European Works Councils: Valuable Organization - HR Management Conference in Estonia 3/4 April 2003

1. Human Resource Management Conference, Estonia - 3/4 April, 2003“Valuable Organisation” European Works Councils- the advantages of employer/employee dialogue John Raywood Secretary, GlaxoSmithKline European Employee Consultation Forum

2. European Works Councils ‘A talk in five parts’ Part 1 • What are they? • Who has to have one? • How are they set up? • When do they meet - and what for? • How is ‘consultation’ defined? • What about ‘National Information & Consultation’?

3. European Works Councils Part Two • Intended to promote dialogue • Serve as a rein on Management • Should be an aid to Management • Assist communication with employees Part Three • Expansion of the European Union • the implications for ‘EWCs’

4. European Works Councils Part Four • Are they effective? • What next? Part Five • Effects of mergers on ‘EWCs’ • a case study [GlaxoSmithKline]

5. What are ‘EWCs’? Joint bodies comprising Management and Employee representatives - set up under EU Council Directive 94/45, 22 September 1994 Purpose • “…to improve the right to information and to consultation of employees in Community-scale undertakings and Community-scale groups of undertakings.”

6. Who needs to have one? • Any “undertaking” with • at least 1000* employees within the Member States and • at least 150* employees in each of at least two of the 17 Member States [*Based on the average number of employees, including part time employees, during the previous two years] • Does not apply to merchant navy crews

7. What were Companies’ initial options in implementing the EU Directive? • Agree a procedure with a “Special Negotiating Body”, comprising Employee Representatives from each Country included (Article 6) OR • Negotiate a voluntary agreement (Article 13)

8. What approach was adopted? • Many companies initially chose the voluntary route, largely to maintain their current arrangements and reduce the degree of bureaucracy • Others chose the ‘SNB’ route • greater legal clarity • less risk of Court challenge • often supported the businesses’ strategies • usually favoured by employees

9. What about the UK ‘opt out’? • At the time, UK employees were not legally bound to be included(this changed in December 1999) • But an ‘EWC’ or equivalent body was still required to cater for employees in the other Member States • So, it was sensible to include any UK employees - and most companies did!

10. ‘EWCs’ - when do they meet - and what for? • EWC meets at least once a year or ‘in special circumstances’ • Sub-Committee usually meets more frequently or ‘in special circumstances’ • To share information and to consult with elected representatives on the Company’s transnational operations as they affect the interests of employees in at least two Countries

11. What do ‘EWCs’ discuss? • Strategy - the structure and strategy of the Company, including substantial changes in the organisation; mergers; cut-backs or closures • Finance - the financial and economic situation; Company investments

12. What do ‘EWCs’ discuss? . . . Continued • Development - the expected development of production, R&D and Sales; the introduction of new working methods or production processes; transfers of production • Human Resources - the situation and trend of employment; collective redundancies • Issues for Information & Consultation NOT NEGOTIATION

13. Consultation What does this mean? • European definition an “ exchange of views and dialogue” • Understanding ‘local’ expectations and what are local issues • Takes place at a time when it is still meaningful, i.e. when the opinion of Employee Representatives can be taken into consideration before final decision

14. Typical format/programme of (Annual) ‘EWC’ meetings* • Employee Representatives’ separate preparatory meeting • Keynote Address - from a senior Company executive in Europe • Presentations - on behalf of the major businesses or in relation to an important/current topic • Educational/Training sessions for employee representatives - to help them to understand and appreciate the business environment *(with Interpreters)

15. EU Directive on National Information & Consultation* Purpose [similar to ‘EWCs’] to establish a general framework setting out minimum requirements for the right to information and consultation of employees To be achieved by arrangements which ‘management and labour’ consider to be best suited to their needs and wishes * (2002/14/EC)

16. National Information & Consultation Scope • the recent and probable development of the undertaking’s or the establishment’s activities and economic situation • situation, structure and probable development of employment…and…any anticipatory measures envisaged, in particular where there is a threat to employment • decisions likely to lead to substantial changes in work organisation or in contractual relations

17. National Information & Consultation Arrangements • appropriate timing, method and content ... at the relevant level of management • on the basis of information supplied by the employer...and the opinion which the employees’ representatives are entitled to formulate

18. National Information & Consultation Arrangements (continued) • in such a way as to enable employees’ representatives to meet the employer and obtain a response, and the reasons for that response, to any opinion they might formulate • with a view to reaching agreement on decisions within the scope of the employer’s powers

19. National Information & Consultation The Company’s Options Subject to the provisions of National legislation (to be in place by 23 March, 2005) • reach agreement with employee representatives on the basis of the framework laid down in the Directive or • negotiate arrangements with employee representatives which are different from those laid down, provided that they respect the principles set out in the Directive

20. EWCs promote dialogue • EWCs are a legal requirement • Their purpose is to improve the rights of employees to information and consultation • To be achieved through dialogue between senior company executives and employee representatives • Employers should welcome this additional opportunity for discussion and make it a virtue

21. EWCs - a rein on Management • EWCs are a legal requirement • Employers must respect the obligation to inform & consult as appropriate before implementation of proposals • Time should be built-in to the project schedule to allow for necessary consultations • Develop trust between management and employee representatives

22. EWCs - an aid to Management • The requirement to inform and consult provides an opportunity to seek an second opinion from those likely to be directly affected • Ensures that employees can be involved in the eventual decision and will be more likely to support the change • Avoids ‘unpleasant’ surprises and gives time for ‘acceptance’

23. EWCs assist communication • Employees become better informed • Stimulate new/novel methods of communication to employees (e.g. use of IT and dedicated web sites) • Creates an obligation to brief Line Managers - so that they are not left out of the loop! • Keeps elected ‘Employee Representatives” truly ‘representative’

24. Expansion of the EU What is proposed? With effect from May, 2004, the following ten Countries are due to become members of the European Union: Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Malta and Cyprus

25. Expansion of the EU • Provided that the Country has adopted the relevant EU Directives* (a condition of entry to the EU), Company employees will then become eligible to be represented on the ‘EWC’ • The way in which this will be achieved will depend on the circumstances within each Company *some agreements do not make this a requirement

26. Expansion of the EU Issues to be determined - new Agreement required? - timing/commencement of involvement - interim arrangements - consultation with new Countries - degree of representation - election of employee representatives - training of new representatives

27. Expansion of the EU EWCs - a new experience! • An additional forum - to promote dialogue between employees and management • Not intended to undermine or supersede local processes or local employee rights

28. Test of EWC effectiveness • Discussions remain business focused • Develops appropriate links at the business level to local communication and consultation processes • Recognises that communication is a joint responsibility for management and employee representatives • Encourages participation and involvement through enhanced dialogue • Promotes a spirit of collaboration

29. What next? • Promote greater understanding of the role of the ‘EWC’ amongst staff and managers • Actively involve ‘EWC’ in the formulation of business plans GENERALLY RECOGNISE THAT ‘EWCs’ ARE HERE TO STAY!

30. Effects of mergers on EWCs - GlaxoSmithKline approach (1) • How to merge two existing ‘EWCs’? • Few precedents - none of which were considered directly comparable • Advised to agree everything with employee representatives • The options - begin again (‘Special Negotiating Group’ etc.), or - build on existing arrangements

31. Effects of mergers on EWCs - GlaxoSmithKline approach (2) • Members of both ‘EWCs’ met together • Joint ‘Working Group’ created from members of the GlaxoWellcome and SmithKline Beecham ‘EWCs’ • ‘Working Group’ recommendations put to a further joint gathering and to separate meetings of both ‘EWCs’

32. Effects of mergers on EWCs - GlaxoSmithKline approach (3) The recommendations: • regard the members of both existing ‘EWCs’ as an analogous ‘Special Negotiating Body’ • elect a formal ‘Working Group’ from these ‘EWCs’ - to negotiate a new agreement, subject to final endorsement by each of the former ‘EWCs’

33. Effects of mergers on EWCs - GlaxoSmithKline approach (4) The outcome • New Agreement (under English law) • Basically, followed the ‘subsidiary requirements’ of the (by then) UK Regulations • ‘EWC’ - 31 employee representatives (from all Countries previously included) and a ‘standing sub-committee’ (jointly chaired), comprising 5 employee and up to 5 management representatives

34. Effects of mergers on EWCs - GlaxoSmithKline approach (5) • ‘Working Group’ also authorised to act as ‘interim’ Sub-Committee for all purposes until new Country employee representatives elected - met on two occasions (once in ‘exceptional circumstances’) • Inaugural meeting held in January, 2002, with training for representatives • First Annual Meeting in April, 2002