De rol van Nederlandse werknemers(vertegenwoordigers) bij een grensoverschrijdende juridische fusie (VDHI 119) 2013/9.2:9.2 The European analysis

De rol van Nederlandse werknemers(vertegenwoordigers) bij een grensoverschrijdende juridische fusie (VDHI 119) 2013/9.2

9.2 The European analysis

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The research began with an analysis of European law. To ascertain how any obstacles regarding the application of the role of Dutch employees or their representatives might be resolved, I looked at the provisions of and principles underlying the European rules on workers involvement in the undertaking and on employee participation at company level.

Chapter 2 discussed the developments pertaining to mergers which preceded the Tenth Directive and the associated involvement of employees. This explanation furnished insight into how the European laws elaborated on the position of workers at the European level. The original, economic objective of the EEC Treaty did not preclude employees from acquiring an important position at the European level. The social aspect has grown over the years. Since the 1970s, many interesting directives and regulations have taken effect which have provided shape and substance to the employees’ role. Yet these laws were not accomplished easily, because the Member States had different views – and to a certain degree, still do – on the involvement which employees deserve. This was true for workers involvement in the undertaking and particularly for employee participation at company level.

European regulations distinguish between companies with and companies without a ‘Community’ dimension. Minimum directives were utilised by European lawmakers for rules directed at domestic companies. A certain minimum level on information and consultation was created within the European Union, and the Member States, if desired, could retain or set forth a higher level of protection in their regulations. This harmonisation tactic underlies Directive 2002/14/EC on information and consultation (‘Directive 2002/14/EC’). This directive includes provisions which entitle employees of national companies or establishments to obtain information and be consulted about socio-economic subjects concerning the undertaking or establishment where they work. Finding a compromise turned out to be trickier once the information and consultation rights had to do with decision-making in a Community-scale undertaking or a Community-scale group of undertakings. A system of negotiation ultimately offered a solution in Directive 2009/38/EC on European Works Councils (‘EWC Directive’). Within certain parameters, the central management and the employees (represented in the ‘special negotiating body’) are free to tailor the information and consultation to their own situation. If the parties are unable to make agreements, the statutory standard rules will take effect as implemented in the Member State where the central management is located. The statutory standard rules require a Communityscale undertaking or a Community-scale group of undertakings to set up a European works council and grant the European works council minimum rights on information and consultation. The negotiation system likewise furnished a way out of the interminable debate on employee participation at company level which had prevented the adoption of a Statute for a European Company (‘SE’). Nonetheless, the Commission has not yet been able to declare a similar system applicable to the Fourteenth Directive or the European Private Company (‘SPE’) Regulation.

The laborious negotiations about employee participation at company level are impeding cross-border mobility within the European Union. The uphill battle to adopt the SE, the repeal of the Fifth Directive and the abandonment, for the time being, of the Fourteenth Directive and the SPE Regulation typify this. Time and time again, employee participation at company level constitutes the main problem. The European Court of Justice’s case law has promoted corporate mobility based on the principle of freedom of establishment. In the absence of harmonised rules, however, it is unclear whether and, if so, how employees’ existing participation rights will be protected.

In the Tenth Directive, the European legislator harmonised the rules on cross-border mergers. Chapter 3 examined the substantive role which employees are given when there is a cross-border merger between limited liability companies.

The Tenth Directive does not include any detailed provisions on workers involvement in the undertaking, primarily referring instead to Directive 2002/14/ EC and the EWC Directive discussed in Chapter 2. The situation is different for employee participation at company level. Most of the attention in this chapter was devoted to this form of involvement. The Member States have not reached consensus on a substantive standard level of employee participation. Rather, the national traditions concerning employee participation have been looked to for guidance. There are innumerable such traditions. Article 16 Tenth Directive tried to strike a happy medium within the context of these traditions. The compromise was based on retention of the current employee participation rights, without the goal of subjecting Member States to a mandatory, statutory system against their will. That Article 16 Tenth Directive represents a compromise is apparent from another aspect as well. The regulations include a balancing of interests between the economic and social aspects of the cross-border merger. By mainly following the national employee participation law of the country where the company resulting from the merger is located, the European legislature attempted to make cross-border mergers as simple as possible for businesses. The alternative regime, which assumes negotiations and statutory standard rules as a safety net, only comes into force in three exceptional situations. Application of the alternative regime should ensure that employees’ existing participation rights cannot be circumvented easily.

The European legislator have only partially achieved this goal. Paragraphs (2) through (7) of Article 16 Tenth Directive contain rather unfathomable provisions which include many ambiguities, primarily because of the inconsistent use of terms and a reference to the SE Directive which is too facile. Consequently, it is usually difficult to predict beforehand whether one of the three exceptions will come into play and which cross-border employee participation system the statutory standard rules will require. These ambiguities have not boosted the popularity of cross-border mergers. Still, it is good for European market integration that the Member States discovered a solution for the complex employee participation issues arising with cross-border mergers. Apparently, this was the best the European legislature could do at the time.

Chapters 2 and 3 delved into the balance which the European legislator sought to achieve between facilitating cross-border mergers on the one hand and protecting the involvement of the employees of the participating companies on the other hand. This research pinpointed the basic principles underlying the regulations regarding employee participation and workers involvement in the undertaking.

The basic principles underlying the employee participation regulations

The right to employee participation is not a fundamental European right. Nor has the substantive law in this area been harmonised. Although the Fifth Directive was an attempt to realise a certain standard level of employee participation within the European Union, this attempt was unsuccessful, because of a lack of consensus within the Council. So far, employee participation has been regulated nationally, so that there are huge differences between the Member States in this respect. Because this form of involvement is linked to the legal structure of the company, the strategy of cross-border mergers permits companies to evade domestic employee participation rules. To prevent employee participation from being lost, the European legislator has created a solution within the system laid out in the Tenth Directive which is specifically geared to protecting existing employee participation rights. Article 16 is the result. This provision coordinates the aberrant employee participation rules in place at the national level.

Article 16 of the Tenth Directive was inspired by and largely based on the SE Directive. The regulations are designed to stop the erosion of employee participation rights. This basic idea is expressed in the ‘before and after principle’. The highest level of employee participation which existed in the companies prior to the merger determines the employee participation system to which the company arising from the merger is subject. The system laid down by Article 16 Tenth Directive assumes that employee participation rights will be proportionate in number and of a certain form. The number of employee participation rights prior to the merger is determined through a quantitative criterion. The form of employee participation (appointment, option, recommendation or objection) is irrelevant. In addition, whether the influence pertains to the composition of the management, supervisory or administrative body is not considered too. This is a one-dimensional approach to the notion of employee participation. The one-dimensional approach was not prompted by a desire to facilitate cross-border mergers, but was a result of the compromise on which Article 16 Tenth Directive was predicated. The Member States were simply unable to agree on a ranking of national employee participation systems.

Certain circumstances which are specifically mentioned justify violating the ‘before and after principle’. Freedom of contract is one such circumstance. The participating companies and the employees (represented in the Special Negotiating Body) are entitled to frame the employee participation system after the merger as they see fit. A second circumstance is the fact that only a small percentage of employees out of the total number of workers may have been entitled to engage in employee participation prior to the merger and/or wish to retain that right after the merger. Both situations can be traced to the overarching goal sought to be achieved by the Tenth Directive: ‘facilitating cross-border mergers’. This is defensible. Article 16 of the Tenth Directive cannot be seen separately from the Treaty chapter on which it was based and, by extension, the task imposed on the Commission and the Council in the opening words of Article 49 of the Treaty on the Functioning of the European Union (‘TFEU’) to realise freedom of establishment through harmonisation. Moreover, Article 16 Tenth Directive develops Article 54(2)(g) TFEU further. The latter provision was intended to coordinate safeguards protecting the interests of employees, but only insofar as necessary. The phrase cited shows that the solution to employee participation must be proportional and necessary in light of the freedom of establishment. The scheme set forth in Article 16 Tenth Directive characterises the balance between protecting employee participation on the one hand and the freedom of establishment through cross-border mergers on the other hand. In other words, Article 16 effectuates the protection of employees’ existing participation rights in a way which ensures that the employees’ interest is reasonably proportional to the infringement of the companies’ right of free establishment which ensues from the protective construction.

The basic principles underlying the workers involvement in the undertaking regulations

Workers involvement in the undertaking is, in contrast, based on a fundamental European right. The right to information and consultation is stated in Article 27 of the EU Charter. The Treaty of Lisbon gave the rights, freedoms and principles in the EU Charter the status of treaty provisions (Article 6(1) Treaty on European Union (‘TEU’)). The specification of the fundamental right to information and consultation through directives may be viewed as further regulation of the freedom of establishment. The minimum levels in the directives elaborate on the social market economy which the TEU supports (Article 3(3) TEU).

A general principle of the Tenth Directive is that the companies participating in the cross-border merger must, prior to the merger, comply with the provisions and formalities under the national laws applicable to them. This follows from Article 4(1) (b) Tenth Directive. Article 4(2) Tenth Directive makes plain that Article 4(1)(b) specifically encompasses the employee rights relating to the decision-making process in connection with the merger besides those concerning employee participation. In that light, Recital 14 in the Preamble to the Tenth Directive refers to previous European regulations which were formulated in this area – to wit, Directive 2002/14/EC and the EWC Directive – and which have been implemented into the Member States’ national law. The European legislator did not deem it necessary to include special provisions for situations in which the decision-making process relates to a cross-border merger. Such an approach can be traced back to the primary objective of the Tenth Directive: ‘facilitating cross-border mergers’. Recital 3 in the Tenth Directive’s Preamble provides that the national law will be followed as closely as possible in order to facilitate cross-border mergers. Thus, the primary objective of the Tenth Directive can be regarded as a main principle of the regulations on workers involvement in the undertaking.

Following European regulations adopted previously means that workers involvement in the undertaking manifests itself within its own system which is separate from the cross-border merger as such. The purpose of the European rules is to furnish the employees a certain degree of information and consultation with respect to certain decisions relating to the national undertaking and to the Community-scale undertaking or Community-scale group of undertakings. The Tenth Directive is consistent with this. A distinctive aspect of both Directive 2012/14/EC and the EWC Directive is that they allow the Member States to grant, if desired, the employee representatives a higher measure of workers involvement. This discretion is limited by the Tenth Directive’s aforementioned primary objective. Furtherreaching national rules which limit freedom of establishment with cross-border mergers are only permissible if the limiting rules can be justified by invoking the ‘rule of reason’ formulated in the case law of the Court of Justice. For invocation of the rule of reason to be successful, the national measure must be aimed at a legitimate goal and must be justified on compelling, public-interest grounds. The limitation must also be appropriate to achieving the envisaged goal and may not go beyond what is necessary in this regard. Legal certainty is a major factor in determining proportionality and necessity. As much as possible, the regulations must not in practice impede companies from entering into cross-border mergers. Speed is likewise essential in that respect. The longer it takes to effectuate the merger, the less attractive this technique becomes to companies for bringing about the intended cooperation. In turn, speedy action must not occur at the expense of the carefulness of the procedure.

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