UK businesses plan ahead for higher cost of revised EWC regime

The European Union’s revised directive on European Works Councils is moving towards implementation marking the biggest shift in this space for more than a decade. It will mean earlier and more structured consultation, tougher rules on information sharing, and increased enforcement risk. And, as we’ll hear, it’s not a change you can park for later – it needs to feed into planning decisions now.

A key question for multinational businesses, especially in sectors likely to be significantly affected by this such as life sciences, is how to budget for what’s ahead. The directive expands the rights of EWCs, increases the funding obligations on employers, and is likely to generate more engagement points, more consultation activity and, in some cases, full renegotiations of existing agreements. Even though the detailed national laws won’t land until closer to 2027 and 2028, firms still need to start assessing the scale of what’s coming, and the cost implications. We’ll speak to a lawyer helping clients in the life sciences sector prepare for that.

Budgeting for the revised directive will be challenging for many firms because the exact costs will depend on how each Member State transposes the rules into national law, but we already know enough to start building assumptions. One of the biggest drivers will be whether existing EWC agreements can be adapted or whether a full renegotiation is inevitable – something many legacy agreements will face. Renegotiation brings costs of its own: management time, funding experts for the EWC or the special negotiating body, legal representation, and the employer’s own advisory fees.

On top of that, the revised framework will create more touchpoints with EWCs. Earlier consultation, more formal opinions, and the employer’s duty to respond in writing all point to a more active and more resource-intensive process. That means more meetings, more translation and travel costs, more scrutiny of management decisions, and a higher overall spend than businesses are used to today. For life sciences employers - where cross-border change is frequent - these costs can rise quickly. 

So how should firms budget and plan for what is coming? Ben Brown is helping a number of clients in the life sciences sector where this is a big issue and earlier he joined me by video-link from Leeds and I put that question to him:

Ben Brown: “It's a difficult question because we don't quite know how the directive is going to be transposed into national law and what that national law - wherever the EWC is based - is going to say so it's a really different question in terms of budgeting and, of course, the timeline for this is most of the changes probably are not going to be brought into force - wherever your EWC is based, and the law that applies to it - probably until 2027/2028 perhaps, so decisions about budgeting in respect of legal costs, experts for EWC, the potential to have more EWC engagement, I think, is going to be difficult to budget for now, but I think we should start to think about that, and especially start to think about it if it's likely in your organisation that a renegotiation of the agreement is going to be necessary, particularly if you've got a legacy agreement that was out of the scope of the previous directive that you know is going to need to be completely revamped in order to make it compliant with the new directive. Where that is the case then I think you can start to budget for, well, how much is it going to cost us in management time, or in terms of the payment of experts and the payment of legal representation for an EWC or special negotiating body to start to renegotiate this agreement, and you can start to budget for your own legal costs in that process as well. But in terms of the legal costs that are going to be incurred in due course, in respect of experts, legal advice, etcetera, perhaps the best starting point is to look what you've previously spent. Perhaps, if you've had a dispute with the EWC in the past, see what previous legal fees have been to give you a gauge of where they might be going forward. But I think one thing that is absolutely sure is there's going to be more touch points, there's going to be more engagement, there might be renegotiation, but there's certainly going to be that obligation to make sure in your agreement you're covering reasonable and necessary legal costs for the EWC to operate. It's going to be more than you are paying now, for sure, and I speak to employers and they tell me that the cost burden is already significant of hosting the meetings, housing people from various European member states in one place, paying for transcribers and translators and housing people and feeding people and I think it is a significant cost and I think businesses should be prepared for a greater cost going forward because of the increased requirements for consultation, because of the increased requirements to take opinions into account and respond to them, and because of the increased costs that it's going to take to fund the management and running of those EWCs.”

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.