European Company Regulation - Employee Participation

Employee Participation

The regulation is complemented by the Council Directive supplementing the Statute for a European Company with regard to the involvement of employees (informally "Council Directive on Employee Participation"), adopted 8 October 2001. The directive establishes rules on worker involvement in the management of the SE.

EU member states differ in the degree of worker involvement in corporate management. In Germany, most large corporations are required to allow employees to elect a certain percentage of seats on the supervisory board. Other member states, such as the UK, have no such requirement, and furthermore in these states such practices are largely unknown and considered a threat to the rights of management.

These differing traditions of worker involvement have held back the adoption of the Statute for over a decade. States without worker involvement provisions were afraid that the SE might lead to having such provisions being imposed on their companies; and states with those provisions were afraid they might lead to those provisions being circumvented.

A compromise, contained in the Directive, was worked out as follows: worker involvement provisions in the SE will be decided upon by negotiations between employees and management before the creation of the SE. If agreement cannot be reached, provisions contained in the Directive will apply. The Directive provides for worker involvement in the SE if a minimum percentage of employees from the entities coming together to form the SE enjoyed worker involvement provisions. The Directive permits Member States to not implement these default worker involvement provisions in their national law, but then an SE cannot be created in that member state if the provisions in the Directive would apply and negotiations between workers and management are unsuccessful.