Democracy at work

By the time you’re reading this, my Dutchman Jan Gorissen and I will be newly married. As general counsel for a couple of large corporations – one Dutch and one American, Jan worked closely with many business organizations all over the world.

I am writing today about a conversation we had on Labor Day. Appropriately enough, we got into a discussion comparing the labor movement in the United States with systems in Europe called Works Councils. I had never heard of these councils and asked Jan to give me a short course, Works Councils 101 as it were.

In many European countries, Works Councils have existed for decades as prescribed by law. The mandate often depends on the size of the company. In some countries, any firm with 1,000 employees must have a Works Council. In other European countries, the number of employees may be much lower. (And in some cases a company’s managers and employees will voluntarily form a Works Council, regardless of size.) National labor unions also exist in these countries. They are industry specific as are ours. Each Works Council, however, is set up to function within just one company, and so works with more knowledge of issues specific to that company, and incentive to see that company succeed in the marketplace.

Council members within an organization are chosen for four-year terms by all employees. Management is required to provide to Council members, at least twice a year, information on the state of the business financially and generally.

The Councils function as local/firm-level complements to national labor negotiations. Management of local firms meet with their Works Council to adjust national labor agreements to fit local conditions. The Councils also ensure that workers in different European countries are all receiving the same information about transnational policies and decisions. The Council members from various companies (and countries) can then meet and develop a unified response to employers’ transnational plans. Management must at least consider this response from the Councils, before implementing their plans.

In these ways, the Councils function to reduce workplace conflict by facilitating the flow of information between employees and employer, and to allow workers to be consulted in matters related to their direct labor conditions (with a right to veto). More strategic management decisions (acquisitions, new product development etc.) are not subject to prior approval of the Councils, but must involve consultation with the councils.

Jan explained that a typical Works Council Act addresses the following topics:
Management decisions subject to prior advice of the council
These decisions include, for example, transfer of control of the company, acquiring another company or merging with another company. In such cases, if the Council advises against the decision, management must refrain from implementing the decision for a month. This allows the Council to file a court case, where the judge must decide if a reasonable management in any company would have come to this decision.

Management decisions that affect labor conditions directly

For example, instituting or amending retirement plans, profit-sharing or savings plans; work time or vacation time and performance appraisals. In these matters, management needs approval from the Works Council, or it will be up to the court to decide.

At this point, I had quite a positive picture of the concept of Works Councils. I still do, but it is somewhat tempered by Jan’s description of realistic factors that come into play. There is often tension between the national unions and the Works Councils. There is sometimes, of course, tension between management and the Works Councils.
Still I think the more we know about the European model, and vice versa, the better our ability to continually improve the systems of communication within our own organizations. And, open collaborative relations between employees and employers can only mean better business for us all.

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