UK’s life sciences sector prepares for impact of revised EWC directive

The EU has reached political agreement on a revised directive that will overhaul the European Works Council regime. It’s the biggest reform in more than a decade and it will mean earlier consultation, tougher confidentiality rules and greater enforcement risk for large multinationals operating across Europe. For HR, it’s one to watch closely. Member states will have two years to transpose the changes into national law and up to three years for full implementation, so employers will need to start planning ahead. 

The impact will be felt across many sectors but especially in life sciences, where cross-border operations, complex supply chains and highly sensitive R&D activity make EWC engagement a regular feature. The revised rules expand when consultation is triggered, strengthen EWC rights and increase the funding obligations on employers, all of which point to a more active and better-resourced EWC landscape.

Life sciences businesses are among the most internationally integrated in Europe, with research, manufacturing, regulatory and commercial functions spread across multiple member states. That means decisions taken in one location often have direct or indirect effects in another – exactly the kind of cross-border impact that will now trigger EWC involvement under the revised directive. With a broader definition of transnational matters and an explicit requirement to consider future and indirect effects, consultation is likely to be required more frequently and at an earlier stage.

Confidentiality is another major pressure point, and one that will require careful planning. Life sciences employers routinely handle sensitive information – clinical trial data, IP strategy, patent pipelines, and ongoing research. Under the new regime, withholding that information becomes much harder. Employers will only be able to refuse disclosure where there is a tangible and significant risk of harm, based on objective criteria, and they will need to justify that decision to the EWC. 

Funding obligations will also increase. Employers will need to cover the reasonable and necessary costs of the EWC, including multiple experts, training and, for the first time, legal representation. That’s likely to empower EWCs, make them more active, and increase the risk of disputes and litigation if employers are not properly prepared.

So let’s get a view on this. Ben Brown advises a number of clients in the life sciences sector and earlier he joined me by video link from Leeds. So, first question, is it right for employers to expect more challenges, and potentially more litigation, in future? 

Ben Brown: “I think that is right because I think European Works Councils are going to be empowered by this new directive because they're going to be given the ability to be funded in a more structured and better way. So employers are going to be on the hook for reasonable and necessary costs of the operations of the European works council to the extent that they're not currently - for example, funding more than one expert to help in the provision of opinions, and also in terms of the cost for legal representation as well. So I think empowerment is definitely the order of the day. They're also going to be empowered by what you refer to, in terms of the confidentiality piece as well and, of course, for life sciences employers the confidentiality around intellectual property, around clinical data, around patent pipelines and research and development is of critical importance - more so, I would say, than a lot of other sectors - and so how the new rules on confidentiality impact those, some careful consideration is going to have to be made because what previously might have not needed to be disclosed in the new regime is probably going to need to be disclosed and it's really only where there's a really tangible, significant risk of harm where confidential information can be withheld, essentially, from a European Works Council, and that's going to require objective analysis of what that data is. So there needs to be some kind of thought process by employers as to what will classify in an objective way as confidential, such that it can be withheld and, of course, explanations are going to need to be provided to EWCs  who might feel, again, more empowered to challenge those situations. So I think employers are going to have to put some form of process in place and, ultimately, information of a confidential nature is going to need to be shared in order for EWCs to give their opinions. So I think really, rather than focusing on what can be withheld, I think also some effort will need to be placed on well, how can we ensure the transmission and storage and disclosure of that confidential information to our works council in the most secure way possible because I think that is going to be critical as well. Of this is in addition to training management and members of the works council around confidential information and making sure you have those non-disclosure agreements in place when information is provided in that space. I think all of that upfront preparation is going to be really important.” 

Joe Glavina: “Finally Ben, thinking about HR’s role, what's your key message to HR professionals watching this?” 

Ben Brown: “I think the key message for HR professionals to deliver to their businesses is that European Works Councils going forward are not just going to be, perhaps, what they might be perceived to be now, which is a once a year talking shop where not really much is needed to be done and prep is not really needed, and there's no real risk of things that happen in that forum having an impact across the wider business. I think HR professionals, who have a European Works Council and have operated in this space for a number of years, will see these changes in the new directive as significant and I think there does need to be a learning exercise done and driven by the HR team, and the legal team as well, in parallel, I think, to the senior management to almost explain the significance of this change and how actually European Works Councils are going to become more of a force, I think, in internal decision making processes because if that is not taken properly into consideration, and planning is not properly made for that. I think there is going to be a real risk of disputes with European Works Councils, increased costs, because of the funding requirements and, of course, costs of litigation as well, which, frankly, employers are going to need to almost partially fund themselves because of the new requirements to fund EWCs’ legal representation. So I think the message really is we need to start preparing now, and we need to start actually upskilling managers on this change because it is significant.”

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.