accounted for almost 12,000 of the overall increase. The sectors that recorded the largest annual increases in part-time employment were Health (5,800) and Wholesale and retail trade (3,300).

Finally, it is important to highlight that the results of the 2006 census show that the proportion of females in full-time education exceeds that of males for every year of age in the range 15 to 23 years, a continuing trend. The difference in participation rates between males and females is widest for 19 year olds at 15.7 percentage points.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues Trade unions are the primary channel of workplace representation, and the establishment of works council-type structures on a voluntary or collectively-agreed basis is not common. The industrial relations system has historically been characterised by ‘voluntarism’ – in this context minimum legal intervention rather than non-intervention by the government in collective bargaining. Ireland’s EU membership in 1973 contributed to Ireland’s emerging legal framework – at individual and collective level. The Industrial Relations Act 1990 confers immunity from prosecution for workers and their representatives for industrial action, but only if they are acting within what is known as ‘the golden formula’ (actions in contemplation or furtherance of a trade dispute). The 1990 Act introduced new definitions of industrial action and ‘strike’.

Ireland’s 1937 constitution guarantees freedom of association to employees, but there is no legal or constitutional obligation on employers to recognise a trade union, in other words, to negotiate with it, for collective bargaining purposes. However, arising from the recent Supreme Court ruling (2007) involving the case of Ryanair vs. IMPACT trade union, it was held ruled that there is no reason why collective bargaining should be confined to unionised employment.

2. Social partners Unions

A significant feature of the industrial relations system in Ireland has been a gradual widening of the partnership approach beyond the traditional social partners - trade unions, employers' associations and farming organisations to include organisations representing unemployed people, women and others working to counter social exclusion. .

Trade unions in Ireland

Trade union organisation is based on three types of unions: while collar, craft and general. There are also Irish-based and British-based unions, and unions affiliated to the Irish Congress of Trade Unions (ICTU) and non ICTU affiliated unions.

There is one main trade union confederation, the Irish Congress of Trade Unions (ICTU), which has 56 affiliated trade unions. The ICTU’s remit covers the Republic of Ireland, where 43 unions operate, and Northern Ireland where 32 affiliated unions operate. As of January 1 2006, ICTU had a total membership affiliation of 784,277 in the Republic and Northern Ireland.

A number of British based unions that operate in the Republic must provide for control of Irish affairs to be vested in an Irish executive. Although ICTU plays an important part in national-level relations with government and employer organisations, it is more a grouping of independent and autonomous unions than a confederation that dominates and directs its affiliated unions.

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- The Social, Industrial, Professional and Technical Union (SIPTU) is the largest trade union, with more than 250,000 members. It is a general union with membership in many different types of employment and in diverse sectors of the economy.

- The public sector union, IMPACT, is the second largest, with 54,000 members. The retail and wholesale union, MANDATE, is third, with just 40,000 members.

- The Technical Engineering and Electrical Union (TEEU) is fourth, with more than 34,000 members. The Irish Nurses Organisation (INO) is fifth, with some 30,000 members.

A small number of trade unions operate outside ICTU. The statutory Department of Enterprise Trade and Employment figures indicate union membership at 653,433 for 2004.

Employers’ organisations

The Irish Business Employers Confederation (IBEC) is the largest employer organisation with 3,485 member companies in the Republic. It was formed in 1993 following the merger of the Federation of Irish Employers (FIE) and the Confederation of Irish Industry (CII). IBEC is the umbrella body for leading business groups and sectoral associations, and it performs the dual functions of an employer organisation (handling industrial relations) and a trade association (promoting business generally).

Other notable employer organisations include the Construction Industry Federation (CIF), with 2,435 members; the Society of the Irish Motor Industry (SIMI), with 1,817 members; the Irish Pharmaceutical Union (IPU), with 1,605 members; the Irish Hotels Federation (IHF), with 939 members. The Chambers of Commerce (CCI) do not play a role in collective bargaining, but are involved in the system of social partnership. Because estimates range between 35% and 67%, no reliable figure can be presented on how many employees work in companies that are members of an employer organisation.

The table below provides details of the main union and employer organisations.

Name of Number of Details of membership union members

Trade union confederation with 56 affiliated ICTU 784,277 unions Largest general union with membership across SIPTU 250,000 plus range of occupations and sectors of the economy IMPACT Organises in the public sector 54,000 MANDATE Retail and wholesale union 40,000 TEEU Technical Engineering and Electrical Union 34,000 INO Irish Nurses Organisation 30,000 Employers’ Details of membership Number of organisation members IBEC Umbrella body 3,485 member companies CIF Construction Industry 2,435 SIMI Motor Industry 1,817 IPU Pharmaceutical Industry 1,605 IHF Hotels 939

3. Joint bodies The State as an equal partner in the Irish Partnership industrial relations model represents the public good and the public sector employer at this negotiation forum. It also has a facilitative role, providing a range of third-party institutions to assist in dispute resolution. There are a number of advisory bodies established by the State or where the State has representation including: National Economic and Social

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Council (NESC), Economic Social Research Institute (ESRI), the National Centre for Partnership and Performance. The top-level social partner group, known as the National Implementation Body (NIB), is to continue in its current role of monitoring the resolution of, and intervening in, major disputes, which it usually refers to the Labour Relations Commission (LRC) or the Labour Court. The NIB can also make recommendations to the social partners on how to deal with particular problems by way of further procedural changes. The NIB is comprised of very senior government, employer and union representatives.

Historically, the state did not directly involve itself in the collective bargaining system. Instead it adopted a facilitative role, providing a range of third-party institutions to assist in dispute resolution. The system of industrial relations is characterised by very high use of both the collective and individual dispute resolution bodies. In recent years there has been an increase in the involvement of the High Court and Supreme Courts in industrial relations cases. There are two main dispute resolution bodies dealing with collective industrial relations and other Tribunals for dealing with individual issues and equality issues:

• The Labour Relations Commission (LRC), established in 1990 (Section 25 Industrial Relations Act 1990) is the main state institution. Among other functions, it provides conciliation, mediation, and advisory services. It also provides a rights commissioners service, which deals with both individual employment law disputes and industrial relations disputes;

• The Labour Court, established by the Industrial Relations Act 1946 and amended by Section 26 of the Industrial Relations Act 1990 makes recommendations for resolving labour disputes and it is considered to be the court of last resort. Although its recommendations are generally non- binding, in recent years efforts have been made in certain disputes to introduce binding arbitration. It also adjudicates on some individual employment law disputes, notably in the area of equality, and in such cases its decisions are binding on the parties – subject to appeal to the civil courts;

• The Equality Tribunal (established by the Employment Equality Act 1998) has the main responsibility for adjudicating on equality disputes, with appeals being taken to the Labour Court and High Court on points of law. Equality issues can also be referred to the civil courts;

• The Employment Appeals Tribunal (EAT) is the main body dealing with employment law disputes, with an option to refer many of these disputes in the first instance to a Rights Commissioner (established by the Industrial Relations Act 1969). Appeals against the decisions of such bodies can end up in the civil courts; and

• The Department of Enterprise Trade and Employment Labour Inspectorate enforces the national minimum wage and health and safety legislation.

4. Collective bargaining Collective agreements generally lack the force of law, being binding in honour only. Because collective agreements are governed by the law of contract they require all the elements of a valid contract. Collective agreements are binding between the parties to the agreement i.e. employers and trade unions – but not the members. To overcome this problem and make the agreement legally binding on employees, terms and conditions of employment gain legal effect when incorporated by an employer into the employment contract.

Agreements can be registered with the Labour Court, thereby acquiring legal effect. However, there is limited use of this provision and it is largely confined to collective agreements covering specialist issues such as pensions. It is also possible to have a registered agreement that covers an entire industry, including employers that are not members of the relevant employer organisation. Not every trade union signed up to the new national pay agreement or the second public service pay benchmarking exercise.

The fact that national agreements do not have legal effect, and are not applied nationally, means it is not possible to calculate a rate for collective bargaining coverage. If equated with the trade union density, at around 40%, this would make it lower than most other Western European countries. However, it is

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possible that the bargaining coverage is greater than union density because some non-union employers might use the national agreements as a guide to pay increases, but there no empirical data on the extent of such an effect exists.

In Ireland any party recognised for the purpose of collective bargaining in the workplace/company may enter into a collective agreement with the company. Arising from a recent Supreme Court case (2007) – Ryanair vs. IMPCT trade union – the Supreme Court has ruled that there is no reason why collective bargaining should be confined to unionised employment.

In contrast to some other European countries, Ireland does not have any widespread procedures for the extension of collective agreements, at whatever level, to cover parties who were not originally signatories to the agreement. However certain procedures for the extension of agreements and the imposition of binding terms and conditions of employment do exist and the two systems are outlined below:

The Industrial Relations Acts 1946 to 1990 provide for the extension of collective agreements to non- signatories through the Registered Employment Agreement (REA) system. Agreements that can be made binding include those covering a sector or region (public agreements) and single enterprises (private agreements). The Labour Court will register an agreement if certain conditions are met, one of which is that the parties to the agreement are substantially representative of the workers and employers to whom the agreement is expressed to apply. The effect of registration is to make the agreement legally binding on every worker of the class, type or group to which it is stated to apply and to his employer, even if such worker or employer is not a party to the agreement. The opportunity to register an agreement offered by the legislation has been little used in practice, and has not had a significant impact on the terms and conditions of workers throughout the economy. At present there is only one "live" private REA and five public REAs covering two sectors on a national basis, and two sectors in the Dublin area only.

Joint Labour Committees (JLCs) are bodies established under the Industrial Relations Act, 1946 to provide machinery for fixing statutory minimum rates of pay and conditions of employment in various sectors. A JLC is made up of equal numbers of employer and worker representative appointed by the Labour Court and a chairman and substitute chairman appointed by the Minister for Enterprise, Trade and Employment. JLCs operate in areas where collective bargaining is not well established and wages tend to be low.

The function of a JLC is to draw up proposals for fixing minimum rates of pay and conditions of employment for the workers involved. When proposals submitted by a JLC are confirmed by the Labour Court, in the form of an Employment Regulation Order (ERO), they become the statutory minimum pay and conditions of employment for the workers concerned. Employers are then bound under penalty to pay wage rates and provide conditions of employment not less favourable than those prescribed.

Companies engaging in collective bargaining usually have agreed procedures to guide the process such as the election of officers, proceedings at meetings, and the duration of term of office. Collective bargaining will usually have well developed rules based on democratic principles to inform the decision making and voting process. Section 14 of the Industrial Relations Act 1990 sets out the balloting procedures prior to engaging in industrial action.

An employer of workers to whom an Employment Regulation Order applies must keep records of wages, payments, and so on, and must retain these records for three years. The employer must also put up a prescribed notice in the place of employment setting out particulars of the statutory rates of pay and conditions of employment.

Employment Regulation Orders are enforced by the Labour Inspectors of the Department of Enterprise, Trade and Employment. These inspectors have the power to enter premises, inspect wage sheets and other records, interview the employers and workers concerned, recover arrears and, if necessary, take legal proceedings against an employer who is in breach of an ERO.

Since 1987, pay bargaining in Ireland has predominantly occurred at national level through successive social partnership agreements, although an element of local pay bargaining still occurs round these pay floors. As a result of the national agreements, Ireland has a highly centralised bargaining system and with the notable exception of the construction sector, industry level bargaining is not a feature. Outside the

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national agreements, negotiations normally take place at organisation level between trade unions and individual employers, with the latter usually represented by an employer organisation.

Since 1987 the partnership model has played a major role in the development and conduct of economic and social policy for Ireland. This approach contributed to raising the country from a deep economic and social crisis in the 1980s and facilitated a return to growth. Since 1987 a number of partnership agreements have been implemented. These agreements determine the growth of pay in both the public and private sector, but also embody a negotiated approach to a wide range of economic and social policies. The consensus which underpinned these agreements was, to a large extent, developed in the National Economic and Social Council (NESC), in which the social partners and senior civil servants undertake analysis and discussion of strategic issues.

5. Collective disputes In Ireland the Industrial Relations Act 1990 requires all industrial relations disputes to be referred to the Labour Relations Commission (LRC) for settlement (in exceptional circumstances a dispute may be referred to the Labour Court). If the LRC is unable to resolve the dispute, the dispute will be referred to the Labour Court, with the agreement of the parties, which is intended to be a court of last resort. Employment disputes involving a single worker, or small group, are usually referred, in the first instance, to the Rights Commissioner Service, established under the Industrial Relations Act 1969, and amended by the 1990 Act. This operates within the ambit of the LRC. Either party to such individual disputes may appeal against any Rights Commissioner decision, to either the Labour Court or the Employment Appeals Tribunal (EAT), depending on the issue. Individuals may seek remedies at the EAT for alleged infringements of their statutory employment rights in relation to disputes over redundancy, unfair dismissal, working time, maternity and parental leave etc. In other cases, involving discrimination or victimisation but not dismissal, the Equality Tribunal may investigate complaints. The Equality Tribunal is an independent quasi-judicial body established in 1999, whose core function is to investigate and/or mediate complaints of unlawful discrimination at work under the Employment Equality Act 1998, and to provide legal enforcement and remedies.

A distinction is normally made between collective and individual conciliation. Collective conciliation is offered in disputes between employers and trade unions, and is seen as appropriate only when the internal disputes procedure has been exhausted. Conciliation in collective disputes may relate to issues such as pay and conditions, trade union recognition and (less frequently) dismissal. Conciliation is usually a necessary step before the parties may make use of other dispute-settlement mechanisms such as mediation or arbitration. Individual conciliation in Ireland is carried out by Rights Commissioners. At a collective level, conciliation is offered by the Industrial Relations Officers of the LRC, originally known as Conciliation Officers. The LRC maintains a computer record of all interventions and settlements at conciliation level, and claims a high success rate.

Arbitration is a form of third party intervention in industrial disputes, with a view to reaching a settlement. Given the tradition of voluntarism in Irish industrial relations and thus the general lack of legal intervention in collective bargaining, the outcome of arbitration is binding in honour only; in other words, an arbitrator's award cannot be legally enforced by either party, but it would be quite rare for either party to fail to abide by the arbitrator's decision. The arbitrator's decision would normally be expected to fall somewhere between the positions of the two parties in dispute; an exception to this is what is termed “pendulum arbitration”.

The principal dispute-settlement institutions in Ireland are the LRC and the Labour Court. The Labour Court is not a court of law but is instead a forum in which third-party intervention is provided. The Labour Court does not use the word "arbitration" to describe its investigations, but in practice they may sometimes amount to arbitration. While the parties are not expected to agree in advance to abide by the Court's decision (with the exception of cases brought under section 20 of the Industrial Relations Act 1969 where trade unions may make a unilateral reference to the Court provided they give an undertaking to abide by the decision), in practice the parties tend to accept the Court's determination as final. It may be argued that since neither party would agree to go to the Court if they believed that the other did not intend to abide by the decision, in practice the Court's function has become that of arbitrator.

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Mediation is a form of third-party intervention as a means of dispute settlement. Mediation is closer to conciliation than arbitration, in that arbitration is a quasi-judicial process, since the arbitrator makes a decision which the parties are expected to abide by. In mediation, the mediator can proceed in the manner of conciliation, attempting to reconcile the parties, but may also make recommendations. These recommendations may be accepted or rejected by either party to the mediation process, or by those to whom the parties are responsible. For instance, a trade union's members may reject the recommendations, or - as with recommendations under the State Conciliation and Arbitration Schemes - these may be rejected by the Minister or the Dáil (the Irish Lower House of Parliament). Mediation in Ireland is provided by the LRC and in terms of investigation of disputes, by the Labour Court.

Strikes Industrial disputes and lock-outs are governed by statute and the Irish Constitution, including: the Industrial Relations Acts 1946-2005 and Trade Unions Acts 1941-1976; Section 14 of the Industrial Relations Act 1990 obliges trade unions to hold a secret ballot prior to taking any form of industrial action. Section 19 of the Act restricts employers from obtaining injunctions against trade unions and their members, to restrain them from taking industrial action, provided the legal procedures for balloting set out in Section 14, have been followed.

The latest Central Statistics Office (CSO) data, as of July 2007, shows that during the first quarter of 2007 there were 1,797 days lost to industrial disputes. This compares with 3,407 for the same period last year. Disputes are included in the figures if they involve a stoppage of work lasting for at least one day and total time lost is 10 or more person-days.

III. EMPLOYEES’ REPRESENTATION IN THE UNDERTAKING

1. General issues Ireland has no system of statutory works councils but they do operate in a minority of Irish companies on a voluntary basis. Trade unions are the primary channel of workplace representation, and the establishment of works council-type structures on a voluntary or collectively-agreed basis is not common practice.

There is no universal model of employee representation in Ireland. Since 1977 Ireland has introduced a number of statutes on worker participation and information and consultation in order to enable Ireland comply with European Union requirements. Despite the introduction of legal enactments in this area there remain a significant number of small and medium indigenous Irish companies (SMEs) that have no form of employee representation, except through collective bargaining, which only applies in companies where trade unions are recognised. There is therefore a significant number of indigenous Irish SMEs without any form of employee representation. Employee representation at company level takes place at the following levels:

– Voluntary collective bargaining – involving trade union representative and employer

– Worker Participation at Board level – this form of employee representation only applies to employees in state and semi state companies, under the Worker Participation (State Enterprise) Acts 1977 and 1988 (see VIII.4).

– Non-union open door policy: in companies where trade union recognition does not operate, for example in the majority of U.S. multinationals, ‘open door management’ policies operate with the employee having direct access to a HR manager on a one-to-one basis to discuss issues. Following the recent Supreme Court decision (Ryanair case) 2007 this system of representation may increase.

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Partnership

Since 1987 Ireland has been operating a partnership model of industrial relations. Research by the ESRI on partnership asked employers about the existence of partnership processes in the private sector and found that the incidence of explicitly-labelled formal partnership is low (just 4% of employers surveyed), but that informal partnerships are somewhat more prevalent (19%).

In relation to employees’ responses, an important aspect of employees’ experience of work is the extent of autonomy or control over their work. The ESRI findings relating to autonomy are mixed: 27% of employees have low levels of control, around half (46%) have some discretion, but only 27% have a high degree of control over work tasks. As many as 36%-42% of private sector employees responded that they hardly ever receive information in areas such as product/service innovation, new technology, and new work practices. Many employees also indicate a lack of prior consultation on decisions affecting their work – as many as 27% report that they are rarely or almost never consulted.

Employees experience a higher incidence of direct participation than collective representation. Overall, 23% of all employees indicate that partnership committees involving management and unions exist at their workplaces, with about one quarter of those reporting such arrangements being personally involved in them. Meanwhile, about 38% report direct participation provisions – such as teamwork/problem- solving groups – with more than 70% of employees in such workplaces being personally involved.

Works Councils

Workplace employee representation and participation structures are (outside the semi-state sector) solely voluntary or based on agreement. There are no official statistics on the extent of such structures. The most recent reliable and convincing evidence on this issue is provided by 1999 research based on the findings of a 1996/7 University College Dublin national workplace survey on Irish management practice in the changing marketplace. Of the workplaces surveyed claiming to have in place various forms of employee participation, 12.7% had joint consultative committees/works councils (compared with 71% for total quality management, 59% for teamwork, 15% for quality circles and 6% for ad hoc task forces). It seems clear that relatively few employers have works council-type structures in place.

Information and Consultation

An important legal development in 2006 was the transposition of the EU Information and Consultation Directive to smaller scale companies. The Employees (Provision of Information and Consultation) Act 2006 extends a right to information and consultation to smaller scale undertakings: in undertakings with at least 100 employees from 23 March 2007 (it was previously at least 150) which will decrease to at least 50 employees from 23 March 2008. The main features of the Act are: – a 10% employee trigger mechanism for setting up an information and consultation structure;

– that trade unions will no longer be the sole channel for employee representation;

– a facility for the negotiation of ‘pre-existing’ agreements;

– the freedom to avail of ‘direct’ forms of information and consultation, to suit local circumstances.

One of the most controversial aspects of the 2006 act, Section 7, provides that negotiations to set up an information and consultation structure will have to be ‘triggered’ by workers themselves. This should be done in the form of a written request from at least 10% of employees of the undertaking, subject to a minimum of 15 employees and a maximum of 100 employees. The provision for direct information and consultation has also attracted controversy, with trade unions arguing that information and consultation should take place through representative channels. Ireland’s largest union, the Services Industrial Professional and Technical Union (SIPTU) has threatened to challenge the legislation in Europe.

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2. Legal basis and scope The right to form and join trade unions is protected by the Irish Constitution. However, this does not imply an obligation on employers to recognise or to negotiate with any trade union. The Industrial Relations (Miscellaneous Provisions) Act 2004 allows for employee representatives (who need not be in a trade union) to refer a claim over workplace representation rights to the m LRC if an employer refuses to engage in local voluntary discussions. Following the 2007 Supreme Court ruling (Ryanair case) it decided there was no reason why collective bargaining should be confined to unionised employment.

3. Capacity for representation All employees (part-time, contract and full-time employees) have a right to join a trade union for representation purposes. However there is no obligation, in law or in the Constitution, on the part of the employer to recognise the trade union.

An individual with an industrial relations grievance, may be represented at an industrial relations forum (Labour Court, LRC, Rights Commissioner, Employment Appeals Tribunal, Equality Tribunal) using self representation, trade union representation, legal representation or colleague representation.

The rule book or constitution of individual trade unions sets out their rules.

4. Protection granted to the members Section 6 of the Unfair Dismissals Acts 1977-1993 provides protection against dismissals for trade union membership or activities.

Section 13 of the Employees (Provision of Information and Consultation) Act 2006 sets out the protection afforded members by employers. This states that an employer shall not penalise the employees’ representative for performing his or her functions in accordance with the Act. This includes:

• dismissal • other unfavourable change to his or her conditions of employment or any unfair treatment (including selection for redundancy), or • any other action prejudicial to his or her employment.

Section 8 of the 2004 Industrial Relations (Miscellaneous Provisions) Act protects workers against victimisation due to membership or non-membership of a trade union.

5. Means Companies may allow employees time off work for trade union activities. There is no additional remuneration for such activities which are undertaken on a voluntary basis by the employee/workplace representative.

The Industrial Relations Act, 1990, Code of Practice on Employee Representatives (Declaration) Order 1993 and Section 13(3) of the Information and Consultation Act 1996 provides that the employees’ representative shall be afforded any reasonable facilities, including time off, that will enable him or her to perform his or her functions as employees’ representative promptly and efficiently. An employees’ representative shall be paid his or her wages (within the meaning of the Payment of Wages Act 1991) for any period of absence afforded to him or her in accordance with subsection (3). The granting of facilities under subsection (3) shall have regard to the needs, size and capabilities of the undertaking concerned and shall not impair the efficient operation of the undertaking.

6. Role and rights It is argued that the 2006 Act may have a very limited impact on the operation of information and consultation mechanisms in the Irish workplace. Even where an employer comes within the scope of the Act by virtue of the number of employees threshold, the obligations under the Act will only apply where a

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written request is made by 10% of employees (but not less than 15 or more than 100 employees) to the employer or to the Labour Court to enter into negotiations to establish information and consultation arrangements. While it remains to be seen whether large numbers of employees will request employers to establish information and consultation procedures in their workplaces, employees’ involvement in their employer’s business will, as a result of this legislation, become a growing feature of carrying out business in Ireland.

The Irish Congress of Trade Unions (ICTU) has expressed reservations regarding the Act and argued that it does not give workers an automatic right to information and consultation, allowing them only to trigger negotiations to set up such structures and that, consequently, employees will face hurdles raising issues. Others have argued that the new Act could turn out to be a “double-edged sword” for trade unions.” On one hand, it could provide a second channel of employee representation. The widespread information and consultation could result in more employees seeking expertise and guidance from their trade unions and may encourage more employees to join trade unions. Alternatively where companies set up information and consultation structures, employees may draw the conclusion that they have no need for a trade union. Trade unionists may also view the new work “council-type” forums that may emerge as competition, if it means that fewer workers seek trade union recognition.

The Act more or less complies with the text of the original Directive and provides for information and consultation on economic and financial matters. The Directive's subsidiary requirements list ‘transfers of production, mergers, cutbacks or closures of undertakings, establishments or important parts thereof, and collective redundancies as areas subject to information and consultation.

Section 8 of the act sets out minimum requirements for negotiated agreements and for how the approval of the workforce is to be secured. A negotiated agreement shall be:

– in writing and dated;

– signed by the employer;

– approved by the employees;

– applicable to all employees to whom the agreement relates;

– available for inspection by those persons and at the place agreed between the parties.

Where no pre-existing agreement is in place or where the parties fail to introduce a negotiated agreement within six months, then the parties have to adopt – once it is feasible to do so and not later than six months after they first become applicable – the Standard Rules. These rules provide for the election of an information and consultation forum of not less than three employees or more than 30 employees. In a limited number of cases, employee representatives have an input in aspects of corporate restructuring through voluntary ‘partnership agreements’ between unions and company management. But, the input of representatives tends to be limited to information and consultation rights relating to operational issues such as new forms of work organization. It is very rare for representatives to exercise a veto over higher- level strategic corporate issues, such as mergers/takeovers, divestment/investment. Moreover, these ‘partnership agreements’ are voluntarist, in the sense that they have no formal legal support and can be withdrawn by employers at any time.

7. Other specific representation bodies

Other specific representation bodies are the Health and Safety Committees and the European Works Councils

The EU Directive on Information and Consultation was transposed into Irish law in the Transnational Information and Consultation Act 1996 and potential covers 350 companies with operations in Ireland. European Works Councils (EWCs) have provided (or will provide) the employees of these operations with important information and consultation rights and are a useful element in the process of extending partnership arrangements. However, Ireland is rather unique in that, unlike many other European

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countries, it does not have legislative supports for works councils or similar structures, apart from in the commercial semi-state sector.

The Act more or less complies with the text of the original Directive. However, there are a few important novelties in the Irish legislation. One such feature is the term European Employees’ Forum. The significance of this term has been a matter of some contention. Some commentators feel that mention is made of an employee forum simply to give a name to whatever structures emerge from negotiations at the special negotiating bodies (SNBs). It may also be the case that that such a term is more likely to be favoured by non-union companies because it is less likely to be associated with union orientated bodies. Another feature that was not included in the Directive was that pre-directive agreements had to be agreed and supported by the majority of employees affected.

External assistance from experts, financed by the undertaking, is available under the Transnational Information and Consultation Act 1996.

8. Protection of rights Section 13 of the Employees (Provision of Information and Consultation) Act 2006 sets out the protection afforded to union members by employers (see VIII.3.6 above).

The Act provides for the Labour Court to investigate disputes that arise under the legislation and provides for the enforcement of Labour Court determinations by the Circuit Court. It also provides strong protections for employees’ representatives in the performance of their duties under the Act.

The legislation provides for penalties of up to €3,000 or imprisonment for a term not exceeding 6 months or both on summary conviction for offences under the Bill and on conviction on indictment to a fine not exceeding €30,000 or imprisonment for a term not exceeding 3 years or both.

IV. EMPLOYEES’ REPRESENTATION IN CORPORATE BODIES

In Ireland there is no statutory framework for board-level representation in the private sector. In the State and semi state sector, employee representatives have one-third of the seats on the main board, required under the Worker Participation (State Enterprises) Acts 1977 and 1988. This is based on the single tier model of worker participation.

Until 1977, there had been no form of institutionalised employee participation, apart from collective bargaining. This changed when the 1977 and 1988 Acts were introduced. Worker directors are now firmly established in state-owned commercial companies. The 1977 Act provided rights to employee representation on the boards of seven of the largest state-controlled companies. The 1988 Act provides for the introduction of arrangements for sub-board structures in the state sector. In recognition of the fact that different circumstances apply to individual companies, the Act allows management and worker representatives to choose from a wide range of sub-board participatory institutions (Kelly & Hourihan 1997) . The Acts cover less than 10% of the workforce. There are approximately 60 worker directors in total. Employee representatives have seats on single-tier/unitary boards of directors. However, they are in the minority on these boards as they only account for one-third of board membership. Board representatives are directly elected by the workforce. Representatives must be company employees. Trade unions have nomination rights. In practice, the majority of worker director representatives are also trade unionists (Carley 1998:15)

Composition

The 1977 Act established the following participation provisions:

– The direct election of full-time employees to one-third of the seats on the board of directors in seven state-controlled trading companies.

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– The franchise extends to all full-time employees.

– Candidates for election may be nominated only by a trade union or other organisation (such as a staff association), which is recognised for collective bargaining purposes by the company concerned.

– The term of office of the elected worker directors is three years.

– The worker directors hold the same status as any other directors and are therefore entitled to the same rights and assume similar responsibilities.

– Elections are conducted under the proportional representation system.

Functions The 1988 Act provides for the introduction of arrangements for sub-board structures in the State sector. In recognition of the fact that different circumstances apply to individual companies, the Act allows management and worker representatives to choose from a wide range of sub-board participatory institutions.

Section 18(2) of the 1977 Act states that a person who is appointed to be a member or director of a designated body and whose duties are not full-time should not suffer any reduction in pay and allowances he/she would normally expect to receive.

With regard to confidential information, the rules governing company directors under the Companies Act 1963 apply.

European Companies The Directive on employee involvement in the European Company (SE) was transposed into Irish legislation by the European Communities (European Public Limited-Liability Company) (Employee Involvement) Regulations 2006 which was signed by the Minister for Enterprise, Trade and Employment in December, 2006but did not come into effect until the end of March, 2007. This legislation followed the Directive closely and the transposition was supported by the social partners.

V. EMPLOYEE INVOLVEMENT IN DECISIONS THAT AFFECT THE UNDERTAKING

Recovery and bankruptcy procedure There are no procedures available under Irish industrial relations legislation to trade union representatives in this area. However the Companies Acts 1963-1990 sets out the rules for Directors in insolvency and bankruptcy issues.

Operations affecting shareholder

Employees and their representatives possess little real power to shape re-structuring issues, with external shareholders having more power to affect corporate decision-making. In a limited number of cases, employee representatives have an input in aspects of corporate restructuring through voluntary ‘partnership agreements’ between unions and company management. But, the input of representatives tends to be limited to information and consultation rights relating to operational issues such as new forms of work organisation. It is very rare for representatives to exercise any kind of veto over higher-level strategic corporate issues, such as mergers and takeovers, divestment and investment. Moreover, these ‘partnership agreements’ are voluntary, in the sense that they have no formal legal support and can be

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withdrawn by employers at any time. There is no procedure in Irish industrial relations law available to trade union representatives to prevent seek to prevent company difficulties. However, trade unions and employees may seek the injunction remedy to prevent an employer taking certain action. This legal procedure is currently under consideration by the Aer Lingus trade unions following the privatisation of the company and proposals to move significant business to Belfast Airport (August 2007). On a number of occasions employee representatives have made appeals to public authorities regarding the consequences of restructuring. However, this has mainly occurred in the commercial semi-state sector. Trade unions have often appealed to the Department of Public Enterprise regarding the consequences of re-structuring.

Under the Mergers and Takeovers Acts, 1978 to 1996, any member of the public can write to the Minister for Enterprise, Trade and Employment to challenge a proposed merger or takeover. This includes workers or worker representatives in a company planning to undergo a merger or takeover. However, only the Minister has the authority to veto a merger or takeover, by prohibiting or postponing it.

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ITALY

The Italian model of industrial relations radically changed after the Second World War. During the fascist-corporative period (1926 - 1944) freedom of association and industrial action were banned and collective bargaining was considered an instrument of public economic policy, managed by the fascist trade unions under the control of the Fascist Party. The fall of the fascist regime and the 1948 Constitution allowed the reinstatement of freedom of association, the affirmation of the right to strike and the return of collective bargaining into the legal sphere.

According to article 114 of the Italian Constitution, powers and functions are shared among Municipalities, Provinces, Large Cities (Città Metropolitane), Regions, and the Central State. In particular, according to art. 117 which has been substantially reformed by Constitutional Act n. 3 of 18th October 2001, labour law issues fall within the exclusive legislative competence of the State (national legislator) and the same happens for basic social insurance and for the definition of essential levels of protection of civil and social rights which have to be granted nationwide. On the other hand, the State and the Regions regulate protection of health and safety of work, vocational and professional training and complementary and integrative social security. Regions hold an exclusive legislative competence in areas including job placement and the management of employment services.

I. ECONOMIC AND SOCIAL CONTEXT

Some basic economic data With reference to GDP and expenditure components the following data was published on 9th March 2007 by the Italian National Institute of Statistics (ISTAT), Quarterly National Accounts, and refers to the fourth quarter of 2006:

GDP evolution

VOLUMES IN GROWTH RATES MILLIONS OF EURO IV quarter '06 to III IV quarter '06 to quarter '06 IV quarter '05 Gross Domestic Product 317.9 1.1 2.8

Imports 86.3 2.0 5.6

Final Consumption Expenditure 248.9 0.2 1.2 - households final consumption 186.7 0.2 1.7 expenditure - NPISH and Government final 62.2 0.0 -0.2 consumption Expenditure Gross Fixed Capital Formation 66.6 1.8 3.8

- equipment and other products 30 1.6 3.6

- transport equipment 6.4 0.4 2.6

- construction 30.2 2.3 4.2 Changes in inventories, including acquisitions less disposals of valuables Exports 84.525 4.5 6.3 (Source ISTAT, press release 9th March 2007, www.istat.it)

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As far as the productive structure is concerned, Italian firms are organised according to three different models:

– Mult-iscale dimension groups - From an industrial relations point of view, the large scale dimension groups’ model is characterised by high union density;

– Small and medium enterprises (SMEs), which prevail in Italy, are usually grouped into districts, i.e. geographical areas, where a particular type of production is concentrated. With reference to industrial relations, generally speaking, unions are present in firms employing more than 15 workers, where representative bodies can be established according to art. 19 of Act n. 300 of 1970 (see below).

– Cooperatives with a mutual purpose, which usually pay attention to the participation of workers, often associates of the cooperative

Labour Market

In the fourth quarter of 2006, the labour force in Italy was 24.727 million, the total number of employees was 23.018 million, and the total unemployment rate was 6.9%.

There were 6.057 million self-employed, distributed respectively in 3.017 million in the North, 1.292 million in the Centre and 1.748 million in the South of Italy. In the fourth quarter of 2006, the incidence of part-time work was 13.8% of the total (23.018 million) i.e. 3.123 million divided into employees and self employed. Among part-timers (2.339 million), 409,000 were men and 1,930,000 were women. Around 4.2% of men and 26.5% of women work part time.

In the same period, fixed-term contracts made up 13.6% of the total (23.018 million), so fixed term workers numbered 2,313 million. In the fixed-term contract the distribution by gender is as follows: 1.101 million men and 1.211 million women – accounting for 11.4% of men and 16.7% of women.

Concerning labour supply, the data shows that in 2006 it increased by 210,000 in comparison to 2005 (+0.9%); in particular the increase has been of 110,000 female workers and of 100,000 for male workers. The activity rate with regard to the age range 15-64 is 62.7%. The employment rate with regard to the age range 15-64 is 58.4%.

II. INDUSTRIAL RELATIONS

1. Legal basis and key issues Italian industrial relations are based on the principle of autonomy since, according to art. 39 par. 1 of Italian Constitution, trade union organisation is free. This means that trade unions have the right (and not simply the freedom) to freely organise themselves and their activity and that neither the State nor any private subject can act in breach of this right. It is discussed whether employers’ associations too are covered by art. 39 par. 1 Cost., or whether this principle only regards only employees’ representatives (trade unions). According to some academics, art. 39 Cost. refers only to trade unions, and employers’ freedom of association has to be derived from art. 18 Cost. (freedom of association in general) and from art. 41 Cost. (freedom of private economic initiative). Other academics think that art. 39 also includes employer associations. The first position is preferred due to the link between art. 39 and art. 40, which provides the right to strike that obviously only applies to employees and their representatives.

The Italian system of industrial relations has been strengthened by Act n. 300 of 20 May 1970, better known as the Workers’ Statute (Statuto dei lavoratori – hereafter SL) which, after more than twenty years, finally implemented at workplace level the constitutional principles concerning trade unions’ rights and freedoms, and the dignity of the employee as an individual. It has been argued that it was only with the adoption of the SL that the constitutional rights of the workers effectively penetrated the enterprise. It

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is important to mention article 19 of the SL here, as this recognises the workers’ right to constitute a representative body within the enterprise (see below).

The government use to play an active role in industrial relations through tripartite agreements. Such a role was often related to the structural problems of the productive system or of the labour market, as in in the 1980s when attention was drawn to wages dynamics and the link with a growing inflation. Of great interest in that period, are two tripartite agreements on employment and industrial relations – the so- called “Scotti” agreement of 22nd January 1983, which attempted to stop wages being automatically adjusted in line with inflation; and the so-called “San Valentino” agreement of 14th February 1984, which succeeded in doing so without the agreement of CGIL, the major trade union confederation in Italy (see below)..

In the 1990s, the most important tripartite agreement has been represented by the Protocol of July 23rd of 1993 concerning wages and employment policies, bargaining structure and levels, labour policies and instruments to support production (149). This Protocol can still be considered as the fundamental charter of the contemporary Italian industrial relations system. This has been completed by the Protocol of 20th December 1993 on a new employees’ representative body (RSU). Furthermore, in the second half of the 1990s, on 27th November 1996, the social partners signed an agreement under the supervision of the Minister of Labour on the implementation of EC Directive of 22nd September 1994, 94/45/CE providing the institution of the European Work Council.

At the end of 1990s, on 22nd December 1998, the social partners and the Government signed a Protocol on development and employment, on the use of the “concertative” method, and on the implementation of EC directives concerning the European social dimension. In particular, the Government agreed that the implementation of these matters has to be preceded by an opinion, or common position, issued by the social partners in order to grant a certain degree of consensus from them (150).

The last tripartite agreement is represented by the “Pact for Italy” (Patto per l’Italia) of 5th July 2002 based on the right wing government’s intention to reform the labour market, employment contracts, social security, and the pension system. This agreement has not been signed by CGIL and has produced no practical effect in terms of trade unions involvement in the law-making process.

2. Social partners

Trade Unions

The three major Italian trade union confederations (CGIL, CISL, UIL) are members of the ETUC:

CGIL: General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro) had 5.5 million members in 2006. As successor of the CGL, set up in 1906, its traditional leanings are communist and socialist.

CISL: Italian Confederation of Workers’ Unions (Confederazione Italiana Sindacati Lavoratori) had 4.3 million members in 2006. As successor of the CIL, set up in 1918, its traditional leanings are mainly Christian-democrat.

UIL: Union of Italian Workers (Unione Italiana del Lavoro) had 1.9 million members. As successor of the UIS, which split from the CGL in 1911, its traditional leanings are socialist, social-democrat and republican.

Total union membership was estimated in 11.589 million or 23% of the adult population in 2004. Trade union density was 34% in 2004. There were major differences among sectors: 25% in industry, 26% in services and 35% in administration, health and social services. Others differences can be observed with

149 The 1990s have been characterized by a large use of the concertative method. 150 Social dialogue has usually preceded the implementation of European directives concerning workers involvement, see, f.i., the Social Partners Agreement of 2nd March 2005 on the implementation of the Directive 2001/86/EC; the Social Partners Agreement of 27th November 2006 on the implementation of the Directive 2002/14/EC; the Social Partners Agreement of 28th September 2006 on the implementation of Directive 2003/72/EC.

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regard to gender (34% men; 23% women); age (>30: 16%; between 30 and 49: 31%; > 50: 32%); with regard to occupation (31% professional and managerial staff; 28% white collar; 37% skilled blue collar; 23% unskilled blue collar).

Employers’ associations

With regard to the employers’ associations there is almost a “mirror effect” i.e. they have developed in relation to the existence of, and by reacting to the claims of, the trade union movement.

In the private sector, Confindustria, the General Confederation of Italian Industry (Confederazione Generale dell'Industria Italiana), is a member of BusinessEurope, and the largest organisation. It is composed by about 260 federations divided by sectors and provinces. There are several other organisations:

- Confcommercio which unites enterprises in commerce and services;

- Confservizi which represents enterprises in local public services;

- Confagricoltura, Coldiretti and Confcoltivatori are organisations for the agricultural sector;

- Confapi, Confartigianato and the CNA represent SME and craft workers;

- ABI (Associazione Bancaria Italiana), which has included Assicredito since 1997 and represents a large number of banks.

In the public sector, since 1993 the ARAN (Agenzia per la Rappresentanza Negoziale) has represented the State as an employer in collective bargaining. More recently (1997) the legislator has recognised public administrations’ right to give directives to ARAN through the so-called Sector Committees which are representative bodies of public administrations of the same kind (for instance all the Regions).

3. Joint bodies With regard to institutional participation, the social partners can appoint members into the National Council for Labour and Economics (CNEL) instituted by article 99 Cost. According to the Italian Constitution, CNEL can submit legislative drafts on labour and economic matters to the Parliament. As provided by art. 2 of Act n. 936 of 30th December 1986, CNEL is composed of 12 experts (eight of them appointed by the President of the Italian Republic, and the other four proposed by the Prime Minister); and 99 representatives inform different industrial and service sector, both public and private. Forty four are representatives of employees (appointed by trade unions), 18 of them are representatives of self- employed workers (appointed by self-employed associations) and 37 of them are representatives of employers (appointed by employers’ associations).

With reference to the institutional participation of the social partners in the directive boards of public administrations, trade union participation is currently viewed negatively, and under art. 44 of Legislative Decree 165/2001, all the provisions concerning the participation of employees’ representatives in the directive boards of Public Administration have been repealed.

A different form of social partners participation in administrative bodies is that provided for in the Arbitration and Conciliation Board within the Local Offices of the Ministry of Labour (Direzioni Provinciali del Lavoro), which are composed of one member appointed by the local Office and members appointed, in the same number, by trade unions and employers’ associations.

Article 8 of the Legislative Decree n. 188/05 on the implementation of Directive 2001/86/EC provides an independent administrative body, named Commissione Tecnica di Conciliazione (hereafter CTC) to deal with the issue of disclosure of company confidential information.

Under article 14 of Legislative Decree 188/05, the Italian Legislator has also established a Technical Committee within the Ministry of Labour and Welfare, composed of Ministry representatives and members appointed by the social partners. This body has to monitor the application of Legislative Decree 188/05.

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Article 2 lett. h) of the Legislative Decree n. 276/2003 recognises the functions of “Bilateral Bodies” (Enti bilaterali) These bodies are constituted on employers’ associations and trade unions initiative and are composed by their representatives. Among their functions are mediation of labour supply and demand; the promotion of vocational training, best practice against discrimination, social inclusion of disadvantaged people and the certification of the employment contracts.

4. Collective bargaining

Legal basis and key issues One of the main features of the Italian industrial relations system has been the substantial lack of any legislative intervention (apart from SL and Act n. 146 of 1990). Although the erga omnes effect of a collective agreement is formally provided by article 39 Cost., the procedure laid down in its par. 2, 3, and 4 in order to achieve it has never been adopted by the Italian legislator. However, the government had played a relevant role though the above mentioned tripartite agreements. In particular, the tripartite Protocol of July 1993 laid down the fundamental rules for collective bargaining, according to which priority has been given to a two level system i.e. the national branch level and the local or enterprise level, depending on the practices in the sector concerned.

Branch national bargaining leads to branch collective agreements i.e. the CCNL (contratto collettivo nazionale di lavoro), which lasts two years with regard to wages and economic conditions, and four years as regards other matters, procedural clauses included. Branch collective agreements provide the framework for local or enterprise bargaining which cannot derogate them.

With reference to the relationship between the law and collective bargaining the ruling principle is that collective agreements that provide a lower level of protection in comparison to the one stated by the law are null and void. On the other hand, collective bargaining, can always define more favourable conditions for workers. However, since the 1980s, the law has often allowed and even stimulated collective bargaining to derogate or implement its provisions. The rationale of this method of regulation of labour issues is that collective bargaining is considered more flexible and can provide solutions supported by employers and employees and, consequently, is more effective.

A particular example of interaction between the law and collective bargaining takes place when the social partners are involved within the implementation of EC Directives. Since collective bargaining has no erga omnes effect, any agreement reached between employers’ associations and trade unions cannot be considered binding by the Legislator. However, de facto, the legislator usually takes into account the social partners common position in the implementation of the directives.

Collective agreements are legally binding for the signatory parties and their members only. Nevertheless, a consolidated case law recognises wages defined by national collective agreements as a reference point for the judge in deciding weather the constitutional principle of sufficient wage laid down in art. 36 Cost. has been respected by the employer. This also applies where the employer has not signed the collective agreement or is not a member of the employers’ associations which have signed it.

In the public sector, the erga omnes effect of collective agreements is not a problematic issue as public administrations are mandatorily represented by ARAN within collective bargaining and they must apply the collective agreement signed by ARAN to all their employees (art. 45 par. 2 Legislative Decree n. 165 of 2001).

Main features In the private sector, the population of workers formally covered by collective agreements is 43.3% of employees. As to the number and distribution of collective agreements, the percentage of employees covered by a collective agreement is 67% in industry, 51% in the services sector, 87% in the public sector

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(151). The main topics regulated by collective bargaining are wages, tasks, working time, health and safety, disciplinary sanctions, information and consultation, and the percentage of flexible contracts that can be used by the employer.

5. Collective disputes In Italy, compulsory arbitration is not allowed since it is considered against the constitutional right to strike. For a long time neither the legislator nor social partners have provided for any kind of conciliation or mediation in collective relations. Generally speaking, this is still so. Nevertheless, in 2000, while amending Act n. 146 of 1990 concerning the exercise of the right to strike in essential services, Act n. 83 has introduced a duty for trade unions and any (public or private) enterprise or administration delivering essential services to engage in a conciliation procedure accompanied by a cooling off period in order to avoid strikes. Such a procedure has to be provided in the same collective agreement defining indispensable tasks that have to be guaranteed in the case of strike. If collective bargaining does not provide for this, conciliation can be carried out by administrative bodies belonging to the Ministry of Labour Affairs. Conciliation has also to be tried where public authorities are preparing to exercise extraordinary powers (precettazione) which, according to the above mentioned Act n. 146/90, allow them to ban strikes that are likely to put the public interest in danger.

In the public sector, where disputes regarding rights arising from an existing collective agreement, the contracting parties are obliged to try to solve the dispute by negotiating an interpretative agreement which eventually takes the place of the disputed one.

Strikes The right to strike is recognised by article 40 of Italian Constitution which provides for legislation concerning the way it is exercised. However this has not been enacted, with the exception of recent legislation concerning strikes in essential services (Act n. 146 of 1990, modified by Act n. 83 of 2000). In other cases, according to case law of the Supreme Court (Corte di Cassazione) and of the Constitutional Court, trade unions are free to organise industrial actions to further their aims(152).

With reference to the essential services, the main areas regulated by the Act 146/90 are:

- the definition of essential services - which includes health care, free movement and justice;

- the procedural requirements where a strike is called (conciliation and cooling-off period);

- the strike notice of at least 10 days;

- the definition, by collective agreement, of rights which must be guaranteed in the case of a strike - so- called indispensable measures (for instance first aid in health care);

- the (economic) sanctions in case of breaches of the requirements;

- powers and functions of the Commission supervising the proper application of the law (Commissione di Garanzia).

The Commission is an independent body composed of nine members chosen between experts in constitutional law, labour law and industrial relations. They are appointed, jointly, by the Presidents of the two Chambers of the Italian Parliament. Article 13 of Act 146 of 1990 defines the functions of the

151 The lack of 100% of coverage is due to the fact that a small part of public sector workers are not employed under a private law employment contract but are bound to the administration by a unilateral administrative provision, like judges, diplomats and university professors. 152 According to the Supreme Court, decision 30 January 1980 n. 711, the exercise of the right to strike cannot endanger the productive capacity of the firm protected by article 41 Cost. In other words, strike can touch the production but not the productivity of the enterprise.

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Commission, which include evaluating the effectiveness of the “indispensable measures” and the enforcement of the law.

The number of work-hours lost in strikes is linked to conflicts concerning the employment relationship and two–thirds are due to collective agreement renewals. The latest statistics show that 3.143 million hours were lost to strikes in 2006 (provisional data) compared with 6.348 million in 2005 and 4.890 million in 2004.

Employers too can defend their interests and have the option of using the lock out, which is the total or partial closure of the establishment, refusing the performance of work offered by the employee and, as a consequence, avoiding paying them wages. The Italian Constitution does not recognise the lock out as a right, so the lock out is merely a freedom of the employer which has no protection at constitutional level. The regulation of lock outs is found in contract law and, according to this, the refusal to accept employees’ performance is considered a breach of the employment contract. An employee has the right to claim compensation for damages suffered. According to specialised literature and case law, an employer using a lock out cannot be considered liable for damages, except in the case of a “defensive lock out” deriving from an unlawful strike (153) which is unimaginable within the Italian legal system.

III. EMPLOYEES’ REPRESENTATION IN THE UNDERTAKING

1. General issues After the Second World War, the first form of workers representation bodies at the workplace were Management Councils (Consigli di Gestione). A legislative draft proposal to give them legal status was not passed and these Committees slowly disappeared following the full recovery of the Italian industrial relations system.

Until 1970, employee representative bodies developed only on a spontaneous basis, sometimes supported by collective bargaining, and their structure has often changed. For instance, the Commissioni Interne, which emerged during the period from 1947 to 1968, was a kind of representative body without links to the trade unions, and was directly elected by the employees. Delegates or Factory Councils (Consigli di fabbrica), which existed in 1968 and 1969, were formed when a representative was elected by employees carrying out the same type of job, and all the representatives together made up the Factory Council.

Nowadays, the Italian system provides for a single channel of representation at the workplace with some aspects of the dual-channel model, with the election of the two thirds of representatives from trade union lists. There is no distinction with regard to the scope of the employer’s activity. So, in Italy, there is no specific exclusion or regulation of employee representation at workplaces within public or private religious organisations.

2. Legal basis and scope The Act 20th May 1970 n. 300, the so-called Workers Statute (Statuto dei Lavoratori, SL), recognises the right to trade union representation within undertakings employing more than 15 workers. Article 19 of the SL, in its original text, provided that in order to establish a trade union representative body (Rappresentanze Sindacali Aziendali, hereafter RSA) within the undertaking, workers had to refer to the most representative trade union confederations at national level, or to the trade unions which had signed a national or provincial collective agreement that applied within the enterprise.

Art. 19 has been radically modified by a referendum on the 11th June 1995, so that now, in order to constitute a RSA, workers may only refer to the trade unions which have signed the collective agreement applied in the enterprise. However, in practice, the situation differs from the model defined by article 19, because on 23rd July 1993 a tripartite agreement provided a new model of trade union representation at

153 Constitutional Court, 4th May 1960, n. 29; Constitutional Court 15th December 1967 n. 141.

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the workplace. So now the Italian experience is characterised at plant level, by the presence of the trade union unitary representative body (Rappresentanze Sindacali Unitarie, hereafter RSU), dominated, de facto, by CGIL, CISL, and UIL.

Two third of RSU members are elected and their seats are allocated in proportion to the number of workers’ votes; one third is designated by the above mentioned trade unions and the seats distributed among them. RSU members enjoy the same rights and protection as the former RSA members, as provided by Title III of the SL which guarantees that employees’ representatives are able to fully perform their tasks. The RSU can conclude collective agreements at plant level and has information and consultation rights provided by national collective agreements and by the law.

The main features can be summarised as follows:

• representation at the workplace is provided by trade unions bodies;

• the representative body provided by article 19 SL (RSA) has been de facto replaced by the RSU established by the tripartite agreement of 1993;and

• there is no right to employees representation is granted in enterprises employing less than 15 workers.

In the public sector employees’ representation is regulated by article 42 of the Legislative Decree n. 165/2001 and by collective agreement 7th August 1998. Here it takes the form of the RSU but all the members are elected by the employees.

3. Composition The 1993 Protocol lays down the following rules: Two thirds of seats: workers elected from competing lists by all employees by a secret ballot with proportional representation; and one third of seats: distribution among the lists presented by the signatory parties of the protocol, in proportion to the votes won, through appointment or election. The number of seats set out by the Protocol is: three in establishments with 16 to 200 employees; three additional seats for each further 300 employees from 200 to 3,000 employees; and three additional seats for each further 500 employees above 3,000 employees. More favourable provisions specific to the sector or the enterprise contained in collective agreements shall apply. All representatives, whether elected or appointed, constitute the RSU.

In public administration the Legislative Decree n. 165/2001 and the framework agreement of 7.08.1998 provides that all RSU members shall be elected directly by the employees, with proportional representation.

The term of office of the RSU members is of three years. Resignations and the consequent replacement of RSU members cannot exceed 50% of the whole number of the original members. In this last case, the tripartite agreement of 1993 provides for the dissolution of the RSU and the call for a new election. In the private sector, trade unions which have signed the protocol and trade union organisations that have accepted its provisions and have the support of at least 5% of the electorate may present lists. In the public sector, according to article 42 paragraph 4 of Legislative Decree n. 165/2001, trade unions which have signed the RSU agreements supported by 3% of the workers concerned, or 2% in administrations or bodies with more than 2,000 workers, may present lists.

Workers representation at the workplace is not mandatory, as the law merely provides that such representation “may be established at the workers’ initiative” with reference to a trade union which has signed the collective agreements applicable in the establishment (article 19 SL). In the public sector, the initiative lies in the hand of a trade union which has signed the framework agreement of August 1998.

4. Protection granted to the members RSU members are protected against dismissal (article 18 SL) and the consensus of the trade unions is required for their transfer from the establishment (article 22 SL).

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5. Working of the body and decision-making The RSU decides by majority even though consensus is always sought.

Title III of the SL refers to the activities of trade union representatives at the workplace. According to article 20 SL “workers are entitled to meet, in the establishment where they work, outside working time, and, up to a maximum of ten hours per year, during working time. They receive their normal pay for this latter period of time”. These meetings (so called assemblies) deal with “issues of trade union and labour interest” and are called by the RSU. Trade unionists not employed within the enterprise may attend as long as preliminary notice is given to the employer. According to article 21 SL, the employer must allow, within the establishment and outside working hours, referenda on matters concerning trade union activity, called by the RSU.

Under article 23 SL, RSU members have the right to paid leave of at least eight hours per month in order to perform their tasks within the establishment. Unpaid leave of at least eight days per year are provided by art. 24 SL to RSU members, in order to take part in trade union activity outside the firm. Article 30 SL provides that members of the local or national directive board of a trade union have the right to paid leave according to the provisions of collective agreements.

Articles 25 and 27 SL establish particular duties for the employer. The first one states that the employer has to provide the RSU with a suitable space to advertise information on trade union and labour matters. The second one states that the employer (in establishments with more than 200 employees) has to provide the RSU with a dedicated room within the establishment, or very close to it, in order to allow the RSU to perform its functions.

Employees have the right to collect financial contributions from their colleagues to support trade union activities (article 26 SL).

External assistance from experts is allowed (since1997) with regard to collective redundancies (Act n. 223 of 1991, article 4 paragraph 5; with reference to the implementation of the SE Directive, Legislative Decree n. 188/05, article 3 par. 6 and article 4 lett. e) and Annex II, second part, paragraph 1 lett. n); with reference to the implementation of the SCE Directive, Legislative Decree n. 48/07, article 3 par. 8 and article 4 lett. e) and Annex II, second part, paragraph 1 lett. n).

6. Role and rights The RSU has collective bargaining functions and it is entitled to consultation and information rights in undertakings which employ more than 50 workers.

In the private/public industrial sector, a certain number of collective agreements provide for information procedures, especially when changes within the productive structure of the enterprise are envisaged. Information procedures provided by collective bargaining appeared for the first time during the 1970s. During the 1980s the most important collective agreement containing information and consultation rights has been the so-called IRI Protocol of 16th July 1987, concerning state-owned enterprises (now privatised). During the 1990s, the most important collective agreement in this field was the Electrolux - Zanussi agreement of 6th December 1997 which introduced a “supervisory board” which met three times a year with the management, and whose role was to examine group’s results and, in advance, any industrial and organisational decisions that were envisaged. After a positive and promising start, the model has now been abandoned.

In the transport sector an interesting framework agreement on non-conflictual industrial relations, including information and consultation procedure, was signed on December 23rd 1998, but has hardly produced any effect.

In the public sector a comprehensive system of information and consultation rights has been defined by collective bargaining at national branch level and implemented in all public administrations since 1999. The system is based on an information, consultation and joint examination procedure which is aimed at guaranteeing trade union involvement within employment matters while administrations’ autonomous decisional power is maintained.

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Information By Legislative Decree n. 25 of 6th February 2007 (154) Italy has finally implemented the Directive 2002/14/EC establishing a general framework for informing and consulting employees in the European Community. The decree recognises information and consultation rights to the RSU, leaving to collective bargaining the definition of the practical arrangements within a general legal framework provided by art. 4 of the decree:

a) information and consultation shall concern the recent and probable developments of the undertaking’s activities and economic situation;

b) information and consultation shall concern the situation, structure and probable development of employment within the undertaking and, where there is a threat to employment, the anticipatory measures envisaged; and

c) information and consultation shall concern decisions likely to lead to substantial changes in work organisation or in contractual relations, including those covered by article 8 par. 1.

According to article 2 of Legislative Decree n. 25/2007, information means the transmission of data by the employer to the RSU in order to enable it to acquaint itself with the subject matter and to examine it. As provided by article 4 paragraph 2 of Legislative Decree 25/2007 information shall be given according appropriately concerning time and content, and in such fashion enable the employees’ representatives to conduct an adequate study and, where necessary, prepare for consultation.

The practical arrangements on the information are decided within the agreement between the competent bodies of the participating companies and the special negotiating body (article 4 of the Legislative Decree 188/05). Where the parties cannot agree, or no agreement has been reached between them, according to the rules provided by the article 7 of Legislative Decree, standard rules on information and consultation apply.

Consultation According to article 2 of Legislative Decree n. 25/2007 consultation means the exchange of views and the establishment of dialogue between the RSU and the employer. In this case too, the practical arrangements are defined by collective bargaining according to the provisions of art. 4 of the Legislative Decree, which provides that consultation shall take place:

a) while ensuring that the timing, method and content are appropriate;

b) between relevant levels of management and representation, depending on the subject under discussion;

c) on the basis of information supplied by the employer in accordance with article 2 lett. f) and of the opinion which the RSU is entitled to formulate;

d) in such way as to enable the RSU to meet the employer and obtain a response, and the reason for that response, to any opinion they might formulate; and

e) with a view to reaching an agreement on decisions within the scope of the employer’s powers defined in article 2 lett. b).

7. Other representation bodies There are other provisions on information and consultation rights in Italian legislation regarding specific matters, which all derive from the implementation of EC Directives. The health and safety representatives provided by Legislative Decree n. 626/94 on the implementation of European Directives on the health and

154 The legislative decree re-elaborate, with some substantial changes, the common opinion of social partners on the implementation of EC directive 2002/14/EC on delivered on 27th November 2006.

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safety of employees at the workplace are elected or appointed within the RSU (155).With reference to health and safety, there is one representative up to 200 employees, three from 201 to 1000, and six for 1000 or more (Legislative Decree n. 626/1994, articles 18-19). The transposition of Directive 89/391/EC through this Legislative Decree made provision for the introduction of specific representatives in this area, having rights of information, consultation, supervision and proposal, in particular as regards: changes in risks and work organisation; measures to prevent industrial accidents and occupational diseases; safety audits; the appointment of safety service officers; and the planning of specific training.

European Works Councils According to art. 6 par. 2 of Act 74/2002 (on implementation of European Directive 94/45/CE on EWC), the RSU has a link with the EWC through the joint appointment by trade union organisations and the RSU of the Italian members of the SNB. If in an establishment or enterprise the trade union representation body does not exist, the national trade union organisations have to agree with the management of the enterprise the arrangements for the involvement of employees of the establishment or enterprise in the appointment of the SNB members.

8. Protection of rights Trade unions at local level (although not RSU directly) may act against an employer who is attempting or has attempted to prevent them exercising their rights and freedoms on a collective or individual basis (condotta antisindacale) by asking the judge to issue an injunction to stop the anti-union behaviour and to remove its effects (Article 28 SL). Penal sanctions are provided where an employer does not comply with the Court injunction.

IV. EMPLOYEES’ PARTICIPATION IN CORPORATE BODIES

Article 46 of the Italian Constitution states that “for the purposes of the economic and social progress of workers and in harmony with the needs of production, the Republic shall recognise the right of workers to take part in the management of enterprises with the resources and within the limits provided by the law”. This provision has never led to any representation of employees on the boards of directors of companies.

Representation of employees in the boards of European Companies Nevertheless, more recently, according to art, 2 lett. m) of Legislative Decree n. 188/05 on the implementation of the European Directive 2001/86 on the involvement of employees in the SE, participation is defined as the influence of the RSU in the affairs of a company by way of:

– the right to elect or appoint some of the members of the company’s supervisory or administrative body;

– the right to recommend and/or oppose the appointment of some or all of the members of the company’s supervisory or administrative body.

The agreement between the competent bodies of the participating companies and the special negotiating body shall specify the arrangements of participation provided by article 4 par. 2 point g) including: the number of members in the SE’s administrative or supervisory body which the representative body or the employees’ representatives will be entitled to elect, appoint, recommend or oppose; the procedures as to

155 According to art. 18 paragraph 2 of Legislative Decree n. 626/94, health and safety representatives are elected or appointed within the RSU only in case of establishment or firm employing more than 15 workers. In establishments or firms with less than 15 employees the health and safety representative is directly elected by employees. Article 9 SL provides the right to check the compliance of the employer with safety and health regulation within the workplace. On the relationships between art. 18 Legislative Decree n. 626/94 and art. 9 SL see G.C. Perone, Lo statuto dei lavoratori, Utet, Torino, 1997, p. 96.

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how these members may be elected, appointed, recommended or opposed by the employees; and their rights.

However, the rules on the composition and the term of office of the members of the supervisory board of the Joint Stock Company, provided by the article 2409 duodecies of the Civil Code, does not contain any reference to the involvement of employees.

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European Commission

Employee representatives in an enlarged Europe

Luxembourg: Office for Official Publications of the European Communities

2008 — 311 pp. — 21 × 29.7 cm

ISBN 978-92-79-08928-2