Revised EWC directive set to reshape consultation for multinationals

The EU has reached political agreement on a revised directive that will make European Works Councils easier to set up, better funded and better protected. The changes mark the most significant reform of the EWC regime in more than a decade, and they’ll mean more cost, more complexity, and tighter compliance for large multinationals operating across Europe. We’ll speak to a lawyer advising clients on navigating the changes in the life sciences sector where the impact will be significant.

The directive will enter into force once formally adopted and published, with member states given two years to transpose it into national law and up to three years for full application — likely around 2028. The new rules expand when transnational consultation is required, strengthen information-sharing duties, and tighten the tests for withholding information on confidentiality grounds. Employers, though, will need to start reviewing their arrangements well ahead of that.

The life sciences sector is one of the most internationally integrated industries in Europe, with research, manufacturing, and regulatory functions spread across multiple member states. That means workforce decisions taken in one country often have knock-on effects in another – the very kind of cross-border impact that will now trigger EWC consultation under the revised directive.

The changes will affect how pharma and biotech companies plan organisational change, particularly where R&D, supply chain or regulatory functions are being restructured. Consultation will need to start earlier, and EWC representatives will be entitled to give a formal opinion and receive a written response before final decisions are made. Employers will also face stricter obligations to justify confidentiality when dealing with sensitive commercial or clinical information.

Earlier I caught up with Ben Brown, who joined me by video link from Leeds to discuss what these changes will mean in practice for employer in life sciences. So, first question, which decisions are likely to trigger EWC consultation going forward?

Ben Brown: “I think the easy answer to that question is most decisions that affect the workforce or affect the way that businesses and employees in the life sciences sector propose to operate and reorganise as time goes on. The reason really for that is the expanded definition of the transnational issue in the new directive because it now means that employers who believe potentially that the decision might only affect workers in one member state, for example at a research and development facility in Germany, now need to think about whether the consequences of that decision, that restructure, whatever it may be, could also then affect workers in another member state, and that decision making needs to be taken before the decision is implemented in that member state. So I think the answer is there's going to be a broad range of issues that employers face. For example, if they are considering licensing agreements in more than one member state that have impacts on others, if they are undertaking any merger and acquisitions activity, if they are potentially even thinking about implementing AI as a replacement, for example, of particular elements of the workforce in one member state that may then have an impact on other member states simply because of the consequences of that original decision means that it's rolled out subsequently into other member states. So I think employers are going to have to really think hard about strategy and also where one decision in Germany might be thought of as something in isolation, actually, if it has a potential impact across a wider pan-European scope then those considerations need to be factored into the decision making before they are taken, rather than afterwards, and the consequences of thought about afterwards, because that then could put you in breach of the new directive when it comes into force.”

Joe Glavina: “As I understand it, there's going to be a new requirement to allow EWCs to give an opinion and receive a reasoned, written response before any decisions are taken. So how will that affect how employers manage change?”

Ben Brown: “I think the answer to that question is it's going to elongate the process of change for life sciences companies when they are thinking about their product pipeline, the patent cliff edges when they're thinking about research and development, spending, and budget. It's going to mean that decisions about where operations are closed, where operations are opened, where funding is placed, which have has an impact across the European scope of operations, the decision making around that process is going to need to be factored into your European Works Council's consultation plan and the reason for that is that European Works Councils are going to be given the ability to provide an opinion on those decisions before decisions are taken. So management are going to have to need to give information to the European Works Councils, where matters have this wider transnational impact, for them to give reasoned opinions on the decisions before those decisions are taken. So I think the process is going to be elongated, for sure, and I think employers are going to have to work into their decision making timelines, scope to consult with those European Works Councils, seek their opinions, consider their opinions, and then factor in the time to give a reasoned response to those opinions and I think those kind of touch points are going to be essential to build into decision making processes before, for example, R&D spending is allocated to one country rather than the other, or whatever it might be for a life sciences business. So I think the idea is it's going to take longer, and I think more thought around the process is going to be required.”

Ben is currently helping a number of his clients to prepare for the revised directive. If you are one of the many businesses likely to be affected by these changes then please do contact Ben – his details are there on the screen for you. Alternatively, of course, you can contact your usual Pinsent Masons adviser.