UK’s life sciences businesses prepare for earlier EWC consultation

The European Union’s revised directive on European Works Councils is now moving towards implementation and it brings a very different set of demands for employers. So, how will existing EWC arrangements stand up to the new rules, what changes are needed, and how early in the decision-making process consultation will have to take place? For HR teams, this is about systems, governance, and readiness. We’ll speak to lawyer Ben Brown who is advising clients in the life sciences sector where the impact will be significant. 

So why is this an issue for life sciences? Typically, operating models in the sector involve interconnected research, manufacturing, and regulatory functions across several member states. That means even routine business decisions can create knock-on effects elsewhere, and under the revised regime those cross-border impacts have to be picked up much earlier and fed into the EWC process.

One of the first tasks will be reviewing the EWC agreement itself. Many agreements in this sector are long-standing and may not align with the revised standards. As we’ll hear, the right place to start is with a gap analysis: identifying whether the agreement can be adapted or whether a full renegotiation is going to be necessary. That exercise alone will give you a good idea of the level of risk and the scale of the work involved.

The next step is looking closely at how decisions are made inside the business. The new rules require consultation before decisions are taken, so employers need to understand where potential cross-border impacts arise and build points into the governance process where the EWC must be brought in. In life sciences that could involve changes to R&D spending, site strategy, AI-enabled efficiencies or restructuring of particular functions. Under the revised regime, those types of decisions will require earlier engagement and a structured process for receiving and responding to an EWC opinion.

So let’s hear more on this. Earlier I caught up with Ben Brown, who joined me by video link from Leeds. So what can employers be doing now to prepare for the changes?

Ben Brown: “So the first thing to risk assess is your current agreement. So especially if your current agreement is historic and was not subject to the last directive, it's certainly going to be subject to renegotiation to bring it into spec to the new one. So I think the first thing I would always recommend is a gap analysis of the current EWC agreement. Is it likely that that's going to need to be completely renegotiated or is it likely that you can agree some variation with the existing EWC? Depending on what that gap analysis shows, I think, is going to give an indication of the risk level associated with it. A higher risk level, of course, is going to be a complete renegotiation whilst a lower risk level is going to be a potential variation in order to just simply bring it up to spec with this new directive. Of course there's going to be costs associated with that, but I think that's certainly the first step. I think the second step is risk assessing where specifically, in decision making frameworks, engagement with and consultation with the EWC is going to fall in. I think a lot of our clients currently will operate on the assumption that it's more of an information exercise where decisions probably have already been taken where EWCs are made aware of. I think going forwards, business is going to have to assess where consultation with EWCs comes into the equation before decisions are taken because that's the new requirement essentially – you have to give EWCs the ability to opine on decisions before they're taken and you have to consider their opinion and provide a reasonable written response to that. So I think it's about risk assessing how, for example, in a life sciences business when you are looking at R&D spend or you're looking at, for example, the use of AI in different operations that might have consequences for other operations in terms of reducing workforce resulting in restructures in one European member state that may ultimately have a wider scope when you apply it elsewhere. Actually, before that decision is taken, you're going to need to have consulted the EWC because the consequence of that potential decision in one member state has an impact on other member states. So I think even just understanding that now from a risk analysis perspective is going to be really important because those checkpoints in terms of decision making are really going to need to be thought about and, of course, the benefit of thinking about this early is that you've got the ability to think about training, upskilling, making sure that you have considered where decisions are made, and you've upskilled management to understand what the new requirements are going to be, and you have upskilled also the EWC as well because I think that the current members probably are going to need to be brought up to speed in terms of what these changes are, how that's going to impact the operation and the management of the European Works Councils.”

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.