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Are European fundamental rights to information and consultation getting diluted by national implementations? Study on implementation of European Works Councils Directive 2009/38/EC in the field of access to justice'

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  • Freelance expert in industrial relations
Conference Paper

Are European fundamental rights to information and consultation getting diluted by national implementations? Study on implementation of European Works Councils Directive 2009/38/EC in the field of access to justice'

Abstract and Figures

The paper starts by presenting in Part I the contextual background, rationale for the research and its origin. In Chapter I the study analyses available sources of law defining sanctions for breach of EWC laws. This part starts with a short overview of the existing research on the topic and then goes on to looking at specific, most relevant sources of European laws and auxiliary sources discussing EWC sanctions in their chronological order. In Chapter II firstly, provisions of the original 1994 EWC directive (94/45/EC) are presented followed by official recommendations for their implementation in national transpositions (European Commission 1995). Secondly, in order to highlight the contrast between the (non-binding) recommendations made under auspices of the European Commission and the findings of the report on the application of the EWC directive 94/45/EC (European Commission 2000) follow. The paper then goes on to look at recommendations and findings of the Impact Assessment study (European Commission 2008) undertaken in the preparation for adoption of the recast directive 2009/38/EC. Subsequently, provisions regarding sanctions in the recast directive 2009/38/EC are discussed. They are followed by reference to Recommendations of the Expert Group Report 2010 (European Commission 2010) to present the reader with officially adopted guidelines and ideas on how the primary sources of law (directives) should be implemented. In Chapter III empirical findings on specific sanctions available in national law of the EU Member States are presented. Firstly, changes to national enforcement regimes as a result of the EWC recast directive 2009/38/EC are discussed. Secondly, a classification by type of violation of EWC laws is presented. Thirdly, general trends with regard to sanctions in the Member States are discussed; they are followed by specific focus on financial penalties and the discussion of their levels in view of general requirements of severity, proportionality and dissuasive character of sanctions. Finally, the question whether there is a link between severity of national enforcement systems and regime shopping is considered. Chapter IV contains an analysis of the meaning of the three criteria the EWC recast directive 2009/38/EC setting quality requirements for sanctions on the national level (effective, proportional and dissuasive sanctions). Various elements of theories of enforcement, European Commission’s recommendations with regard to e.g. financial market regulation, and jurisprudence of the European Court of Justice are called upon to provide substantial input and guidance for evaluation of national sanctions in view of the recast directive’s requirements. In the final Chapter V some policy relevant issues are discussed. These include i) considerations on the ultimate sanction of invalidity of managerial decisions implemented without respect for information and consultation obligations towards EWCs; ii) considerations on the question whether the problem of implementation of sanctions is an isolated, EWC-specific problem; and iii) whether there is scope and legal competence on part of the European Commission to intervene in the field of sanctions to be implemented in the EU member states.
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1
European Works Councils knocking on
the door of justice
A study on implementation of sanctions in
national transpositions of directives 94/45/EC
and recast directive 2009/38/EC
Romuald Jagodzinski, ETUI
Paper for the 2014 Industrial Relations in Europe Conference - The future of the
European Social Model New perspectives for industrial relations, social and
employment policy in Europe?
10 - 12 September 2014, Dublin, Ireland
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Table of Contents
Paper’s structure ........................................................................................................... 3
Chapter 1: Background information ...................................................................... 3
1.1. Introduction .................................................................................................................... 3
1.2. Contextual setting .......................................................................................................... 4
1.3. Research background and rationale for the analysis ................................................ 5
1.4. Sanctions as part of general concept of access to justice .......................................... 6
Chapter 2: EWC sanctions in legal and auxiliary sources ............................ 7
2.1. Existing research ............................................................................................................ 7
2.2. Sanctions in various sources ........................................................................................ 9
Chapter 3: Sanctions in national law .................................................................. 16
3.1. Overview of solutions applied by Member States concerning category of breach
of EWC laws and possible sanctions ........................................................................................ 16
3.2. Changes to national regulations on sanctions following the recast directive
2009/38/EC................................................................................................................................ 16
3.3. Classification of violations of EWC laws ................................................................... 17
3.4. Observations concerning general trends in sanctions applicable for violations of
EWC rights (including the current post-recast directive regulations) ................................ 20
3.5. Financial penalties for corporate violations of EWC laws in the EU Member
States 26
3.6. Severity, proportionality and dissuasiveness of financial penalties and corporate
turnover ....................................................................................................................................... 30
3.7. Regime shopping is there evidence for opportunistic quest for laxer laws? ................ 34
Chapter 4: Parameters for evaluation of sanctions compatibility with the
requirements of the EWC recast directive 2009/38/EC ................................................. 37
4.1. Definition of a sanction in EU law ............................................................................. 37
4.2. The doctrine of ‘effective, proportionate and dissuasive sanction’ in EU law ..... 38
4.3. European Court of Justice: sanctions as an inherent ingredient of EU directives
39
4.4. Sanctions and their characteristics according to the European Commission ..... 45
4.5. Conclusions .................................................................................................................... 49
Chapter 5: Policy relevant questions ................................................................... 50
5.1. Personal or corporate liability for violations of EWC law?..................................... 51
5.2. Can illegal actions produce lawful effects? Declaration of nullity and invalidity of
managerial decisions taken with violation of EWC laws ...................................................... 52
5.3. Problematic sanctions in EWC transposition – an isolated issue in EU
directives? ................................................................................................................................... 55
5.4. Policy conclusions: is there scope for EU authorities intervention in the field of
sanctions? .................................................................................................................................... 58
6. Conclusions ......................................................................................................... 69
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Paper’s structure
The paper starts by presenting in Part I the contextual background, rationale for the research
and its origin.
In Chapter I the study analyses available sources of law defining sanctions for breach of EWC
laws. This part starts with a short overview of the existing research on the topic and then goes
on to looking at specific, most relevant sources of European laws and auxiliary sources
discussing EWC sanctions in their chronological order.
In Chapter II firstly, provisions of the original 1994 EWC directive (94/45/EC) are presented
followed by official recommendations for their implementation in national transpositions
(European Commission 1995). Secondly, in order to highlight the contrast between the (non-
binding) recommendations made under auspices of the European Commission and the
findings of the report on the application of the EWC directive 94/45/EC (European
Commission 2000) follow. The paper then goes on to look at recommendations and findings
of the Impact Assessment study (European Commission 2008) undertaken in the preparation
for adoption of the recast directive 2009/38/EC. Subsequently, provisions regarding
sanctions in the recast directive 2009/38/EC are discussed. They are followed by reference to
Recommendations of the Expert Group Report 2010 (European Commission 2010) to present
the reader with officially adopted guidelines and ideas on how the primary sources of law
(directives) should be implemented.
In Chapter III empirical findings on specific sanctions available in national law of the EU
Member States are presented. Firstly, changes to national enforcement regimes as a result of
the EWC recast directive 2009/38/EC are discussed. Secondly, a classification by type of
violation of EWC laws is presented. Thirdly, general trends with regard to sanctions in the
Member States are discussed; they are followed by specific focus on financial penalties and
the discussion of their levels in view of general requirements of severity, proportionality and
dissuasive character of sanctions. Finally, the question whether there is a link between
severity of national enforcement systems and regime shopping is considered.
Chapter IV contains an analysis of the meaning of the three criteria the EWC recast directive
2009/38/EC setting quality requirements for sanctions on the national level (effective,
proportional and dissuasive sanctions). Various elements of theories of enforcement,
European Commission’s recommendations with regard to e.g. financial market regulation,
and jurisprudence of the European Court of Justice are called upon to provide substantial
input and guidance for evaluation of national sanctions in view of the recast directive’s
requirements.
In the final Chapter V some policy relevant issues are discussed. These include i)
considerations on the ultimate sanction of invalidity of managerial decisions implemented
without respect for information and consultation obligations towards EWCs; ii)
considerations on the question whether the problem of implementation of sanctions is an
isolated, EWC-specific problem; and iii) whether there is scope and legal competence on part
of the European Commission to intervene in the field of sanctions to be implemented in the
EU member states.
Chapter 1: Background information
1.1. Introduction
In 2009, fifteen years after its adoption the original European Works Councils (EWC)
Directive 94/45/EC underwent a review resulting in recasting the directive as 2009/38/EC. It
took the European Commission a decade to launch the reform procedure of the directive as
stipulated by its art. 15 requiring such a ‘review’ to be completed by 1999; a decade of repeated
demands from the European Trade Union Confederation and individual trade unions, the
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European Parliament, the European Economic and Social Committee, experts and even
individual EWCs ({Jagodziński 2009 #2}).
The recast directive 2009/38/EC, among many improvements, for the first time made
reference and imposed requirements on the Member States with regards to provision of
sanctions for breaches of EWC law. The criteria for the quality of sanctions set in the
Preamble to the recast directive that the Member States are obliged to ensure in
transpositions are effectiveness, proportionality and dissuasive character. This amendment
held a big promise for all EWCs forced to seek legal redress. Similarly, EWCs not (yet)
involved in legal conflicts with their management bore expectations with regard to stricter and
more dissuasive sanctions that were presumed to give worker representatives more leverage
in both overall, and in conflictual situations.
Against the expectations the uptake of this new requirement of the directive by the Member
States has been very limited and many of them retained enforcement regulations that were
arguably substandard already under the ‘old’ directive 94/45/EC.
This approach in the Member States seems at odds with the new requirements of the EWC
recast directive and the general principles of EU law. According to the European Court of
Justice enforcement provisions are not a technical, but substantial matter ensuring the
effectiveness of directives.
Since in the implementation report of directive 94/45/EC (European Commission 2000) the
issue of enforcement was largely neglected and because according to informal information the
European Commission plans to launch an implementation study on the transposition of the
2009/38/EC directive it is important to reemphasise the necessity to include enforcement
frameworks, and specifically sanctions, in any evaluation of quality of transposition. Since
workers and management bargain ‘in the shadow of the law’ it is important to ensure that this
shadow is in shape guaranteeing a level playing field for them. If the EU really wishes to
maintain EWCs as an important actor of European industrial relations it has to become more
critical and decisive in evaluating the levels, the types and availability of sanctions, and
possibly require the Member States to bring their enforcement frameworks to the standard of
the directive.
1.2. Contextual setting
It seems that the relevance of the research on court judgements in European Works Councils
(EWC) related litigation has been gradually acquiring significance in terms of daily practice of
those bodies over the past decade. European branch level trade union organisations, the
European Trade Union Federations (ETUFs), are more and more often addressed with
enquiries from EWCs concerning information about possible measures that can be applied
against international companies that do not respect their obligations in the area of
information and consultation. Consequently, they take measures to support the coordinated
EWCs and employee representatives in litigious cases (e.g. EMF 2006; EPSU 2008). The
increase in number of such inquiries reflects and confirms the disturbing reality reported in
2005 in a study by Waddington (Waddington 2005 and 2010;
Jagodzinski/Kluge/Waddington 2008: 22-25): in some areas in which EWCs do have a
competence formally guaranteed by law the basic information and consultation rights are
notoriously violated and ignored. It is perplexing that EWCs in 69% of cases are not provided
with useful information allowing for a meaningful consultation in economic questions and
matters related to financial situation of a company (Waddington 2005). Equally alarming
results were found with regard to a big group of matters linked to restructuring (closures or
cutbacks: 71,8%; mergers, take-overs or acquisitions: 83,3%; transfers, relocation of
production: 79,5%; ibid.) which according to the European Commission (European
Commission 2002 and 2005) is an area where EWCs have an ‘essential role’ to play.
High number of instances of EWC initiated litigation is rooted, however, not only in the lack
of information and consultation or their poor quality, but also in their timing. Empirical
evidence is again delivered here by Waddington’s study (Waddington 2005 and 2010). EWCs
often report, employee representatives learn about implemented managements’ decisions
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from press (information in 25,7% and consultation in 20,5%), or once they are already carried
out (only in 24,2% information was given before a decision was finalised; consultation in
19,9%).
It is difficult to quantify the potential for further litigation cases involving EWC rights to
information and consultation, however, confirming Waddington’s study results the ETUFs are
reportedly confronted with questions concerning possible lawsuits on a regular basis. Many of
violations and infractions of EWCs rights are settled amicably between the parties and do not
make it to court rooms. A certain number of them, however, do not make it to court rooms
due to lacking information about the different national rules of governing access to courts. In
case of conflicts that end up in courts the practice has shown that the sanctions imposed by
national courts differ significantly across the Member States. This puts in question the very
idea of adopting European standards for information and consultation and, respectively, for
their enforcement.
The latter question is of particular importance in view of the forthcoming evaluation of
implementation measures unofficially announced by the European Commission to be
executed in 2015, with results expected in 2016. Since the criteria for sanctions included in the
EWC recast directive represent a new obligation for the Member States this study aims at
informing the European Commission about possible omissions and deficiencies in national
systems concerning the fulfilment of the directive’s requirements.
1.3. Research background and rationale for the
analysis
The analysis of EWCs access to courts originates from a study on EWC related litigation
presented in the second part of the book ‘The recast of the European Works Councils
directive’ (Blanke and Dorssemont 2010) analysing the available jurisprudence, both on the
EU (European Court of Justice) and national court levels, referring directly and indirectly to
EWCs (see part 2 of Dorssemont and Blanke 2010). As has been argued over the years and,
especially, during 2008 in the debate on the recast of the EWC directive, the rights and
competences of these bodies at the moment of adoption of the directive 94/45/EC (1994) were
defined imprecisely and, in fact, insufficiently to ensure the necessary legal certainty of their
existence and functioning (Jagodzinski et al 2008; European Parliament 2007; Altmeyer
2003). Taking this finding as a point of departure in 2008 the author launched the above
mentioned study analysing available case law relating to EWCs (later in cooperation with F.
Dorssemont and T. Blanke) and invited national experts to work on the topic (Blanke and
Dorssemont 2010). The hypothesis of the study was that weak and vague directive is likely to
result in numerous and consequential litigation. By this token, analysis of court judgements
(both by European Court of Justice and national courts) was expected to provide important
clarifications in regard to EWCs’ operation.
The analysis of laws regulating EWCs access to courts was initially designed to serve a twofold
purpose: firstly, to provide a background for the analysis of EWC related jurisprudence and,
secondly, to help explore the question, whether, against the background of poor quality of
information and consultation in EWCs (Waddington 2010) the number of existing EWC court
cases could have been limited by insufficient legal regulation guaranteeing EWCs access to
courts.
The latter question was especially pertinent as the EWC related jurisprudence was
concentrated only in specific countries (Germany, France, the UK) and not proportionally
spread across the EU countries. In course of the study on case law it became evident that legal
institutions and frameworks in the area of access to courts vary significantly across the
Member States. Sanctions, as part of the general concept of enforcement of the EWC
directives, represent probably the most striking example of diversity in implementation across
the EU.
At the same time, the question whether national legislation, despite all the justified
differences between countries, ensures that EWCs have proper facilities of access to courts in
all the Member States was identified as a highly under-researched area. Hence the current
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paper (and the broader study of access to justice) aims at extending beyond the frames of a
background fact-finding of a merely subsidiary nature.
The relevance of the study seems to extend also beyond the specific area of EWC research.
Due to the fact that worker rights in information and consultation on national level often
seem to be guaranteed by similar or identical enforcement measures1 analysis of punitive
systems with regard to EWCs can be useful for a better understanding of the general system of
penalties for breach of information and consultation rights. The extent to which drawing more
general conclusions beyond enforcement of EWC rights will obviously vary across the Member
States and it is beyond the scope of this analysis to determine it, yet the present report might
represent a contribution to such broader research.
1.4. Sanctions as part of general concept of access
to justice
The below paper is based on a broader study by the author (Jagodzinski 2014, forthcoming)
dealing with various aspects of access of European Works Councils to justice. Due to the
extent of the study only its part dealing with sanctions has been selected as presenting the
outcome of legal proceedings (litigation) considered the most palpable result of any court
case. However, it should not be forgotten that sanctions should not be considered in
separation from the entirety of the legal system and national industrial relations and are
strongly conditioned by the former.
As advocated by the author in the more comprehensive study of implementation of EWC
enforcement provisions, sanctions represent only one of several parts of the broader concept
of EWCs’ access to justice. The latter is argued to consist, generally, of:
a) Access to judicature and capacity to act in courts;
b) Costs of legal proceedings;
c) Competence of courts;
d) Category of breach and possible sanctions.
1 Many national measures do not refer specifically or exclusively to breaches of EWC obligations and
rigthts, but rather consider wrongdoings in this area as a general category of breaches against worker
rights and/or information and consultation rights. An example here is Estonia where the CSIEA (the
Community-scale Involvement of Employees Act (CSIEA), which transposes into Estonian law
Directives 94/45/EEC, 2001/86/EC, and 2003/72/EC, as well as the cross-border mergers directive
(2005/56/EC; harmonised with the national law implementing EU Directive 2002/14/EC into the
Employee Trustee Act) among else provides liability for violation of prohibition on international
informing and consulting and involvement of employees (§ 85), and for violation of obligation of annual
informing and consulting and informing and consulting under exceptional circumstances (§ 87). In
event of such violations the extent of liability is the same as with the violation of the rules of the general
framework of informing and consulting . Source:
http://www.juridicainternational.eu/public/pdf/ji_2008_2_25.pdf
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Chapter 2: EWC sanctions in legal and auxiliary
sources
2.1. Existing research
After approximately two decades of existence of European-wide employee representation
assemblies and over ten years of binding force of the Directive 94/45/EC on European Works
Councils (EWCs) these bodies represent a well described and investigated element of
European industrial relations. Research has been conducted on both the theoretical level (e.g.
McGlynn 1995; Schulten 1996; Streeck 1997; Traub-Merz 2001) and the echelon of empirical
studies dealing with various aspects of EWC functioning (case studies: e.g. Marginson & Hall
et al. 2004; analysis of EWC agreements: Bonneton & Carley et al. 1996, Marginson & Carley
2000; research on quality of information and consultation in EWCs: Waddington 2010;
typology of EWCs: Lecher et al. 2001, Kotthoff 2006; EWCs as a vessel of emerging
transnational bargaining: Da Costa & Rehfeldt 2007; Schömann 2008; EWCs and EU
enlargement: Kerckhofs 2003; Voss 2006, etc.).
At the same time, legal analysis of case law as well as of related instruments of enforcement of
EWC rights in Europe is a clearly underdeveloped area of research (see also similar evaluation
in European Parliament 2007: 2). A dominating approach in the literature has been an
analysis of the role and positioning of EWCs in the European labour law (e.g. Blanpain /
Engels 2001; especially Chapter 21; Krimphove 2001; Barnard 2000; Schiek 1997; Thüsing
2008), a general legal overview of provisions of the directive 94/45/EC (Rigaux &
Dorssemont 1999) , or commentaries of national transposition acts (Blanke 2001; Skupien
2008; Confederation des Syndicats Chretiens 1997; Schnelle 1999; Müller 1997). Interesting
and more in the scope of the present project lies the analysis of the relationship of the
principle of subsidiarity and the extent of margin of leeway conferred to the national legislator
on the one hand, and the community universal character of standards introduced by the
directive 94/45 (Bachner 1998). Nonetheless, only individual academics have turned the
attention to the increasing role of case law and litigation in the further development and
harmonization of European law on workplace codetermination (Blanke 1999: 366). Some
further authors (Clauwert et al 2003 generally on social rights; Köstler / Büggel 2003 on
Societas Eruopea and company law) took the challenge of comparing, or at least juxtaposing,
information and consultation rights enshrined in different EU instruments in the area of
social rights. In those publications EWCs have always been mentioned and incidentally
referred to, but never made a separate subject of analysis.
Few exceptions to the general overlooking of enforcement issues with regard to workers’
information and consultation rights at large, and EWCs specifically exist. Firstly, a practice
oriented study for the European Metalworkers Federation (EMF) in 2002 (Büggel 2002). The
study looks at some legal aspects of the operation of EWCs (and of national works councils)
such as legal/moral personality, right to negotiate collective agreements, right to conclude
other contracts (being in fact a derivative of legal personality or its functional, limited
variant), resources (budget) for EWCs and EWCs opportunities to participate in litigation
before courts. While the work by Büggel was a helpful resource and a point of departure for
the present chapter (also for Annex 1). Nonetheless, it came short of an analysis of the data
put together and a more in-depth investigation concerning the effects of application of certain
solutions by the Member States, or of the lack of particular arrangements for operation of
EWCs.
Secondly, a Eurofund study on implementation of the ‘Impact of the information and
consultation directive on industrial relations’ (Eurofund 2009) focusing on the
implementation of the 2002/14/EC directive on works councils included several enforcement
issues, such as identitity of employee representatives as well as an item ‘enforcement
procedures and sanctions’. The importance of such a systemic study cannot be overstated as it
included a collection of national reports on the implementation of the 2002/14/EC directive
serving as a basis for a comparative overview and some important policy relevant conclusions.
While useful for providing some information on national systems of information and
consultation it did not, however, cover (at least explicitly) the transposition of the EWC
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directive and EWC specific enforcement issues. Admittedly, in some countries some
procedures for enforcement of information and consultation rights of workers are similar
irrespective of whether only the local and national or transnational levels are concerned; in
many countries, however, these procedures are different and/or enforcement issues are
specific to one of them. Finally, the consideration of enforcement issues was not the study’s
main focus and thus, understandably, was not exhaustive.
The Eurofund (2009) study was shortly preceded by another publication commissioned by the
European Parliament in 2006 on the ‘Impact and Assessment of EU Directives in the field of
“Information & Consultation”’ (European Parliament 2007). This analysis comprised the
classical information and consultation trio, i.e. implementation of directives 2002/14/EC,
94/45/EC on EWCs and 98/59/EC on collective redundancies and was much more focused on
their transposition on national level from the point of view of enforcement. It identified some
crucial shortcomings, took account of varying social partners’ views on the necessity of
revision of these legal acts2 and formulated relevant policy recommendations. Useful and
timely relevant as the study might have been it seems not to have had a limited, if any, impact
on the outcome of the recast of the EWC directive.
A third group of topic related and relevant analyses is formed by literature consisting of more
general legal studies on the issue of requirements for national implementation in regard to
procedures and sanctions (Malmberg 2003) analysing rules developed by the European Court
of Justice (ECJ) regarding the limits to autonomy of Member States in the process of
implementation of EU directives. Malmberg (Malmberg 2003; Malmberg et al 2003;
Malmberg 2004) looked specifically at domestic rules on procedures and sanctions stipulated
in the EU labour law directives and analysed them against the principle of effective
enforcement. These very instructive studies referred to EC labour law in general, however,
they did not scrutinise legislation on information and consultation of employees. Similarly, of
general relevance for the analysis of effectiveness of implementation measures were works by
Kilpatrick (Kilpatrick et al. 2000) and Craufurd Smith (Craufurd Smith 1999). Both, but
especially Kilpatrick et al., explore the complex relations and often controversial dialogues
between courts, national and supranational, on remedies, among others, under the
Convention on Human Rights and the Social Charter. In the latter context conclusions from
the 4th Annual Symposium Report of the European Union Agency for Fundamental Rights are
of particular relevance (FRA 2013). Firstly, the FRA pointed to the essential link between law
and its implementation by stating:
‘When discussing links between the rule of law, justice and fundamental rights, the working
group first had to examine the different dimensions of the rule of law. Participants agreed
that the rule of law has a formal and a substantial dimension. They highlighted that it
should not be considered as a narrower concept since the existence of law in itself is never
sufficient and law cannot be abstracted from its implementation.’ (FRA 2013:7).
The working group ‘also underlined the importance of citizens’ trust and confidence in the
processes and discussed in this context (…) law enforcement procedures, and the capacity of
judicial systems to provide effective justice.’ (ibid.). As further space for action it indicated,
among others, condicting studies measuring ‘the capacity of the judicial systems in terms of
their functionality and th e ability to produce results’ (ibid.). These conclusions of the FRA
working group confirm the importance of the matters covered by the below study and its main
idea of analysing national enforcement and judicial systems’ ‘functionality and the ability to
produce results’ with regard to EWC rights. Even though the below analysis does not look at
the outcomes of litigation3, yet it pursues the logic of assessing the implementations’ ability to
produce palpable outcomes, i.e. factual possibility to defend EWC rights in court. In this sense
it fits well into the FRA’s plea ‘that any potential rule of law assessment should not only look
2 One of the study’s official goals was to respond ‘to the request to review the scope of the legislation and
its impact (…) and the extent to which the social partners are satisfied with the present legislative
arrangements. It provides a background to proposals to review the operation of the European Works
Council directive, and to consolidate information and consultation legislation’ (European Parliament
2007: 1).
3 This goal was pursued in the original study Blanke and Dorssemont (eds.) (2010) from which the below
analysis originates.
9
at available laws and institutions (structures) or policies (procedures) but also, and
especially, the situation on the ground (outcome)’ (ibid. 9).
The above author’s own literature review seems to corroborate Müller’s and Hoffmann’s
(Müller and Hoffmann 2001) earlier diagnosis of a research gap on EWC enforcement issues.
The research that we find underdeveloped, or, in fact, missing, is directly linked to the EWC
relevant case law: it is an analysis of the institutional background providing for enforcement
of the EWC legislation, or in other words means, procedures and outcomes (sanctions) of
EWCs’ access to courts. The identification of this gap is a spin-off from and draws upon the
author’s earlier comprehensive analysis of the case law of the domestic courts4, co-led with
prof. F. Dorssemont and finalised in 2010in form of an edited volume (Blanke and
Dorssemont 2010). The publication was devoted to taking stock of multifaceted developments
in EWCs at an important point in time between adoption of the EWC recast directive and its
entry into force. The latter publication as well as a regularly updated database of litigation
related documents available at ETUI’s website www.ewcdb.eu provide the much needed
insight into legal questions driving the operation of EWCs and clarify contentious issues of
interpretation of the directive 94/45/EC.
In fact we are convinced that research on both aspects, i.e. on material litigation and
institutional enforcement frameworks, are indeed two sides of the same coin, i.e. of EWCs
capacity to seek conflict resolution in courts. While analysis of case law and jurisprudence
focuses on the outcomes of litigation, the present study aims at deepening the understanding
if solutions in the field of implementation of measures necessary for EWCs to be able to
approach courts and defend their rights as well as analysing their compatibility with the
present standards of the EWC directive(s).
2.2. Sanctions in various sources
Differences among the EU member states are not limited only to the access to courts sensu
stricto (see above sections on material competence of courts in various countries), but occur
also once a dispute has been brought before the court. The following chapter does not
investigate procedural differences between the EU member states, but focuses on the question
of sanctions.
Sanctions (in all their forms) being the outcome of pursuit of justice have consistently been in
the spotlight of discussions on judicial matters related to EWCs. They have represented a
bone of contention between the employers and trade unions in the process of recasting the
EWC directive (more on this issue in Jagodzinski 2009). The European Commission in an
attempt to satisfy both parties included criteria for sanctions that need to be effective,
proportionate and dissuasive (Recital 36) to satisfy the unions’ and researcher community
demands (e.g. Dorssemont & Meussen 1999: 383), yet included there requirements only in the
Preamble of the directive 2009/38/EC which constitutes a non-binding part of the legislation.
Despite the elevated interest in sanctions, especially in context of the political debate on the
recast directive 2009/38/EC the available literature on the subject has not investigated this
problem in a structured, comparative manner (apart from limited information contained in a
comparative table ‘(E)WC’s their legal/moral personality and related implications’ (Büggel
2002). The limited literature on the subject matter emphasised in a more normative way the
need for effective, dissuasive and proportionate sanctions has (e.g. Dorssemont & Meussen
1999: 383)arguing that penalties were considered the necessary element to guarantee that
employees’ representatives could claim rights in EWC agreements, the latter being specific
arrangements sui generis falling outside of the normal collective bargaining and thus not
covered by other legislation:
4 A major contribution on this topic is Blanke and Dorssemont (2010), where a systematic analysis of
EWC case law is presented.
10
“(…) it is essential to take all the possible steps to guarantee that workers, workers’
representatives, trade unions and the EWC have access to justice to demand the respect of
these agreements sui generis.” (ibidem).
Taking the Dorssemont’s and Meussen’s conclusion and Bueggel’s practice oriented
comparison as points of departure the present chapter undertakes to provide an overview of
sanctions applied across the EU member states in order to provide factual input for evaluation
of their compatibility with the requirements set by the recast directive 2009/38/EC in terms
of effectiveness, proportionality and dissuasive character.
Provisions of directive 94/45 concerning category of
breach and possible sanctions
The EWC directive refers to sanctions only in a general way. Firstly, such reference is made
already in the preamble (28th recital) by stating that ‘(…) the Member States must take
appropriate measures in the event of failure to comply with the obligations laid down in this
Directive (…)’.5 This obligation is repeated in Art. 11.3 (‘Member States shall provide for
appropriate measures in the event of failure to comply with this Directive’).
Recommendations of the Working Party ‘Information
and Consultation’ (1995) concerning category of breach
of EWC laws and possible sanctions
In relation to possible sanctions for breach against the rights defined in the EWC directive
and the explanation of art.11.3 for the purpose of transposition by the MS the same
recommendations of the WP apply as these expressed in regard to the competent courts (see
above point 2.1.5 b); see also: European Commission 1995: 172). In particular, the WP by
referring to principles laid down by the European Court of Justice (ECJ) emphasized the
necessity that
- ‘the (…) legal remedies must not be such that it is impossible in practice to enjoy the
rights which courts are obliged to protect (the principle of effectiveness);
- (…);
- last, (…) the sanctions must be effective, proportionate and dissuasive.’ (ibidem).
These two criteria set out by the WP aimed at advising the Member States to apply genuinely
effective sanctions that would have a truly deterrent effect on any potential perpetrator.
Clearly and rightly the link between the effectiveness of legal remedies in general and
sanctions is made, as they are an interdependent system whose full efficacy can be reached
only if both the elements are complementary.
Findings of the Implementation Report (European
Commission 2000) concerning category of breach of
EWC laws and possible sanctions
Even though the directive 94/45/EC aimed at creating common standards for operation of the
transnational representation of employees and uniform rights to information and
consultation, they have been enforced differently according to individual national standards,
industrial relations traditions and understanding (despite the advice on common standards
5 In 25th recital a reference to sanctions is made also to similar level of protection to be guaranteed to
employee representatives sitting on EWCs as that available to employee representatives on national
level. This aspect of operation and institutional guarantees granted to EWCs is, however, beyond the
scope of this chapter and is, thus, not analysed here.
11
provided by the European Commission in form of Recommendations of the Working Party).
As far as inspection of the transposition measures in this area is concerned the European
Commission in the Implementation Report (European Commission 2000) dealt with this
issue only briefly and limited itself to taking note of existence of various solutions. Firstly, a
reference to the Italian transposition was made as insufficient in respect to sanctions
(European Commission 2000: 3). Secondly, only sanctions for breach of confidentiality of
information (ibidem: point 3.9.3) were investigated. The report registered a strong variety in
the character and type of sanctions applicable in case of breach of the obligation not to
disseminate information classified as confidential. It highlighted that as a rule penal sanctions
apply in the vast majority of the Member States. Interestingly, the Commission did not make
any reference to the difference visible already at that time in terms of more severe sanctions
applied for breach of confidentiality (for perpetrations committed by employee
representatives) as compared to infringements of the right to transmit information and
pursue consultation (linked to actions of management).
Concerning penalties for violating information and consultation rights the Implementation
Report enlisted (in a descriptive and non-exhaustive manner) selected examples of solutions
applied in some Member States. Secondly, regarding the question of punishment for breach of
obligations of the directive it classified the sanctions into two major groups:
a) ‘penalties for infringement of collective agreements’ (DK, SE), and
b) ‘general procedures under employment law’.
The implementation report recorded also differences in relation to types of fines
applied by Member States. Interestingly, it noted that ‘Not all countries specify how these
penalties are to be applied in the case of infringement of obligations entered into under an
earlier agreement, and so it may be assumed that they also apply in this case, except in
Denmark and Sweden, where agreements already in force are not covered by the system of
penalties’. The ascertainment of this shortcoming was, however, not followed by any kind of
actions aiming at remedying the flaw in transpositions. The European Commission rendered
itself satisfied with the above statement (a mere supposition of universal coverage of
sanctions) and did not consider any corrective measures or recommendations for the Member
States to guarantee more explicit enforcement of art. 13 agreements. Similarly, no statement
was made concerning the possible effects of such a lack of penalties on respecting the right to
information and consultation. Finally, the question of proportionality and dissuasive
character of sanctions, despite being recommended by the Working Party ‘Information and
Consultation’ (1995) as universal criteria or requirements concerning the quality of sanctions
have not been considered in the Implementation Report of 2000.
Impact assessment study of 2008 (SEC/2008/2166 final)
The Europeam Commission’s preparatory study on possible impact of the recast directive on
EWCs with regard to sanctions made reference to European Parliament’s Resolution A5-
0282/2001 (Report W. Menrad) calling on the Commission to submit a proposal for a revised
directive in which ‘precise definitions’ of, among other, sanctions would be adopted
(European Commission 2008: 9).
Another reference to sanctions is made when the study presents results of a survey completed
within the remits of ‘A Preparatory Study for an Impact Assessment of the European Works
Council Directive’ (European Commission 2007) concerning ‘Additional costs in some EWCs’
where ‘Labour Disputes’ are reported to have occurred in 16% of surveyed companies with
EWCs. In these companies such disputes are reported to have consumed 0-500 000 Euro,
however, the costs arose not due to sanctions, but due to additional meetings and expert fees
(European Commission 2008: 15). The costs of labour disputes are also used as an argument
against no-action by the Commission (i.e. a refusal to go through with a review and reform of
the directive 94/45/EC)6
6 ‘Growing costs of labour disputes (at present affecting every sixth company, with costs ranging from
€10 000 to €500 000 per company) and legal fees due to legal uncertainties (at present included in
overall
12
When discussing drivers of problems identified with regard to the EWC directive the Impact
Assessment Study excludes ‘shortcomings in enforcement’ and sanctions as an origin7. The
foundation of this conviction and the dismissal of any problem with sanctions is again solely
the self-proclaimed comprehensiveness of the Implementation Report of the European
Commission of 2000 (being the very same institution ordering the Impact Assessment Study).
The dismissal of the view that sanctions have represented on of the origins of problems with
the application of the directive 94/45/EC is upheld even though ‘evolution tion of the legal
framework at EU level, leading to the lack of clear and coherent legal rules: no interplay
between different instruments, different sets of definitions, different outcomes of court cases’
was enumerated among the causes (European Commission 2008: 16). The explicit exclusion
of sanctions from the list of problems in application of the directive is even more puzzling in
light of the point made by the Impact Assessment Study concerning the lack of effectiveness of
transnational information and consultation rights. The Study finds that ‘lack of effectiveness
of transnational information and consultation rights has two main aspects:
- EWCs are not sufficiently informed and consulted, in particular as half
of the EWCs are not consulted before a restructuring decision is made
public;
- Workers are not in a position to exert their rights, as no EWC has been
established in their company although it falls within the scope of the
Directive.’ (ibid. 17).
Despite admitting the above the Study falls short of making a link between the insufficient
information and consultation of workers as well as them being ‘not in a position to exert their
rights’ and the effectiveness of judicial and administrative procedures and dissuasive
character of sanctions. Neither is this link made when the study goes (immediately) on to
referring to data from the J. Waddington’s (Waddington 2010) survey on the (poor) quality of
information and consultation and infringements of information and consultation rights in
some high profile restructuring cases (European Commission 2008: 17).
The Study continues to show its inconsistency on the point of sanctions when in the Section
IV (‘Policy Options’) it puts up ‘clarification of sanctions’ as one of the main measured to
pursue the objective to ‘remedy the shortcomings in the information and consultation of
EWCs’ (ibid. 30). In more concrete terms the Study’s recommendation is to:
‘improve compliance by making clear to company actors the existence of sanctions in the
event of violations of information and consultation rights and to address legal uncertainties
regarding the capacity of the European Works Council to represent workers’ interests and
regarding the information needed to open negotiations to set up a new EWC, (…) the
proposal here is to:
- reiterate the general principle according to which, in the event of
infringements, sanctions must be effective, proportionate and
dissuasive (…)’ (ibid. 37).
This lacks of consistency between recognising the role of sanctions and the refusal to address
them continues also when the Study concludes that ‘measures proposed for the protection of
rights are in general likely to improve legal certainty, with the related benefits, and the
effectiveness of these rights’ and that ‘clarification on sanctions (…) is likely to make clearer
to company actors the existence of sanctions in the event of violations of information and
consultation rights, and therefore increase compliance’ (European Commission 2008: 46). It
also admits that some ‘operational objectives (…) need to be achieved in order to ensure the
effectiveness of employees’ information and consultation rights’ and lists among them the
legal costs or varying from €1500 to €66 000 a year for specific fees, particularly important in merger
cases).
7 ‘Problems are not primarily caused by shortcomings in enforcement. The Commission has verified
that the Directive is properly implemented by Member States and has carried out in-depth studies to
that end. The results indicate that all Member States have adopted national implementing measures
that are close to the text of the Directive and put in place sanctions in the event of infringements. As a
general rule, the competent national authorities, including courts, have taken measures to ensure the
correct and effective application of the national transposing rules and to ensure that companies meet
their obligation’, European Commission 2008: 16.
13
objective ‘to clarify sanctions in case of non-compliance’ (European Commission 2008: 27
28). However further on the Study concedes that ‘this would not necessarily require adding
anything to the present Directive, as the need for Member States to provide for appropriate,
dissuasive and proportionate sanctions is already a general principle in Community law.’
(ibid. 46)
The coherent refusal of putting up sanctions as an area for major overhaul in any revision of
the EWC directive is striking, as is the justification of its origin. The Study recognises that
‘trade union and EWC contributions as well as Parliament resolutions have insisted on the
need for sanctions, given the numerous breaches of the right of workers to be informed and
consulted at transnational level’ yet it confronts these demands by democratic and direct
stakeholders’ representatives with two contributors’ views: ‘however, AmCham EU8 considers
tht sanctions are already provided for and CEEP that they should remain national’ (ibid.46).
Only then does the Study go on to explaining that ‘in addition, a further reinforcement or
more detailed prescription of sanctions would not be in conformity with the subsidiarity
principle, as the responsibility for establishing appropriate, dissuasive and proportionate
sanctions lies, as a general principle, with the Member States.’. It seems that in this spirit the
Study arrives to the recommendation for any Commission’s action to be adapted to take into
account the interests of various stakeholders, yet specifies that ‘particularly the content of the
subsidiary requirements, the protection clauses (including sanctions) and the definition of
the transnational scope havebeen reviewed in order to minimize the concerns that
employers may have about the effects of the new rules (…)’ (ibid. 62)9.
Recast Directive 2009/38/EC
Following the Impact Assessment Study’s (European Commission 2008) recommendations
the only modification concerning sanctions introduced by the recast directive 2009/38/EC
was the addition of two Recitals 35 and 36 stipulating:
‘(35) The Member States must take appropriate measures in the event of failure to comply
with the obligations laid down in this Directive.
(36) In accordance with the general principles of Community law, administrative or judicial
procedures, as well as sanctions that are effective, dissuasive and proportionate in relation
to the seriousness of the offence, should be applicable in cases of infringement of the
obligations arising from this Directive.
The obvious shortcoming of such a solution is that in the vast majority of Member States
directives’ preambles are considered non-binding parts of legislation and are not considered
as parts to be mandatorily transposed into national law. It seems that this might be one of
explanations for few modifications of provisions concerning sanctions in the Member States10
(see also further sections).
8 American Chamber of Commerce to the European Union.
9 Reiterated again in a final overview table weighing various legislative options on page 80.The other
stakeholders’ insistence on clarifying sanctions was not granted equal visibility.
10 For instance the Greek trade union OBES involved in the transposition of the directive as a social
partner proposed to include the following passage into the implementation act: ‘In the case the central
management does not provide the members of the EWC or the members of the selective committee the
necessary information to fulfil the obligation for information and the preparation of potential
consultation, or it provides wrong or incomplete information or refuses the obligation to conduct
consultation, the EWC legally represented or the members of the selective committee have the right to
appeal before the First Instance Court of the central administration office and request through an
application is discussed at the time of interim measures, to be provided with the information required
on specific transnational issues and ask that the implementation of any decisions of the central
management, concerning these transnational matters are suspended until the central management
fulfils properly its obligation to consultation. The above application for interim measures is discussed
in priority within fifteen (15) days. The central management has the burden of proving that it has
properly fulfilled its obligation to information and consultation. In the case the central management
14
The recast directive’s requirements concerning sanctions should be read in conjunction with
art. 11.2 of the recast directive that obliges the Member States to ‘provide for appropriate
measures in the event of failure to comply with this directive’.
Group of Experts’ Report on Implementation of Recast
Directive 2009/38/EC on European Works Councils
(December 2010)
When providing an overview of provisions of the Recast Directive 2009/38/EC the Expert
Report reiterates the recitals 35 and 36 of the recast directive by restating that appropriate
measures in the event of failure to comply with the obligations laid down in the Directive must
be ensured. It also explains that ‘in accordance with the general principles of Community law,
administrative or judicial procedures, as well as sanctions that are effective, dissuasive and
proportionate in relation to the seriousness of the offence, should be applicable in cases of
infringement of the obligations arising from the Directive’ (European Commission 2010a: 9).
In this way the requirement of ensuring effectiveness, proportionality and deterrence
(dissuasive character) of the entirety of provisions guaranteeing access to justice is clearly
reiterated, communicated and accepted by all Member States sitting on the Group of Experts.
Further on the Expert Report deals with specific questions concerning implementation of
provisions on sanctions. Firstly, the question of executability of sanctions for non-compliance
with the requirement to inform the European Social Partners (ESP) about the composition of
the SNB and of the start of the negotiations. The executability of sanctions is considered in
relation to three possible options (ibid. 30). It is remarked by the Expert Group that in any
case applicability of sanctions to employee representatives for not informing the ESP is
questionable since they:
- They do not have the global picture of SNB’s composition before the first meeting;
- They are not responsible for organising the first meeting;
- It would be difficult to provide for sanctions towards individual employees’
representatives in case of non-compliance.
The Expert Group concluded on the matter that ‘an information obligation upon employees’
representatives towards European social partners or European trade unions could only be
effective after the first meeting of the SNB. Giving the responsibility to inform to the SNB
would however lead to delayed information and raises the question of the sanctions to be
provided.’
Secondly, in the later part of the Report when discussing specificities of transposition the
Expert Group highlights the necessity to devote special attention when implementing (among
others) Recitals 35 and 36 dealing with judicial procedures and sanctions and recommends
that they ‘should particularly be considered, given the clarifications they provide to the aim of
the articles or their importance in the adoption process.’ (ibid. 60).
Finally, the Expert Group report devotes a specific section (Section 19) to the question of
compliance with the recast directive. When discussing the origin and objective of provisions
on compliance it recalls the European Commission’s earlier statements on the application of
provisions concerning sanctions in the transposition of directive 94/45/EC. In this sense it
takes note of, among others, the following points from the Impact Assessment Study
(European Commission 2008):
- Clarification on sanctions as a requirement as an operational objective to ensure the
effectiveness of workers’ rights to information and consultation;
infringes the requirement for an appropriate consultation and proceeds to the implementation of
decisions relating to transnational matters, such decisions are subject to be void and cannot be
enforced against employees for modification or termination of individual contracts of employment.
Similarly, those decisions do not constitute a legitimate reason for terminating collective bargaining
agreements’. The Greek government refused to include it in the law arguing reportedly there was no
sufficient justification for such a modification either in the directive (non-binding character of the
preamble) or in the national Law 4052/12.
15
- Providing more awareness on ‘the existence of the sanctions’ to the actors in order to
improve compliance11.
Considering the significant variety of severity of sanctions applied in the Member States and
the factual jurisprudence rarely imposing the maximum penalties the latter recommendation
of providing more awareness on their existence seems as a rather liberal or even lax approach
to ensuring more ‘clarification on sanctions’ and ensuring the effectiveness of workers’ rights.
This approach of the European Commission leading the works of the Expert Group was,
nevertheless, consistently applied and manifested itself in the response to the central question
on whether the existing sanctions have to be changed. The reply of the Expert Group made of
national specialists was ambiguous: ‘Not necessarily, but they may have to be updated with
new obligations (such as principles, information of social partners of new
negotiations,training) and checked by Member States in order to ensure they are "effective,
dissuasive and proportionate in relation to the seriousness of the offence" (ibid. 65). In other
words the responsibility to evaluate whether the sanctions in place fulfil the criteria of
effectiveness, dissuasiveness and proportionality was delegated to the Member States. Such
an approach is consistent with European Commission’s policy in all areas and other directives
and therefore criticism-proof. However, the European Commission continues to bear
responsibility for ascertaining that the transposition laws on national level meet the
requirements of the directive and that the achievement of directive’s goal is genuinely ensured
(Commission’s role as the ‘Guardian of the Treaties’12).
11 ‘As regards the clarification on sanctions, it is likely to make clearer to company actors the existence
of sanctions in the event of violations of information and consultation rights, and therefore increase
compliance. However, this would not necessarily require adding anything to the present Directive, as
the need for Member States to provide for appropriate, dissuasive and proportionate sanctions is
already a general principle in Community law’; and: ‘Clarifications regarding the protection of rights:
In order to improve compliance by making clear to company actors the existence of sanctions in the
event of violations of information and consultation rights and to address legal uncertainties
regarding the capacity of the European Works Council to represent workers’ interests’ (ibid.).
12 As stipulated by Art. 211 of the Treaty Establishing the European Community and Art. 258 of the
Treaty on the Functioning of the European Union.
16
Chapter 3: Sanctions in national law
The following chapter aims at presenting results of a review of national legislation from the
point of view of available sanctions. It starts by looking at various categorisations of breaches
of EWC laws as a starting point for differentiation of sanctions. In this sense it points towards
the existence of a close link between the category of infringement of law (e.g. penal, civil,
administrative) and possible sanctions foreseen in national law. Further on the chapter looks
at various sanctions in national law and proposes their categorisation. Subsequently, special
attention is devoted to financial sanctions and their levels in view of the requirements of the
directive as to effectiveness, proportionality and dissuasive character. Finally, the question of
regime shopping incentivised by (relative) laxness in enforcements of EWC laws of some
national regimes is considered.
3.1. Overview of solutions applied by Member
States concerning category of breach of EWC laws
and possible sanctions
There are several reasons for undertaking a review of national solutions and proposing a
categorisation of legal qualification of breaches of EWC rights:
- Insufficient thoroughness of the Implementation Report of 2000 (European
Commission 2000);
- The post-2000 Implementation Report enlargement of the EU by 12 New Member
States;
- New provisions in the 2009 recast of the directive on EWCs (Directive 2009/38/EC);
- Due to the absence of relevant penal provisions in the EWC directive 94/45/EC and
their laxness on national level (e.g. the German debate13) they have been one of the
most intensively debated aspect of the revision/recast of the original EWC directive
94/45 (see e.g. Jagodzinski 2009).
Such categorisation of legal qualification of breaches of EWC regulations is also a preparatory
step for and complements a review of sanctions themselves (see second part of the chapter).
Finally, it must be noted that currently no overview of such type exists and, therefore, it is
meant as a contribution to the debate on the quality of the implementation of the recast
directive 2009/38/EC.
3.2. Changes to national regulations on sanctions
following the recast directive 2009/38/EC
The demand to introduce effective sanctions in all of the Member States (together with other
claims by the trade unions) has been strongly opposed by the European representation of
employers (BusinessEurope, CEEP; Jagodzinski 2009). The employers’ resistance to
introducing any (binding) supplementary precision, requirements or standards concerning
the institution of penalties was coupled with the European Commission’s consistent
institutional reservations concerning the limits of directives’ degree of invasiveness into
national legal orders (ibid.). A compromise solution taking into account trade unions and
other institutional actors’ (European Parliament, European Economic and Social Committee;
for details see Jagodzinski 2009) insistence on introduction of more binding punitive
regulations resulted in a compromise reflected by inclusion of requirements of
proportionality, dissuasive character and effectiveness of sanction into the Preamble of the
directive (recital no. 36) rather than in the universally binding body thereof.
13 German Trade Union Deutscher Gewerkschaftsbund as well as IG Metall via the SPD fraction in
Bundestag argued that the existing sanction of 30 000 DM was not sufficiently dissuasive for
multinational corporations (Antrag der SPD-Fraktion, BT-Drs. 17/5184, http://www.infopoint-
europa.de/images/Beitraege/antrag%20spd%20drs.17_5184.pdf.)
17
Nonetheless, recital 36 is a progress in comparison to directive 94/45 and provides a
supplementary explanation and specification of art. 11.2 of the recast directive that obliges the
Member States to ‘provide for appropriate measures in the event of failure to comply with
this directive’. It remains to be seen to what extent the obligations stemming from the
Preamble of directive 2009/38/EC will be taken into account in the process of evaluation of
the transposition to be undertaken by the European Commission. Two groups of potential
infringements are thinkable. Firstly, a relatively straightforward case of countries where
sanctions are not indicated in the transposition acts, either directly or by reference to other
external acts, which represents violation of art. 11.2 of the recast directive 2009/38/EC. In
this category it seems that profound examination should be conducted with regard to CZ, EE,
HU, LV, NL and SK (and possibly also Lithuania), where based on the EWC transposition act
implementing directive 2009/38/EC it was not possible to conclude what are the potential
consequences of violations of EWC rights or to trace references to external acts regulating
punitive measures for such violations. It is of course possible that those sanctions can be
ascertained by reference to other acts (e.g. labour code), even though not mentioned by the
given EWC transposition, nonetheless, such solutions may fall short of meeting the criterion
of transparency of law and legal security in its application.
Secondly, another group of cases of potential infringement of transposition obligations
comprises those national transpositions that despite including regulations on sanctions do not
provide them in quality corresponding to the requirements of the directive 2009/38/EC (i.e.
its Recital 36 in conjunction with art. 11.2). To the end of identification of such possible
instances of insufficient quality transpositions previous and following sections in this chapter
attempt to provide tools for this evaluation.
3.3. Classification of violations of EWC laws
Since the recast directive did not introduce any major changes to directive 94/45/EC with
regard to sanctions the in many Member States the provisions concerning sanctions remain
unaltered (only in Austria, Bulgaria, Denmark, Estonia, Hungary, Lithuania, Latvia, Portugal,
Slovakia, Slovenia and the UK some change to provisions regulating access to justice,
including sanctions, was introduced; see also the overview table in Annex 1). A vast majority
of national transposition acts does not include provisions on sanctions, but makes reference
to other acts of national law. A result of those references to other existing acts of law is a
significant degree of variation of solutions across the EU. An implication of the diverse
legislative approaches is a practical difficulty for the stakeholders to obtain an overview and
evaluate the possible litigation’s outcomes, especially in context of the transnational
composition and character of EWC work.
In the first place it needs to be pointed out that none of the EWC directives specifies the type
or gives indication as to the branch of law in which sanctions are to be defined14. Analysis of
the nature of references from the national acts implementing the EWC directive(s) to external
acts undertaken in frames of the current study reveals an array of solutions in place. First and
foremost, sanctions threatening perpetrators for violation of EWC rights and duties depend
primarily on the category of breach specified in the EWC transposition act. Therefore, to
provide a full insight into the landscape of punitive measures applied in the EU it seems
worthwhile to examine how are the violations of EWC laws classified. A review of references
from the EWC implementation acts to external laws resulted in the following classification15:
a) Countries where the category of infringement of the respective EWC acts is
considered an administrative / labour law offence (AT, CY, IE, IT16, DE*17, UK,
Lithuania18, LU, MT, ES*19, SK; Bulgaria*20, CZ *21);
14 This is not always the case with the EU directives. An example supporting the point in case are some of
the environmental protection directives (e.g. 2008/99) indicating criminal penalties as the preferred
measure since they ‘demonstrate a social disapproval of a qualitatively different nature compared to
administrative penalties or a compensation mechanism under civil law’ (Recital 3).
15 Countries appearing in more than one category at the same time were marked with an asterix.
16 Offence in cases of breach of confidentiality.
18
b) Countries where the category of infringement of the respective EWC acts is
considered a criminal offence (FR, PL, DE*, Estonia*22, Belgium23);
c) Countries where the category of infringement of the respective EWC acts is classified
as other forms of breach, infringement, violation of rights, etc. (PT
infringement of rights24; FI “violation of the co-operation obligation of a group of
undertakings”; GR – infringement of obligations; IT - infringement; LT – violation of
law; RO – contravention; BG: non-observance of labour legislation25 and violation of
provisions of the labour legislation26);
d) Countries where the category of infringement of the respective EWC acts is classified
as a violation of collective agreements (Sweden27, DK);
e) Countries where the category of infringement of the respective EWC acts is not
specified in the EWC transposition act (NL, NO, SL,CZ*28, HU, LT29, EE30).
Table 2. Category of breach of EWC rights violations
Country
Administrative
or labour law
offence
Criminal
offence
Other term
used
without
further
definition
Violation
of
collective
agreements
specified
AT
17 Distinction between criminal and administrative offences is made. Violations of information and
consultation stipulated by art. 13 agreements are not considered offences.
18 Under act of 29/03/2001 transposing directive 94/45/EC administrative offence, governed by the
Code of Administrative Offences of the Republic of Lithuania.
19 Under the 1997 Act transposing directive 94/45/EC a differentiation between serious and very serious
administrative offences is made (art. 32 and 33). This distinction is confirmed in Real Decreto
Legislativo 5/2000, 4 agosto, Ley sobre Infracciones y Sanciones en el Orden Social (Legal Decree 5/200
4th August, Law on Infractions and Sanctions on the Social Order) Section I, Subsection II art. 9.
20 Art. 416 para. 6 ‘The ascertainment of violations, the issuance, appeal and execution of penalty
decrees shall follow the procedure established by the Administrative Violations and Sanctions Act, save
insofar as another procedure is established by this Code.’
21 Breaches of EWC regulations may be considered ‘Breaches of the legislation and administrative
offences’ under the Labour Inspection Act of 3 May 2005.
22 Not stipulated directly in the EWC transposition act, but by reference to Employment Contracts Act
and Employee Trustee Act of 2006. Offences against the EWC law are monitored and prosecuted by the
Labour Inspectorate which, however, in this case applies the Penal Code and/or the Code of
Misdemeanour Procedure.(Art. 26 Employee Trustee Act).
23 Since in Belgium the EWC Directive is applied by means of a social partners (collective) agreement the
sanctions foreseen for employers who violate collective bargaining agreements that are rendered
generally binding are stipulated in acts: The Parliamentary Act of 5 December 1968 with respect to
Collective Bargaining Agreements and Joint Committees, Official Gazette, 15 January 1969,
subsequently often amended .
24 Under transposition of directive 94/45/EC. In the act No. 171 of 3 September 2009 classification was
changed into ‘serious administrative offence’ (art. 5.4; 8.3; 7.10; 9.5; 14.5; 15.8; 22.8) or ‘very serious
administrative offence (art. 9.5; 10.4; 15.8; 16.3; 17.5; 18.5; 20.6; 22.8; 24.4) or ‘minor administrative
offence (art. 11.4).
25 The right to alert the General Labour Inspectorate Executive Agency for a non-observance of the
labour legislation. (Art. 130b, Paragraph 6: Upon failure on the part of the employer to fulfil the
obligation thereof under Paragraph (1), or where the employer fails to hold the consultations under
Paragraph (4), the trade union organisations' representatives and the factory and office workers'
representatives under Article 7 (2) or the factory and office workers shall have the right to alert the
General Labour Inspectorate Executive Agency of a non-observance of labour legislation.)
26 Art. 414 of the Labour Code.
27 In Sweden any party that wishes to claim remedy according to the EWC law is obliged to demand
negociations within four months of his becoming aware of the circumstances to which the claim relates
and not later than two years after the occurence of such circumstances (Footnote 06 to art. 41 of the
Swedish ACT N° 359 OF 9 MAY 1996).
28 Breaches of EWC regulations may be considered ‘Breaches of the legislation and administrative
offences’ under the Labour Inspection Act of 3 May 2005.
29 Under the act of 22/06/2011 transposing directive 2009/38/EC no classification of infringement of
EWC right is indicated.
30 Not stipulated directly in the EWC transposition act, but by reference to Employment Contracts Act
and Employee Trustee Act of 2006.
19
BE
31
BG
CY
CZ
o
DE
DK
EE
ES
FI
violation of
the co-
operation
obligation of a
group of
undertakings
FR
EL
infringement
of obligations
HU
IE
IT
infringement
LT
Violation of
law
LU
LV
MT
NL
NO
PL
PT
Infringement
of rights
RO
contravention
SE
SK
SL
UK
Source: own compilation.
Since there is a direct link between the category of violation of law and the sanctions it seems
clear that this element constitutes an important component of the concept of EWCs’ access to
justice. Furthermore, organising solutions applied across the Member States into the above
classification gives rise to a couple of reflections.
1) Firstly, it should be pointed out that classification of national implementation acts based
only on the legal term used to describe the type of violation of EWC law may be
sometimes misleading and may not reveal the type of sanctions applicable to the given
infringements32. It is not uncommon that a violations classified as administrative offence
against labour law (being part of civil law) is sanctioned according to criminal code and
31 Based on Article 5 of the Parliamentary Act of 5 December 1968 (with respect to Collective Bargaining
Agreements and Joint Committees, Official Gazette, 15 January 1969, subsequently amended) which
foresees criminal sanctions for employers violating provisions of collective bargaining agreements
(transposition of the EWC directives in Belgium are executed via collective bargaining agreements).
32 In the current project classification was done on the basis of statutory terms used in individual
implementation acts. A further analysis of the nature of sanctions may represent an interesting potential
research project, but due to its complexity remains outside of the scope of the present examination.
20
procedure (e.g. Poland: administrative offence and petty offences code). Therefore the
above classification should be used for indicative purposes only, and shall not be
automatically considered a final listing of corresponding sanctions. Despite that the
classification of types of EWC law violations seems useful because it shows that already at
the preliminary stage of determining the infringement there are significant differences
between the Member States33. The fact that the same violations are often classified
significantly differently by national legislation (e.g. a crime vs. an administrative
misdemeanour) produces (or multiplies) discrepancies in the implementation of the
Directive’s obligation for the national legislator to provide for effective sanctions (e.g.
penal vs. administrative sanctions). As a result a legitimate question about the equality of
rights of employee representatives sitting on the very same EWC and coherence in
application of the EU law can be posed. In fact it is a question that represents an
ingredient of a bigger debate on EWCs as vessels of Europeanisation of industrial
relations in Europe (Waddington 2010) dealing with the question of balance between
national versatility originating in country specific industrial relations and the need of
common standards for common EU originating institutions. The thread of this discussion
looking at effective an instrument the directives are is central to the issue. On the one
hand it must be recognised that specific labour relations and traditions deserve
recognition and protection. On the other hand, however, an excessive versatility of legal
solutions in place has the potential of confusing all the actors involved. EWCs and their
members confronted with the challenge of transnationality often struggle with the
question whether it is worthwhile to start a court case in a representative’s home country
where the maximum sanction is a relatively low fine for the company, or whether it would
not be more effective to try to launch it in another Member State where sanctions can be
more severe and the entire logistical effort or launching litigation more worthwhile. Such
EWCs, under the circumstances of significant legal diversity of solutions and limited
resources, thus grapple with the ways to find common denominator to workers’
representation and face problems with finding an internal common standard for their
operation.
2) Secondly, with all its constraints, the above classification reveals several countries, where
the category of infringement is not specified in the EWC implementation act. Such an
approach adopted in national transposition measures may generate legal confusion and
lack of transparency. Furthermore, in light of EWC directive’s obligations to provide for
(effective) procedures and sanctions as well as in context of the recommendations of the
Working Party of 1995 and the Expert Group of 2010, in cases where no sanctions are
specified directly in the implementing act (or no references to other acts made) justified
serious doubts regarding the fulfilment of the Member States’ obligation to introduce
effective and efficient legal remedies can be raised.
3) Thirdly, the fact that none of the EWC directives offers guidance as to the preferred type
of sanctions for EWC law violations seems to be one of the reasons for the significant
latitude of the national legislators and the wide variety of solutions applied. It is an open
question whether such guidance should be offered by the EWC directive in future, yet it
needs be mentioned that it is not uncommon in the EU legislative practice (e.g. directive
2008/99/EC; see also next section in this chapter).
3.4. Observations concerning general trends in
sanctions applicable for violations of EWC rights
(including the current post-recast directive
regulations)
At the end of the tiresome and demanding trial through court(s) lies the court’s decision,
which, in more straightforward sense, means sanctions for one of the parties. In this sense
33 In the study not only sanctions mentioned explicitly in the national transposition act were analysed,
but also sanctions in other acts (codes, laws, etc.) to which reference was made by the implementation
acts. The latter are often key as regards proper classification since they contain definitions of violations
and specify sanctions.
21
sanctions can be considered the crowning of litigation and thus the last aspect of legal analysis
of institutional safeguards for access to justice. Even though in the vast majority of
discussions the question of sanctions has attracted the most attention the punishment for
violations of EWC laws is not an alone-standing feature. As attempted in the current chapter,
the type of sanctions applicable is dependent upon the classification of the violation and
represents a corollary of the choice of part of national law that governs EWC violations (e.g.
labour law, criminal law, civil law, etc.; see earlier chapters). Consequently, sanctions are not
hovering in a vacuum, but are far more dependent variables. The choice of sanctions is left to
the Member States who are in no way limited by the EWC directive or guided by the Expert
Group instructions in their choice. The only ultimate requirement is that sanctions be
‘effective, proportionate and dissuasive’ and that national procedures ensure an effective
exercise of rights stemming from the directive (effet utile). An inherent consequence of such
an open approach to regulating sanctions and enforcement of EWC rights (and, generally, of
the choice of directive) is a significant variety of solutions applied by the Member States. On
the one hand, such an approach provides for the necessary respect and room for various
national industrial relations and traditions. On the other hand, however, it might result in an
array of significantly varying solutions that, in the end, are not comparable and incompatible
with each other. An implication of such a situation would obviously be ambiguous legal
situation, legal inequality and injustice with regard to a different ‘valuing’ of workers’ rights
across the Member States. If this were the case it would be a flagrant contradiction of the
main reason for adopting EWC legislation on the EU level, i.e. the goal of providing for
common European rights and standards across the countries and multinational companies.
To the end of evaluating whether EWC rights are safeguarded by comparable and coherent
sanctions that correspond to the recast directive’s 2009/38/EC standards the review of
solutions was undertaken in the previous section of the paper. Below some specific
conclusions were drawn:
a) Injunctions and summary proceedings as an important safeguard of EWC
rights to information and consultation
Occurrence of the right to issue injunctions or conduct summary proceedings by
courts is an important factor differentiating national implementation acts. These two
institutions of law are not sanctions – they are provisional remedies to ensure either a
preservation of the subject matters in their existing condition or safeguarding of
plaintiff’s rights. Injunctions are essentially court orders by which an addressee is
required to perform, or is restrained from performing, a particular act and are a
measure to prevent further damage that would otherwise happen if the violation
persisted. Summary proceedings are a procedure or a simplified mode of trial
allowing a case to be held before a judge without the usual full hearing and thus
accelerated in comparison to a regular trial. Summary proceedings greatly enhance
access to justice (Jacobs 2004: 40) and courts’ effectiveness especially when time is of
the essence (e.g. Bocken / de Bondt 2001: 110).
Providing for a shortened procedure summary proceedings in EWC matters allow
obtaining a court decision within time ranging from hours (in exceptional
circumstances where urgency can be proved, as is the case in France) to
approximately 14-15 days (e.g. Italy, Hungary). In some countries summary
proceedings are accompanied by a possibility to issue immediate court’s or
monitoring institutions’ (e.g. in Bulgaria34) orders obliging the perpetrator (i.e. in
case of EWCs the management not respecting rights to information and consultation)
to stop actions representing the subject infringement, or undertake certain actions to
rectify the violation. As some prominent EWC litigation cases, such as the Gaz de
France – Suez merger or the Renault-Vilvoorde, have shown the legal institution of
summary proceedings and/or court orders (injunctions) touches upon the very core of
meaningful guarantees for employee rights to information and consultation and
safeguards the fundamental workers’ right to be involved (i.e. consulted) into the
decision making process before final decisions are taken and measures implemented.
34 Art. 404 of the Labour Code.
22
It seems important to point out that injunctions even if available in a legal system do
not automatically promise swift summary proceedings or do not result in immediate
actions. A point in case here is the Lithuanian transposition law 35 providing legal
remedy against management’s refusal to provide information or in case of a dispute
over the correctness of the information provided in form of employee representatives’
right to apply to court within 30 days (Art. 12). The court would subsequently try the
case, but no mention is made of the time in which such a ruling should be issued. In
case of a ruling that ‘refusal
to provide information is unjustified or incorrect information has been provided, the
central management or any other level of management in question shall be obligated
to provide correct information within a reasonable period of time’ (Art. 11 and 12). As
a result, even if injunction is issued to provide information the period in which the
management should remedy its failure remains unspecified (‘reasonable time’).
Consequently, it might diminish the impact of injunction as a remedy aiming at
halting a violation or preventing damage.
It seems logical and in line with the EWC directive’s 2009/38/EC requirements that if
infringement of the rights to a timely information and genuine consultation are to be
effectively safeguarded courts (or other institutions such as e.g. Labour Inspectorates)
in each EU Member State should should have the competence to stop a violation from
causing further harm to the sufferer (i.e. workers) It should be pointed out that other
sanctions’ effectiveness and the capacity to dissuade potential perpetrators is
significantly limited if only relatively small administrative fines (see below section
3.4.8.4) or financial penalties are the only consequence multinational companies with
often multi-million turnovers need to count with.
Summary proceedings and court orders (suspensive injunctions) as a legal means
represent an important safeguard of parties’ interests and address the serious
shortcoming of any other sanction – its delay. The European Commission endorses
introducing this instrument as an obligatory, minimum standard in the
approximation of sanctions for violations of national transpositions of EU financial
market regulations (European Commission 2010b: 12). It is highlighted that it can be
an effective countermeasure and deterrent especially against crimes committed
repetitively36. Sanctions, be it of financial or criminal nature, take time to be decided
and executed and despite their retributive character cannot perform the function of
instant safeguarding of workers’ rights, as they can hardly remedy the implications of
a managerial decision taken with violation of EWC rights37. By contrast, the
possibility to stop a company from implementing projects or decisions taken without
consultation with workers grants the latter a chance to be heard before the decision is
executed and damage done. It represents also a means of safeguarding the respect for
law at large as it excludes the possibility of cynical violations of law with the aim to
buy oneself out of legal consequences. Finally, one should keep in mind that in many
of the EU member states injunctions are a means in industrial relations used also by
employers in industrial disputes (e.g. to compel a trade union to desist from
organizing an industrial or strike action; see e.g. Gall 2006; Emir 2012: 663). When
such injunctions are available to only one of the social partners (i.e. employers; or
alternatively against only one of the social partners), as is the case in the UK (see e.g
Regulation 19D of the Statutory Instrument 1088), and are explicitly denied to the
worker representatives (i.e. EWCs ) in cases of infringement of their key right to
information and consultation, it represents a consequential imbalance in industrial
relations. This imbalance was taken notice in the UK by the House of Common whose
members when discussing operations of private equity firms concluded that
injunctions issued in summary proceedings are an effective means of enforcement of
35 LAW AMENDING THE LAW OF THE REPUBLIC OF LITHUANIA ON EUROPEAN WORKS
COUNCILS 22 June 2011, No XI-1507
36 ‘For example, cease and desist orders and court or administrative injunctions may be useful if there
is a risk of certain types of violation being continued or repeated.’ (European Commission 2010b: 12).
37 Employee representatives’ involvement in meaningful information and consultation usually cannot be
reinstated post-factum. However such examples are known, .e.g the Gaz de France Suez merger case
that ended up in nullifying the merger; see Dorssemont and Blanke 2010.
23
a company management’s/owners obligation to inform and consult the worker
representatives before any decision involving e.g. a highly levered take-over and thus
should be available to workers and trade unions (House of Commons 2007: 243).
Analysis of national implementation acts of the EWC directive reveals that the
effective measure of court injunctions is provided as a safeguard of EWC rights only
by few national legal orders (BE, BG, EE, FI, FR, ES, LT and IE) and has been applied
in court practice so far only in France (Brihi 2010). Sometimes injunctions are
available only with regard to specific circumstances as is the case Cyprus, where such
court orders are applicable to situations in which the management (unlawfully)
classified information as confidential (art. 17(2)b of the Law 106(Ι)/2011, No 4289,
29.7.2011). Alternatively, in some countries there exist sufficient premises allowing to
infer the courts authority to issue injunctions in EWC cases based on the courts’
analogous capacity with regard to other instances of information and consultation; an
example are The Netherlands where the Commercial Chamber (Ondernemingskamer)
is competent to issue injunctions in case of breach of national level information and
consultation procedures stipulated in the Works Councils Act (European Commission
1998: 26)38 .
In the rest of the countries covered by the EWC legislation such an institution of law
is not available in case of breach of EWC regulations. Unfortunately, an attempt to
introduce such a possibility to the Greek implementation law following the recast
directive 2009/38/EC ended without success39. Consequently, applications by EWCs
aiming at putting managerial decisions, sometimes deliberately taken with
infringement of EWC rights, at halt are handled by courts in a normal course which
usually finds its end several months after an unlawful decision has been taken,
implemented and has negatively impacted the workers who reimained uninformed
and unconsulted40. Such situations lead to a further complication of the legal
situation and make post factum claims for compensation by employee representatives
(e.g. after a major restructuring including redundancies has been completed) almost
purposeless and irrelevant. They also raise questions on imbalance in importance,
value and protection of interests safeguarded by the judicial system: if, for instance,
in case of environmental corporate crimes41 injunctions can be issued, why should not
38 The Commission’s report on implementation of the Directives 75/129 and 92/65 on collective
redundancies argues: ‘Non-fulfilment of the consultation requirement laid down in Article 25(1)(a) of
the Works Councils Act is not specifically penalised by the Act itself. If, however, the works council has
expressed an opinion which the employer has disregarded, Article 26(1) of the Act authorises it to
challenge the employer’s decision before the Ondernemingskamer (Commercial Chamber). The
Chamber may, for example, enjoin the employer to refrain from implementing his proposed decision
(Article 26(5)(b)). The employer may not violate such an injunction (Article 26(6)).’
39 In frames of consultative dialogue between the Greek Ministry of Labour and the trade unions OBES
had proposed that the following two paragraphs would be included in the respective article of the
transposition law, which have, however, been omitted in the final text of Law 4052/12: ‘In the case the
central management does not provide the members of the EWC or the members of the selective
committee the necessary information to fulfill the obligation for information and the preparation of
potential consultation, or it provides wrong or incomplete information or refuses the obligation to
conduct consultation, the EWC legally represented or the members of the selective committee have the
right to appeal before the First Instance Court of the central administration office and request through
an application is discussed at the time of interim measures, to be provided with the information
required on specific transnational issues and ask that the implementation of any decisions of the
central management, concerning these transnational matters are suspended until the central
management fulfils properly its obligation to consultation. The above application for interim measures
is discussed in priority within fifteen (15) days. The central management has the burden of proving
that it has properly fulfilled its obligation to information and consultation.
In the case the central management infringes the requirement for an appropriate consultation and
proceeds to the implementation of decisions relating to transnational matters, such decisions are
subject to be void and can not be enforced against employees for modification or termination of
individual contracts of employment. Similarly, those decisions do not constitute a legitimate reason for
terminating collective bargaining agreements”.
40 Apart from Hungary, where the court is obliged to issue a ruling within 15 days from the application
by an EWC.
41 The term is used in the sense of definitions used by in the work of Shrager and Short (1977)_on
organizational crime and developed by Box (1983: 20-22) describing it as ‘illegal acts of omission or
24
this be an option with regard to fundamental workers’ rights to information and
consultation?
In context of the above considerations the question of availability of summary
procedures and possibility to issue injunctions in national legislation seems to be one
of the decisive issues determining concordance with art. 11.3 and 11.4 of the directive
94/45/EC and 11.2 and 11.3 of directive 2009/38/EC. These articles do not limit the
Member States obligation to providing sanctions; the European legislator imposed
the requirement of ensuring ‘that adequate administrative or judicial
procedures are available to enable the obligations deriving from this Directive to
be enforced’. Without a doubt injunctions fall into that category of administrative or
judicial procedures and contribute the enforcement of obligations of the EWC
directive(s). More importantly still, they are often the only measure capable of
ensuring that the right to information and consultation before decisions are taken is
effectively observed. Therefore it seems reasonable for the European Commission to
consider verifying national implementation acts of Directive 2009/38/EC against the
existence of such or equivalent measures and ensuring that remedies with effect
similar to injunctions are provided for in every Member State.
The scope of the present analysis did not allow to undertake a profound EU-wide
study of the use of suspensive injunctions in labour law, yet, it represents a relevant
and interesting area for further research. It seems not unfounded to seek parallels
with the execution of environmental law in the EU, where in many EU countries, in
order to prevent damage to environment resulting from illegal corporate actions,
suspensive injunctions are issued or the very fact of launching administrative or court
proceedings triggers a suspension of any corporate actions in question (for an
overview see Epstein 2011: 86 ff.).
b) Sanctions imposed by labour inspectorate
In some countries sanctions can be imposed (also) by national Labour
Inspection. Typically, powers of inspection, sanctions and
administrative procedures are regulated by general labour laws,
supplemented in some cases by separate provisions in occupational
safety and health legislation. This is the case e.g. in Italy42, where the
regulation concerning the scope of competence of inspectors contains
the main provisions on inspection sanction s. This is also the case for
other European countries such as the Czech Republic and Hungary.
(Vega and Robert 2013).
c) No sanctions
Italy represents a particular case since, by agreement of the social partners, there are
principally no sanctions for infringement of EWC laws (stipulated in the collective
agreement) and the only remotely relevant provision stipulates‘where an
infringement has been ascertained, the possibility of fulfilling the obligations should
be provided for’ (Point B.1 of the Joint Opinion attached to the 1996 social
agreement43). Only failing that, a fine should be imposed (supposedly by the very
commission of an individual or group of individuals in a legitimate formal organization, in accordance
with the goals of that organization, which have a serious physical or economic impact on employees,
consumers … the general public and other organizations’ (Tombs 1995: 132).
42 The labour inspectors’ scope of competency is regulated by the Legislative Decree No. 124 of 23 April
2004. Labour Inspection in Italy is also supported by The Tripartite Committee for the Support of
Labour Inspection which was established at the beginning of 1980s with a view to assisting the labour
inspectorates. At the national level, the most representative social parties (e.g. CGIL, CISL, UIL,
Confindustria, Confcommercio) are informed and consulted regularly on the various labour inspection
policies and programmes. For more information see ILO online resource at:
http://www.ilo.org/labadmin/info/WCMS_126019/lang--en/index.htm
43 National Multi-Industry Agreement Of 6 November 1996 On The Transposal Of Directive 94/45/EC.
25
conciliation committee within the Ministry of Labour and Social Security). The
amount of fine is, however, not specified. Such situation does not seem unusual in
Italy and has been reported already in the past in regard to implementation of
directives 75/129 and 92/65 on collective redundancies. A European Commission’s
report on the implementation of these directives suggested that
legal sanctions ‘can only be derived from the relevant court rulings and general labour
law regulations’ (European Commission 1998: 5)44.
Similarly in Lithuania, the law amending the previous EWC implementation act45
does not stipulate any sanctions for violation of the laws.
Also in Denmark the transposition of the Recast Directive does not define the
sanctions. It merely stipulates that violation of certain provisions ‘shall be punishable
by a fine’46. It has not been possible, however, to establish what amounts of those
fines were applicable in case of breach of the law. No indication is provided by the
previous act transposing the directive 94/45/EC into Danish law (ACT N° 371 OF 22
MAY 1996), either.
In Hungary the acts implementing the EWC directives (of 2003 and amendment of
2011) stipulate fines for breaches of EWC regulations, yet set no concrete amounts.
Reportedly, neither are the amounts of fines set by the Hungarian Labour Code47.
d) In some countries financial penalties (fines) are accompanied by
possibility of applying penal sanctions of imprisonment.
e) Severity of sanctions as a factor in effectiveness, proportionality and
dissuasive character of sanctions
Severity of sanctions (resulting from the combined effect of effectiveness,
proportionality and dissuasive potential) for violations of EWC law is one of the key
criteria in assessment of compatibility of national legislation with the directive
(Recital 36 of Directive 2009/38/EC). In this way the individual features of sanctions
determine the overall severity of sanctions. On the other hand, the individual features
of the sanctions (i.e. effectiveness, proportionality and dissuasive potential) are
themselves dependant variables. For instance, as discussed above, the type of
sanctions applicable to infringements of EWC regulations is a derivative of
classification of violations to a specific branch of law. By this token, the fact whether
infringements of EWC laws are regarded as violations of civil, administrative or
criminal law determines strongly the severity of sanctions. The latter may also be
influenced by the legislative technique adopted in implementation of the EWC
directive. In various countries sanctions are mentioned either directly in the act
transposing the EWC directive (see e.g. Table 3, also Spain48, Slovakia) or by
reference to external national acts governing infringements, sanctions and procedural
matters linked to workers representation issues. As indicated, the majority of EU
Member States classify violations of EWC regulations as administrative or labour law
offences endangered with a fine (DK*49, ES, FU, IT, LT, MT, NO, PT, RO, SE SL, UK)
44 The report (European Commission 1998) specifies further that based on legal literature and case law,
violation of the employer’s obligation to inform and consult the company union delegations
(rappresentanze sindacali aziendali) is seen by some as anti-union conduct (comportamento
antisindacale) within the meaning of Article 28 of the Statuto dei lavoratori [Statute of Workers’ Rights]
of 1970 and hence as subject to the penalty laid down therein (see also Borelli 2011: 5).
45 LAW AMENDING THE LAW OF THE REPUBLIC OF LITHUANIA ON EUROPEAN WORKS
COUNCILS 22 June 2011, No XI-1507
46 "Any infringements of § 9, § 10 subpara. (1), § 11 subpara. (1), § 16, § 17a, § 20, § 23, § 24 subparas (1),
(2) and (4) and § 28 shall be punishable by a fine." (Art. 31 of the Act No 281 of 6 April 2011 Amending
the European Works Councils Act.
47 Simon (2007): ‘Trade unions also have workplace information and consultation rights. (…) As noted
above, in practice, unions have had to rely on the courts to enforce these rights, but the Labour Code
does not cite any possibility of a sanction.’
48 Provisions of Law 8/1988 of 7 April on infringements and penalties in the field of industrial relations.
49 See point 2 above.
26
or, alternatively, with a financial punishment combined with incarceration (CY, DE,
FR, EL, IE, LU and PL). The latter set of sanctions, on top of the financial
responsibility by the company includes an element of personal criminal responsibility
which automatically seems more severe thus may be argued to be more dissuasive,
The issue, however, is a contentious one. Numerous research argues that in the
context of corporate violations of law financial penalties are the preferred option since
based on the economic calculus they are simply cheaper than incarceration that
incurs costs (Faure 2010: 266; Polinsky and Shavell 1979, Polinsky and Shavell 1991).
3.5. Financial penalties for corporate violations of
EWC laws in the EU Member States
When implementing the recast directive 2009/38/EC (but also in case of the previous
directive 94/45/EC) national authorities chose financial penalties as the most
common sanction for corporate EWC rights infringements. It is hardly possible to
trace back discussions about the rationale of such choice in individual Member States
but in general the issue itself is contentious (see below in this chapter). Admittedly,
one can suppose that the fundamental belief that financial penalties that are aimed to
deprive enterprises of part of their revenue and thus hit them at the very core of their
operation and raison d’etre was the main ground for this policy option.
The question that comes up upfront is whether financial penalties threatening for
breaches of EWC laws are sufficiently severe to meet the requirements of the EWC
recast directive 2009/38/EC (mainly Recital 36). The concept of severity of sanctions
(being the collective result of their effectiveness, proportionality and dissuasive
potential) with regard to financial penalties depends heavily on their proportionality.
As argued by legal research the latter determinant is dependent upon the company’s
financial capacity to pay the fine (Faure 2010: 264) and thus should arguably be set
on the basis of a relationship (ratio) to revenues multinational companies generate
each year. Should the ratio be too low the criteriaof proportionality and dissuasive
character (Recital 36, 2009/38/EC) could not be deemed fulfilled.
Despite the above considerations in none of the Member States are the financial
penalties set proportionately in relation to the corporate perpetrator’s financial
capacity and magnitude. In all the countries providing for financial penalties the fines
are fixed. Their height varies significantly across the countries and can be as low as
equivalent of approximately 4 EUR in PL (lower limit for an offence) or 290 EUR in
(Lithuania). Even if the maximum levels of fines are considered (it is uncertain
whether courts adjudicate maximum statutory punishment in standard cases) they do
not seem to be ‘proportionate in the relationship to the seriousness of the offence’
(Recital 36, 2009/38/EC) where the maximum severity of such fine is e.g. 1100 EUR
PL) or 15 000 EUR (DE).
Table 3. Minimum and maximum thresholds of fines for breach of EWC laws in
selected countries
Country
Transposition of directive
94/45/EC
Transposition of directive
2009/38/EC
Minimum fine
Maximum fine
Minimum fine
Maximum fine
Austria
none
Up to EUR 2,180
may be imposed50
none
20 000 EUR or
40 000 in case of
repetitive
infringements
50 In case of the employer’s violation of duty to inform the EWC about transnational matters that have a
considerable effect on the interests of the workforce (Article 207 (1) of the Labour Constitution Act).
27
Bulgaria
1500 BGN51
(aprox. 765 EUR)
15 000 BGN
(aprox. 7650
EUR) or 5000
BGN (aprox. 2551
EUR) 52
As previously
As previously
Czech
Republic
fine of 200,000
CZK.53 (Aprox.
7700 EUR)
No change (?)
Estonia
none
Up to 50 000
kroons54
none
Up to an
equivalent of 800
EUR (200 Units)
for individuals; up
to 3200 EUR in
case of legal
persons
55
Estonia
50 000 kroons
(aprox. 3195
EUR)
none
Equivalent of 800
EUR if committed
by private person;
Equivalent of
3200 EUR if
committed by
legal person56
In confidentiality
cases up to 383
EUR
57
France
FRF 25,000, (aprox. 3 811 EUR)58
3750 euros or in case of repeated
infringement 7500 EUR
59
Germany
30 000 DM
(aprox. 15 000
EUR)
60
As previously
As previously
Greece
10 000 000 DR
(equivalent to
aprox. 29 300
EUR)
50 000 EUR61
51 Art. 414 of the Labour Code.
52 The 5000 BGN is a limit in case of violations of rights on collective redundancies. For a repeated
violation additional fines and penalty payments may be imposed.
53 Based on Eurofund (2009).
54 If infringement committed by a legal person (Art. 7 of the Employee Trustee Act of 2006
55 According to §47(1) of the Penal Code, a fine unit is the base amount of a fine and is equal to 4 euros.
56 According to §47(1) of the Penal Code, a fine unit is the base amount of a fine and is equal to 4 euros.
57 Act amending the TKS § 851 provides for the liability on violation of confidentiality obligation.
Violation of the obligation not to reveal any confidential information by the members of the SNB, of the
RB, the involved experts and translators and the employees' representatives participating in a procedure
for informing and consulting, if, during negotiations, the parties decided to establish one or more
information and consultation procedures instead of a RB, is punishable by a fine of up to 100 fine units,
which is 6000 kroons/383 euros. The fine is equal to the fine provided for violation of confidentiality
information by the employees’ representatives provided for by the national law. See Article 25 of the
Töötajate usaldusisiku seadus (Employees’ Representatives Act). Passed on 13 December 2006 RT (RT
= Riigi Teataja = Sate Gazette) I 2007, 2, 6 (Available in Estonian at the website:
https://www.riigiteataja.ee/ert/act.jsp?id=12771390)
58 Article 4 of the French implementing legislation (directive 94/45/EC). When an offence is repeated,
both the custodial sentence and also the fine can be doubled.
59 Art. L-483-1 of the French Labour Code.
60 For infringement of information duties (withholding information, misinformation, incorrect
information).
61 Fine up 50.000 according to the articles 23 and 24 of the Law 3996/2011. The law 3996/2011 has
extensive regulation on fines and other penalties in various cases.
28
Ireland
200 EUR/day62
1500 EUR
(summary
proceedings)
or 10 000 EUR on
conviction on
indictment
+ 1000
EUR/day
63
As previously
As previously
Italy
1033 EUR (for
breach of
confidentiality);
5165 EUR for
other
64
6198 EUR (breach
of
confidentiality);
30 988 EUR for
other
65
As previously
As previously
Lithuania
Aprox. 290 EUR
Luxem-
burg
2 501 francs
(aprox. 62 EUR);
may be doubled66
150 000 francs
(aprox. 3718
EUR); may be
doubled
67
251 EUR68
3750 EUR68
Malta
a) Dependin
g on type of
breach: not less
than 10 liri
(aprox. 23 EUR)
and not more
than 50 liri
(aprox. 116 EUR)
for each for every
employee of the
Community-scale
undertaking or
Community-scale
group of
undertakings
b) Not less
than 500 Liri
(aprox. 1164 EUR)
b) not more than
5000 Liri ((aprox.
1164 0 EUR)
1164 EUR
11 646 EUR
Poland
16 PLN (aprox. 4
EUR)
4400 PLN
(aprox.1100 EUR)
As previously
As previously
Portugal
Depends on the
volume of
business69:
1) For
smallest
companies in case
of serious
infringements:
from 630 EUR to
in case of
Depends on the
volume of
business:
1) For
smallest
companies in case
of serious
infringements: up
to 1260 EUR in
case of
62 Per each day of continued conviction (Section 19 of the Irish transposition Act of 10/07/1996.
63 Per each day of continued conviction (Section 19 of the Irish transposition Act of 10/07/1996.
64 If the orders made by the Ministry of Labour and Social Affairs under the Conciliation Procedure are
not complied with within 30 days (Büggel 2002).
65 If the orders made by the Ministry of Labour and Social Affairs under the Conciliation Procedure are
not complied with within 30 days (ibid.).
66 In case of repeated infringement within a period of 4 years (Art. 62 of the transposition act).
67 In case of repeated infringement within a period of 4 years (Art. 62 of the transposition act).
68 No final transposition yet, fines based on a bill of modifications to the labour code (Titre III du Livre
IV du Code du Travail). Fines may be doubled in case of repeated violations.
69 Art. 554 of the Código do Trabalho (Labour Code) of the 12/02/2009 (Lei n.º 7/2009
de 12 de Fevereiro); UC (unidade de conta) = 105 EUR (base don
http://www.ansr.pt/Default.aspx?tabid=82&language=pt-PT)
29
negligence; from
1260 EUR in case
of fraud.
2) For
biggest
companies: from
1575 EUR in case
of negligence;
from 5250 EUR
case of fraud
1) In case of
very serious
infringements: a)
2100-4200 EUR
for smallest
companies in
negligence (4025-
9450 EUR in case
of fraud);
b) 9450-31500
EUR for biggest
companies in case
of negligence and
31 500 in case of
fraud
negligence; up to
2520 EUR in case
of fraud.
2) For
biggest
companies: up to
4200 EUR in case
of negligence; up
to 9450 EUR in
case of fraud
1) In case of
very serious
infringements: a)
up to 4200 EUR
for smallest
companies in
negligence (up to
9450 EUR in case
of fraud);
b) up to 31500
EUR for biggest
companies in case
of negligence and
up to 63 000 EUR
in case of fraud
Romania
2.000 RON
(aprox. 446EUR)
4.000 RON
(aprox. 893 EUR)
As previously
As previously
Slovakia
Up to 1 000 000
SKK70
Slovenia
none
1 000 000 Tollars
(aprox. 4173 EUR)
for legal persons,
or 80 000 Tollars
(334EUR) to
individuals
20 000 EUR for a
legal person;
2000EUR for an
individual
100 000 EUR for
a legal person;
5000 EUR for an
individual
Spain
626 EUR to 1.250
EUR
71
100.006 EUR to
187.515 EUR
72
As previously
As previously
UK
75 000 GBP73
(aprox. 94 500
EUR)
100 000 GBP
(aprox. 126 000
EUR)
Source: own compilation.
Note: Record was taken only of financial penalties and not of criminal sanctions
(e.g. imprisonment) that in some cases can be imposed in parallel.
70 Based on Eurofund (2009)
71 Art. 32 and 33 of the LAW OF 10 APRIL 1997 asspecified further by Real Decreto Legislativo 5/2000,
4 agosto, Ley sobre Infracciones y Sanciones en el Orden Social (Legal Decree 5/200 4th August, Law on
Infractions and Sanctions on the Social Order) Section I, Subsection II art. 9 (as amended by the Ley
40/2006 of 14/12/2006), available at: http://noticias.juridicas.com/base_datos/Laboral/rdleg5-
2000.html#a4 ; category of fine: serious infrintements in minimum to maximum extent. Before the
amendment by the act 40/2006 Büggel (2002) indicated the fines t orange from EUR 3,005 and EUR
90,151 (ESP 500,001 and ESP 15,000,000). At the moment of adoption of the transposition of the
directive 94/45/EC the relevant provisions regulating sanctions were those of Law 8/1988 of 7 April on
infringements and penalties in the field of industrial relations.
72 Category of breach: most serious infractions in their máximum extent (ibid.).
73 Part V, Article 22 of the implementing legislation (TICER 1999).
30
3.6. Severity, proportionality and dissuasiveness of
financial penalties and corporate turnover
Admittedly, it is difficult to value how much a sanction should amount to in order to
be proportionate, yet in specific cases even the highest maximum fine available in all
the countries (100 000 GBP in the UK) might not fulfil this criterion when companies
revenues are considered. Therefore a legitimate question arises whether putting a
limit on financial penalties for corporate crime is a means to achieve sufficiently
severe sanctions, or if it is not rather an obstacle to this end? It should be emphasised
that both predetermined-limited and not predetermined ‘unlimited’ type of financial
penalties were applied in EWC related jurisprudence. One spectacular example of the
latter type was ruled in case of the Renault Vilvoorde lawsuit in which the Belgian
court on 20 March 1998 sentenced Louis Schweitzer, the managing director and chair
of Renault, to pay BEF 10 million for failing to comply with Belgian laws and
collective agreements at the time of the 1997 closure of Renault's Belgian
headquarters at Vilvoorde (Krzeslo 1998).
The question of proportionality of fines poses an additional problem of determining
the point of reference for their proportionality: should they be proportional to
company revenues or turnover (or any similar criterion linked to corporate wealth), as
often argued by trade unions and workers’ representatives; or, alternatively, should
they be proportional to other penalties stipulated in the national legal systems and,
commensurate with that is considered reasonable in relation to the given country’s
costs of living at large. Both approaches are not without a reason. The first one
postulating proportionality with companies revenues is based on the argument that a
sanction of a couple of thousand euros is not really a burden for large multinational
enterprises (according to the EU nomenclature all companies qualifying for an EWC
do not meet the criteria of SMEs) whose turnover and income amounts often to
millions of Euro. The issue is well known to and recognised as a challenge by the
European Commission with regard to EU directives concerning financial market
regulation:
‘To ensure that a fine has a sufficiently deterrent effect on a rational market
operator, the possibility that an infringement will remain undetected must be offset
by imposing fines which are significantly higher than the potential benefit deriving
from a breach of the financial services legislation. In the financial sector, where a
large number of potential offenders are cross-border financial institutions with very
considerable turnovers, sanctions of a few thousand euros cannot be considered
sufficiently dissuasive.’ (European Commission 2010b: 7). In the same
Communication the Commission points out as one of the problems that ‘[c]ertain
factors, such as the benefit resulting from the violation (if calculable) as well as the
financial strength (…) of the author of a violation, are not always taken into
account, while they would help ensuring effectiveness, proportionality and
dissuasiveness of the sanctions actually applied’ (ibid. 8).
At the same time it needs to be noted that doctrine and relevant tests of
proportionality (of penalties) do exist and allow factoring in companies’ turnover
when setting sanctions, mostly of financial nature. This approach is most developed
in EU competition law where the amount of fines relates not only to the seriousness of
the infringement and its consequences for the market, but also takes into account the
turnover of the companies involved, the period of time the infringement has lasted
and any other aggravating consequences (de Moor- van Vugt 2012: 37)74. All in all
there is a limit for fines imposed on corporate perpetrators distorting competition of
74 See for an example Joined Cases T -109/02, T -118/02, T-122/02, T-125/02, T-126/02, T-128/02, T-
129/02, T-132/02 en T-136/02, Bolloré SA e.al. [2007] ECR II-947, cons. 480-484, and Case C-386/10P
Chalkor.
31
10% of the group global annual turnover75 for particularly damaging behavior.
Another example of the understanding of the need to set financial penalties with the
turnover (and profit from violating the law) considerations is the European
Commission’s Communication on reinforcing sanctioning regimes in the financial
services sector listing corporate turnover of perpetrators as one of ‘appropriate
criteria’ to include in applying sanctions:
The effectiveness, proportionality and dissuasiveness of sanctions depend also on
the factors, including aggravating or mitigating circumstances, taken into account
by the competent authorities when deciding the sanctions to be applied to the author
of a specific violation. This holds particularly true for determining the actual
amount of fines, where national legislation usually provides for a range of minimum
and maximum amounts.
These factors should be framed in such a way as to allow competent authorities to
adapt type and level of sanctions imposed to the nature and the impact of the
violation as well as to the personal conditions of the offenders, which would help
ensuring optimal proportionality and dissuasiveness of the sanctions actually
imposed.
In the Commission's view, in addition to the seriousness of the violation which is
already foreseen in almost all national legislations, the factors to be taken into
account should include at least:
- the financial benefits for the author of the infringement derived from the
violation (if calculable), in order to better reflect the impact of the violation and
discourage further violations.
- The financial strength of the author of the violation, as indicated by
elements such as the annual turnover of a financial institution or the annual income
of a person responsible for the violation, which would help in ensuring th
at sanctions are sufficiently dissuasive even for large financial institutions. (…)’
(European Commission 2010b: 13)
Against these abstract guidelines one can ask a question what is, in concrete terms,
the amount of financial penalties imposed on multinational companies operating on
European internal market that meets the requirement of proportionality (in relation
to turnover) and dissuasive potential. Instances of what amount of sanctions by the
European Union interprets is perceived by the public and the business world as
‘dissuasive sanctions’ (for multinational companies considered large) can be gathered,
for example, from analysis of press releases on the topic:
• € 462 million, Hofmann-La Roche, 200176
• € 497 million, Microsoft, 200477
• € 280 million, Microsoft, 200678
• € 899 million, Microsoft, 200879
• € 85.8 million, Knauf, 200880
The above penalties were obviously imposed with consideration of other factors such
as damage to general public in consequence of distortions of free competition and
acquisition of market dominant positions and thus their scale is bigger than that of
violations of law against worker rights. Nevertheless the above figures set a point of
reference for what is perceived as dissuasive sanctions with regard to multi-million
transnational enterprises and groups.
75 Art. 23(2) of Regulation (EC) No 1/2003).
76 Source: www.spiegel.de/wirtschaft/0,1518,292146,00.html
77 www.sueddeutsche.de/wirtschaft/774/341617/text/
78 Source: www.spiegel.de/wirtschaft/0,1518,426368,00.html
79 Source : www.taz.de/1/zukunft/wirtschaft/artikel/1/900-millionen-euro-strafe-fuer-
microsoft/?src=SZ&cHash=073fab7d36
80 Source: www.eu-info.de/eugh/knauf/
32
In consequence of lack financial penalties’ proportionality to their revenues in the
area of information and consultation those penalties are not dissuasive not only for
tycoons of the financial market, but for multinational enterprises at large; without a
doubt it is a universal issue. The problem with this argument is, however, that it
would require from the legislation to set a very wide range of possible fines for
violations of EWC law (a system that could resemble penalties for violations laws on
company concentrations, distortions of free market competition and abuses of market
dominant position) and/or necessitate judges’ broad discretionary powers. The
European Commission has discerned the problem in the field of financial market
regulation by finding that
‘In the banking sector, only 17 Member States take into account the financial
strengths of a financial institution when determining the level of a fine imposed on
it. Only 5 Member States take into account that factor in the application of fines for
violations of the UCITS Directive. However, any penalty imposed needs to have an
equivalent effect on all financial services undertakings: a fine of a small level, while
being clearly dissuasive for certain smaller financial institutions, will have only a
very limited dissuasive effect for large financial institutions’ (ibid. 8).
On the other hand, the alternative approach while proportional to other fines and a
given country’s economic reality seems to disregard the aspect of companies’ financial
power which combined with too low a level of fines might result in enterprises being
able to afford to violate information and consultation rights and thus growing
disrespectful of EWC laws.
The mentioned lower limits (see Table 3) seem absolutely out of proportion if one
takes into account the turnover and income of international companies where EWCs
are installed. Multinational companies more and more often generate income
comparable or exceeding a budget of a middle-sized EU Member States and can thus
be not in the least bothered by such small fines. Probably if those fines would be due
to be paid for each day of delay of consultations caused by management the severity
effectiveness of this sanction would be probably much higher and suffiiciently
dissuasive.Alternatively, as some scholars have been arguing (Dorssemont / Rigaux
1999: 378) companies benefiting from state or EU subvention schemes should be
deprived thereof and forced to refund them if they are found in breach of European
legislation on information and consultation. Otherwise enterprises are welcome to
take and implement decisions without information and consultation with employees
and count in possible one-time fine of several hundreds or thousands of EURO, if this
shall be the price for a unilateral and arbitral management. The latter seems to be a
commonplace in some Member States. For instance in Lithuania the absence of
adequate penalties on employers for failure to observe information and consultation
procedures, properly or at all is reportedly ‘a serious practical problem ‘ (Blažienė
2009) as employers not observing their duty to inform and consult employees’
representatives may be fined from LTL 500 to 5,000 (aprox. EUR 145-1450). As
these fines are not large ‘it may be easier and more beneficial for employers to pay the
fines and continue non-performance of their duties, because there are no special
regulations obliging employers to meet their information and consultation obligations
after payment of a fine’ (ibid). Therefore Blažienė concludes that ‘it can be argued
that information and consultation procedures are inadequately implemented in
practice in Lithuania’. An even more gruesome conclusion confirming the present
study’s considerations on ‘cynical’ employers applying the strict cost-benefit logic is
Blažienė’s observation that ‘it is arguably more attractive for employers to violate
knowingly the legislation and pay fines instead of performing their duty to inform
and consult’. It suffices to refer the reader to Table 3 above to find out that the levels
of penalties for breach of EWC information and consultation rights are not
exceptionally low in Lithuania and that there are countries with even lower levels
thereof.
Concerning the maximum levels of financial penalties, on the other hand, even in
countries that are considered to have set them high (e.g. the UK, Germany, Austria)
they are perceived as insufficiently dissuasive and proportionate. In context of the
recent court case of EWC Visteon the EWC Chairman involved in the proceedings
33
called the maximum fine of 15 000 EUR ‘ridiculous’(PlanetLabor 2012). It is not an
isolated view supported with regard to some Member States also by the European
Commission that with regard to sanctioning regimes in the financial market services
found financial penalties substantially higher than those provided for with regard to
breaches of EWC information and consultation laws to be insufficient (European
Commission 2010b: 6)81.
One needs to bear in mind, too, that fixing a prior upper limit for compensation may
preclude the availability of an effective and proportionate remedy. (European Court of
Justice,C-271/91 Marshall paragraph 30, 32).
The fact that remedies must be effective, proportionate and dissuasive is not disputed
and is firmly established by the relevant Directives and case-law. At the same time,
there does not seem to be a tangible understanding as to what type and level of
sanctions would fulfil these criteria as evidenced by the considerable discrepancies in
the sanctions awarded in the cases selected above. In the ECJ von Colson case, the
Court of Justice held that although there is no requirement for a specific form of
sanction for unlawful discrimination, the sanction must be such as to ̳guarantee real
and effective judicial protection. Moreover it must also have a real deterrent effect [...]
. It follows that where a Member State chooses to penalize the breach of the
prohibition of discrimination by the award of compensation, that compensation must
in any event be adequate in relation to the damage sustained.‘
In view of the above demonstrated shortcomings in terms of effectiveness,
proportionality and dissuasive power of national financial penalties for breach of
EWC laws in some cases it remains to be seen whether the European Commission will
deal with this problem with decisiveness comparable to that shown in its
communication on strengthening sanctioning regimes in the financial services sector
(European Commission 2010b). In the latter document the Commission recognises its
own twofold obligation to act when the Member States fail to apply proper sanctions:
a) by means of ‘considering proposals to introduce provisions
requiring Member States to ensure that competent authorities,
when determining the sanction to be imposed for a violation of
financial services legislation, take into account, as a minimum,
certain common key criteria (European Commission 2010b: 14) ;
b) by deriving the competence to set legal frameworks: ‘the
Commission believes that EU can take action to improve the legal
framework in which competent authorities operate, and
particularly to ensure that all national authorities have the
necessary key powers and investigatory tools, they cooperate and
coordinate their action appropriately.’ (ibid.: 15).
81 ‘Important divergences exist as to the minimum and maximum level of pecuniary sanctions provided
for in national legislation and sometimes the maximum level is so low that the sanctions are unlikely to
be sufficiently dissuasive. For example in the banking sector the maximum amount of fines provided for
in case of a violation is unlimited or variable in 6 member States, more than 1 million euros in 9 Member
States, less than 150 000 euros in 7 Member States’.
In the securities sector among the 18 Member States providing for administrative fines for violations of
the prohibition of insider dealing, 4 Member States provide for maximum fines of 200 000 euros or less,
while only 12 Member States provide for fines of 1 million euros or higher. In the case of violations of the
minimum conditions for authorisation of investment firms, 17 Member States provide for maximum
fines of less than 1 million and in 6 of them the maximum amount is 100 000 euros or less. In the
insurance sector, fines are unlimited or
can reach 1 million euros or more in 10 Member States, they are between 100 000 and 1 million euros in
7 Member States, and less than 100 000 euros in 6 Member States. Violations of financial services
legislation can lead to gains of several million euros, in excess of the maximum levels of fines provided
for in some Member States. A fine that is lower than the gains that can be expected from the violation is
unlikely to have much of a deterrent effect. ‘
34
3.7. Regime shopping is there evidence for
opportunistic quest for laxer laws?
With regard to the significant extent of variation it is often pointed out that lower
sanctions in some countries (next to other forms of laxity in legal regimes) can give rise to
‘regime shopping’. It is not a problem limited to or specific for the labour law or the social
field, but discerned by the European Commission to be present also in other areas:
‘(…) divergences in sanctioning regimes may create distortions of competition in the
Internal Market. If sanctions applied in different Member States for similar
infringements are considerably different, financial institutions could be tempted to
engage in regulatory arbitrage when deciding on their place of establishment or the
location of branches in order to benefit from the least stringent sanctioning regimes’
(European Commission 2010b: 9).
Also in research on EWCs it is argued, that significant discrepancies can lead to a quest
for laxer legal order, which is referred to as ‘regime shopping’ (Pries 2008: 168;
Kristensen & Zeitlin 2005: 270). In these debates it is suggested that EWC-hostile
companies when forced to establish such a body for transnational information and
consultation could search for the most lenient national regime (Dorssemont and Rigaux
1999: 378).
Finding a statistical proof to verify this hypothesis is challenging. Comparison of the
number of multinational companies with EWCs headquartered in individual EU Member
States and of the number of cases of application of a given national law (Figure 1) provides
some insight, yet is inconclusive in this regard.
In total based on the data from EWCdb.eu we conclude there are 57 cases of EWCs based
on a different law than the law of their host company’s headquarters (at this stage only
EFTA-based multinational companies were taken into account; for non-EFTA
multinationals see below). Out of 15 countries hosting such EWCs it seems that a clearly
higher number of cases is concentrated only in France and Ireland, and even that not by a
significant margin (if one adopts the simple arithmetical rounded-up average of 4 cases
per country), and only two further coutries (Belgium and the Netherlands) exceeding the
average of 4 cases. Out of those four countries Ireland has probably the most lenient law
on EWCs offering, but the bare minimum. The remaining three countries have relatively
developed industrial relations offering protection for workers; the latter is confirmed by
occurrence of instances of worker-friendly jurisprudence in litigation involving EWCs
(especially in France and Belgium). At the same time country notorious for its minimum
standard regulations on EWCs i.e. the United Kingdom hosts only three EWCs from
foreign headquartered companies. Consequently, the hypothesis about regime shopping
whose origin is the alleged pursuit of more lenient (employer friendly) legislation seems
to hold, if at all, only with regard Ireland. Concerning the latter country jumping to any
easy conclusions might simply be unfounded as other factors could be at play. Thus it
would require further research into the topic to allow making clear inferences.
Figure 1 Number of EFTA-based multinational companies with EWCs
effective that have chosen applicable EWC law from an EEA country different
than the country of HQ of the multinational
35
* - one agreement (AXA Group EWC of 2009) refers to unspecified EU law rather than to
national legislation.
Source: EWCdb.eu @ 2013.
Regime shopping seems to occur in the most straightforward way in case of EFTA and
EU based companies choosing different EEA (Switzerland does not have an EWC
transposition act) member country law for their EWC (as described above). However,
another dimension to consider are cases of non-European (i.e. non-EFTA) companies
establishing EWCs and thus forced to pick a specific EEA country’s law as the legal order
for their EWC. Figure 2 presents data for non-European companies selecting EEA law for
their EWCs. In total there have been 217 such cases. The most frequently chosen target
legislation (by a significant margin) was that of the UK and Germany ex aequo as well as
Belgium and France. Interestingly the British transposition law considered to be more
employer than worker friendly (as far as information and consultation rights are
concerned) was chosen as frequently as the German law founded firmly upon the
foundation of Mitbestimmung, i.e. extensive participatory rights for workers and
favourable provisions on information and consultation and traditions, and thus by many
considered one of the models in Europe. Moreover, both Belgian and French legislation
that safeguard workers’ rights relatively well too were chosen more frequently than the
reportedly more employer-friendly EWC legislation of Ireland. Interestingly too, the
Belgian, French, German and Irish legislation that has been chosen the most frequently
by companies from outside of the EU provide for either full legal personality (FR, DE),
or capacity to act in courts (IE), or an explicit entitlement to start legal proceedings (BE);
even in case of the UK the Statutory Instrument 1088 transposing the directive in Article
21A provides now for improved access to courts for clearly defined ‘relevant applicants’.
Finally, there has been no specific concentration of companies from one non-EEA
country choosing EU member state’s legislation for their EWCs; the approximately even
distribution across all the EU countries is another point in case against the alleged
regime shopping. All in all it can be concluded that with regard to EWCs regime shopping
has not occurred on a mass, statistically significant scale. This is not to say that in
particular cases consideration on more lenient legal order have been made by
0
2
4
6
8
10
12
14
Target legislation chosen by multinational companies
United Kingdom
Sweden
Norway
Netherlands
Luxembourg &
Liechtenstein
Italy
Germany
France
Number of EFTA-based multinational companies with EWCs effective that
have chosen applicable EWC law from an EEA country different than the
Multinational
companies
headquartered in:
36
management of multinational companies, yet such statements are beyond the numerical
proof that the ETUI database of EWCs can deliver.
Figure 2 EWC bodies effective that have chosen applicable law from a country
different from headquarters of the multinational company (non-EEA-based
multinationals only)
Source: EWCdb.eu @ 2013.
An explantion to the above depicted choices of foreign legislation lies most probably
in the fact that in a vast majority of cases multinational enterprises from outside of
the EU choose Germany, France, Belgium, Luxembourg and Ireland as their
European headquarters based on e.g. favourable tax regulations, infrastructure,
availability of staff, etc. (see: Holt et al. 2006) rather than according to the most
lenient or incomplete regulations on transnational information and consultation of
employees that in terms of priority rank are not on par with the former precisely
calculable costs.
0
10
20
30
40
50
60
AT BE DE DK ES FR IE IT LU NL NO SE UK
United States
Switzerland
South Africa
other (worldwide)
Japan
Canada
Australia
number of EWC bodies effective that have chosen applicable law from a
Multinational
Target legislation country
37
Chapter 4: Parameters for evaluation of sanctions
compatibility with the requirements of the EWC
recast directive 2009/38/EC
Irrespective of the type of sanction, i.e. whether these are financial penalties,
incarceration or other set of punitive measures is the preferred solution in a given
country their evaluation is a complex and multifaceted issue. The following sections
represents an attempt to discuss various parameters of sanctions relevant for the
requirements set in the recast EWC directive 2009/38/EC. At the first glance the
directive in Recitals 35, 36 and and Art. 11 impose collectively only three criteria that
need to be met: effectiveness, proportionality and dissuasive character. Simple as
these three parameters may seem, they represent complex questions. The complexity
of debate on the sanctions’ parameters is directly reflected in the intricacies of policy
choices. To better understand and evaluate the EWC sanctions the following section
introduces the necessary elements of legal studies and research.
4.1. Definition of a sanction in EU law
Interestingly, ‘it seems that Union law does not prefer the term “sanctions” as an umbrella
term for labelling the state’s response to unlawful behaviour’ (de Moor- van Vugt 2012: 12).
The observation of Moor- van Vugt that terms such as ‘penalty’ and ‘measure’ in EU
legislation are more common than ‘sanction’ seems confirmed in case of the EWC recast
directive 2009/38/EC where in Art. 11.2 reference is made to ‘measures’ and ‘adequate
administrative and judicial procedures’. The term ‘sanction’ is used only in the Preamble’s
recital 36 (and recital 34 but in a different context) along with ‘procedures’82.
As Moor- van Vugt finds (ibid.) the ‘distinction between a penalty and a measure is
meaningful’ since the former has a punitive nature, while the latter a reparatory one. A
catalogue of means considered to be measures confirming its clear reparatory character83 can
be found in Regulation 2988/95 (Article 4):
- withdrawal of the wrongly obtained advantage
o payment/repayment of amounts due or wrongly received);
o total or partial loss of the security provided in support of the request for an
advantage granted.
Penalties, on the other hand, threaten for ‘intentional irregularities or those caused by
negligence’ (Art. 5). A catalogue of penalties is provided by Article 5 of the said Regulation
and comprises:
a) ‘payment of an administrative fine;
b) payment of an amount greater than the amounts wrongly received or evaded, plus
interest where appropriate; this additional sum shall be determined in accordance
with a percentage to be set in the specific rules, and may not exceed the level strictly
necessary to constitute a deterrent;
c) total or partial removal of an advantage granted by Community rules, even if the
operator wrongly benefited from only a part of that advantage;
d) exclusion from, or withdrawal of, the advantage for a period subsequent to that of
the irregularity;
82 Recital 36: ‘In accordance with the general principles of Community law, administrative or judicial
procedures, as well as sanctions that are effective, dissuasive and proportionate in relation to the
seriousness of the offence, should be applicable in cases of infringement of the obligations arising from
this Directive’.
83 Art. 4 para 4 of the Regulation 2988/95 emphasises that ‘The measures provided for in this Article
shall not be regarded as penalties.’
38
e) temporary withdrawal of the approval or recognition necessary for participation in
a Community aid scheme;
f) the loss of a security or deposit provided for the purpose of complying with the
conditions laid down by rules or the replenishment of the amount of a security
wrongly released;
g) other penalties of a purely economic type, equivalent in nature and scope, provided
for in the sectoral rules adopted by the Council in the light of the specific
requirements of the sectors concerned and in compliance with the implementing
powers conferred on the Commission by the Council.’
The above considerations and provisions introduce an element of confusion into
interpretation of the EWC recast directive 2009/38/EC which inconsistently uses the term
‘sanction’ in its Preamble as opposed to ‘measure’ in the body in art. 11 para. 2. When a
formalistic interpretation is applied and only Art. 11. Para 2 is taken into account one could
argue thati as a result of the use of the term ‘measures’ in accordance with Art. 4 of the
Regulation 2988/95 only ‘withdrawal of the wrongly obtained advantage’ (i.e. fines or
repayment of amounts due) should be implemented on national measures as legal
consequences of wrongful acts or irregularities in informing and consulting EWCs. This idea
seems, however, indefensible in view of the telogical interpretation of the Directive
2009/38/EC which must include the Preamble and the term ‘sanctions’ used therein.
Furthermore, even if one would have accepted the formalistic interpretation of the provision
of art. 11 para 2 of Directive 2009/38/EC the Member States would still be free and obliged to
impose sanctions in response to breaches of Community law, even if the Treaty or secondary
legislation does not provide for an explicit legal basis for them to do so based on the
fundamental Treaty principle of loyal cooperation laid down in Article 4 para 3 TFEU (de
Moor- van Vugt 2012: 7 ff.). This legal principle is the first and foremost basis and obligation
for the Member States to put an adequate sanctions system into place (ibid.).
In conclusion of the above considerations it may be stated that directive 2009/38/EC
provides for a sufficient basis for the Member States to introduce a wide variety of measures
both from the catalogue of art. 4 and 5 of the Regulation 2988/95. At the same time, it needs
to be borne in mind that on the basis of the European Court’s of Justice ruling in the so called
Greek Maize84 case Member States have freedom of choice of legal means (be that civil, penal
or criminal) they wish to apply to infringements of Community law, provided that those
means are effective, proportionate and deterrent.
4.2. The doctrine of ‘effective, proportionate and
dissuasive sanction’ in EU law
Accepting the existence of differing views in the practical and scholarly debate on the choice of
the best doctrine it the central question with regard to corporate violations of EWC laws is to
determine the method by which companies can best be held responsible. This question has
been raised neither by the legislator (the European Commission) nor by the members of the
Expert Group debating on the implementation of the recast directive 2009/38/EC. The
subject matter was approached from a more pragmatic and less constraining perspective,
namely by means of providing only the criteria of Recital 36.
Despite the fact that these criteria are mentioned in the Preamble they are not explained
further in any way either in the EWC directive or in the report of the Expert Group. The lack
of specification what do these criteria imply might be the source of further problems with
evaluation of the sanctions in, at least, a twofold way. Firstly, because the Member States on
which the obligation to abide by the criteria was imposed are not necessarily clear on what
effective, proportionate and dissuasive sanctions are. The latter might be simply because
similar criteria are not in use in national law and/or because they might have a different
meaning with regard to multinational companies infringing transnational social rights like
those of EWCs. Secondly, lack of clear explanation of the criteria of Recital 36 can have an
impact on the European Commission itself when it performs its standard evaluation of
84 Case 68/88 Commission v. Greece [1989] ECR I-2911.
39
implementation of directives (vide explanations concerning the superficiality of the
Implementation Report of 2000 on the EWC directive 94/45/EC in the present study).
For the above reasons, before one goes to reviewing the available penalties for EWC laws
violations and their compatibility with Recital 36 it seems worthwhile to seek and provide
explanation of the each of the elements of the doctrine of effective, proportionate and
dissuasive sanctions. As a brief general introduction into the specific characteristics of each of
the later features of sanction s reference to ECJ jurisprudence on the central importance of
enforcement provisions and sanctions will be made.
4.3. European Court of Justice: sanctions as an
inherent ingredient of EU directives
With regard to determining the importance of proper transposition of sanctions as inherent
parts of EU directives at least three judgements seem of relevance: cases ‘Colson’85, ‘Harz’86
and ‘Coote’87. In the ‘Colson’ case the ECJ decided in favour of the claimant who was an
individual employee laying a claim against insufficient implementation with regard to the
‘necessary measures’ (sufficient sanctions) to be provided by the Member State to secure the
rights stemming from the directive. In this case the ECJ declared that, even if the
‘substantive” part of the Directive had been implemented, the absence of adequate remedies
for protection against discrimination effected in the transposition not being sufficient to
ensure that the Directive was fully effective
‘[a]lthough the third paragraph of article 189 of the treaty leaves member states free to
choose the ways and means of ensuring that the directive is implemented, that freedom does
not affect the obligation, imposed on all the member states to which the directive is
addressed, to adopt, within the framework of their national legal systems, all the measures
necessary to ensure that the Directive is fully effective, in accordance with the objective
which it pursues.’ (Summary of the cases Colson, C-14/83 and Harz C-79/83)) 88. It should be
emphasised that the Court insists that the nature of obligation of the Member States to
provide effective measures to apply the directive is unconditional, i.e. not subject to national
competence.
The ECJ specified moreover the requirements of efficiency and proportionality of the penalty
by ruling that even though
‘ the purpose of imposing a sanction for the breach of the prohibition of discrimination ,
leaves the member states free to choose between the different solutions suitable for achieving
its objective , it nevertheless requires that if a member state chooses to penalize breaches of
that prohibition by the award of compensation , then in order to ensure that it is effective
and that it has a deterrent effect , that compensation must in any event be adequate in
relation to the damage sustained and must therefore amount to more than purely nominal
compensation such as , for example , the reimbursement only of the expenses incurred in
connexion with the application’ (ibid.).
In the Coote v. Granada Hospitality Ltd case the Court found that lack of effective means of
pursuing a ‘judicial process’ has the potential of jeopardising implementation of the goals
pursued by the directive to be implemented:
The principle of effective judicial control laid down in Article 6, a principle which underlies
the constitutional traditions common to the Member States and which is also enshrined in
Article 6 of the European Convention for the Protection of Human Rights and Fundamental
Freedoms, would be deprived of an essential part of its effectiveness if the protection which
85 ECJ C-14/83 (10/04/1984) Colson and Kamann vs. Land Nordrhein-Westfalen, Slg. 1984, p. 1891.
86 ECJ C-79/83 (10/04/1984) Doris Harz vs. Deutsche Tradax GmbH, Slg. 1984, p. 1921.
87 ECJ C-185/97 (22/09/1998) Belinda Jane Coote vs. Granada Hospitality Ltd. Slg. I 1998, p. 5199.
88 See also Judgment of the Court (Fourth Chamber) of 8 March 2001. - Commission of the European
Communities v French Republic,. Case C-97/00. European Court reports 2001 Page I-02053
40
it provides did not cover measures which an employer might take as a reaction to legal
proceedings brought by an employee with the aim of enforcing compliance with the
principle of equal treatment. Fear of such measures, where no legal remedy is available
against them, might deter workers who considered themselves the victims of discrimination
from pursuing their claims by judicial process, and would consequently be liable seriously to
jeopardise implementation of the aim pursued by the Directive. (Point 2 of the Summary,
case C-185/97).
The ECJ needed also to deal with the crucial debate on delimitation of competences between
the European Community and the traditional national Member State competence to
determine sanctions. In the Harz case it accepted that the competence to set sanctions
remains with the Member States89, yet at the same time specified that this freedom is subject
to the ultimate obligation of effectiveness:
‘Although directive no 76/207/EEC , for the purpose of imposing a sanction for the breach of
the prohibition of discrimination , leaves the member states free to choose between the
different solutions suitable for achieving its objective , it nevertheless requires that if a
member state chooses to penalize breaches of that prohibition by the award of compensation
, then in order to ensure that it is effective and that it has a deterrent effect , that
compensation must in any event be adequate in relation to the damage sustained and must
therefore amount to more than purely nominal compensation such as , for example , the
reimbursement only of the expenses incurred in connexion with the application .’ (Summary,
Case C-79/83).
Gradually the ECJ extended the scope of its jurisprudence by requiring adequate national
remedies to be available for the violation of rights conferred by EC law even in the absence of
any specific ‘remedies provisions’ in the Directive concerned (Malmberg 2003: 3). Finally, in
the ruling in the Johnston case90 the ECJ made reference to the legal order of Council of
Europe and declared that the principle of effective judicial protection ‘underlies the
constitutional traditions common to the Member States and is laid down in articles 6 and 13
of the European Convention for the Protection of Human Rights and Fundamental
Freedoms, which must be taken into consideration in Community law’. (point 18 of the
ruling).
4.3.1. Effectiveness
The dictionary definition of the term ‘effectiveness’ is explains that it is the capability
of producing a desired result or the degree to which something is successful in
producing a desired result91. In more specific terms of directives effectiveness could
be defined as ‘particular goals set by the policy maker on the one hand (the effects)
and the (legal and policy) instruments used by the policy maker on the other hand’
(Faure 2010: 259). In line with this approach in order to assess the effectiveness one
needs to look at the goals set by the EWC directive and compare it with the policy
instruments (in case of the subject matter, on sanctions. The first and foremost goal
of the directive is ‘to improve the right to information and to consultation of
employees in Community-scale undertakings’ (Art. 1) and ‘ensuring the effectiveness
of employees’ transnational information and consultation rights, (…) enabling the
continuous functioning of existing agreements, resolving the problems encountered
in the practical application of Directive 94/45/EC and remedying the lack of legal
certainty resulting from some of its provisions or the absence of certain provisions,
and ensuring that community legislative instruments on information and
consultation of employees are better linked’ (Recital 7). Furthermore there is more
89As regards sanctions for any discrimination which may occur , the directive [76/207/EEC] does not
include any unconditional and sufficiently precise obligation which , in the absence of implementing
measures adopted within the prescribed time-limits , may be relied on by an individual in order to
obtain specific compensation under the directive , where that is not provided for or permitted under
national law’ (Summary, Case C-79/83)
90 Case 222/84 Johnston [1986] ECR 1651.
91 Oxford Dictionaries Online at http://oxforddictionaries.com
41
precision about the information and consultation – it should be done in a ‘timely
fashion’ (Recital 14, 22 and 23) and with ensuring good quality of content. All in all, in
brief, the directive is about ensuring workers’ access (via their representatives) to
information and consultation on transnational decisions and developments.
Inherently, any test of effectiveness of improved access to information
and consultation is interlinked and must include the dissuasive effect of
sanctions that threaten potential perpetrators for obstructing the
achievement of this goal. The latter is valid since after all, a penalty will
most certainly be effective in ensuring improved information and
consultation if/when it has the ability to dissuade potential offenders
from violating the law (ibid.). At the same time effectiveness of the
sanctions is interlinked with their proportionality, which can be
described as a ‘relationship between the seriousness of the offence and
the size and type of the penalty ‘ (ibid.).
Measuring effectiveness of sanctions represents a significant challenge. In view of lack
of any quantitative computation fit for this purpose several approaches are thinkable.
Firstly, one could follow the idea suggested by the European Commission to look at
the level of application of sanctions (problematic to measure in itself):
‘some evidence can be derived from input factors, such as the resources dedicated by
a country to application of sanctions, or output factors such as the number and level
of sanctions applied. For example the number of sanctions applied in different
Member States (…). Some Member States have not applied any sanction for more
than two years’ (European Commission 2010b: 8). The Commission rightly points out
to the possible reason of ‘absence of infringements’, yet at the same time it points out
that ‘it could be due, in part to violations not being detected’ (ibid.). It is all the more
suspicious that some Member States with comparable financial sector have applied
sanctions to a considerably varying degree (ibid.). The situation resembles the one in
the field of EWC information and consultation where in some Member States there
have been no court cases at all, while in others worker representatives sought court
resolution on several occasions. It seems that this has to do not only with resources
devoted to enforcement by the national authorities, but more with the overall facility
of access to courts, resources and legal certainty that EWCs enjoy to a varying degree
in different Member States.
Secondly, a benchmark in approximating the effectiveness of sanctions can be
established by means of relationship of this function to proportionality and dissuasive
character of punitive measures. Since none of the EWC directives ever included a
clear statement on the fact that decisions taken without meaningful and proper
involvement (information and consultation) of the workers are null and avoid an
inference can be drawn that the legislator laid emphasis on prevention or general
deterrence rather than punishment. Consequently, evaluating the deterrence
potential of sanctions for EWC law violations can be recognised as the crucial factor in
determining the effectiveness thereof. In other words, testing whether penal
measures foreseen for violations of EWC obligations can ex ante put potential
violators off of deliberately taking actions and decisions without respecting the
worker representatives’ prerogatives to being informed and consulted can be adopted
as an indirect test for the effectiveness of punitive measures.
Due to the specific nature of workers’ rights to information and consultation one
could, however, go further in describing which characteristics of sanctions are also
necessary for them to be effective. Similarly to postulates voiced with regard to
functions of e.g. environmental law (ibid.) it is justified to argue that punishing the
perpetrator does not represent a sufficient remedy, as the harm done to the collective
of workers persists even if a company is ordered to pay a financial penalty. Taking this
into account one could argue that with regard to information and consultation laws
the function of restoring the original order (‘restitutio in integrum’) should be taken
into consideration when designing sanctions that meet the requirements of Recital 36
42
of the 2009/38/EC directive. For punitive measures to fulfil this function it is
necessary to allow for sanctions to undo the effects of the violation. In this sense the
judgements of the courts in the Gaz de France-Suez merger case declaring the merger
invalid and ordering to repeat the process with the proper inclusion of information
and consultation procedures are a good though relatively isolated cases.
4.3.2. Dissuasive character/potential of sanctions
Dissuasive potenatial of sanction is a function originating from the theory of
deterrence. The theory’s main argument is that the prospect of punishment should be
sufficient to prevent future instances of the offense (see Nagin, 1998, for a
review). The deterrence considerations have been present in the European law
doctrine since the 1980s when the ‘well-known equal treatmenst cases of Von Colson
and Kamann v Land of North Rhine Westphalia92 and Dorit Hart v Deutsch Tradax
GmbH93 hosted the elaboration of the rule that national sanctions must provide a real
deterrent effect against breach of Community law’ (Ward 1995: 209).
The deterrence theory is generally grounded in the assumption that the potential
criminal, like other citizens, is a rational actor (Carlsmith et al. 2002) that bases
his/her decisions on a cost-benefit analysis (Becker 1962 and 1968). A cynical
multinational company applying a strict cost-benefit logic to its obligations of
including information and consultation of workers into a decision-making process
will thus, according to the deterrence theory, calculate whether the cost of non-
observance (i.e. the sanctions) of the EWC legislation is lower or higher than the
benefit represented by a swift decision making in e.g. a merger case. If the sanction
for the violation of law is insignificant/inferior to the benefit of keeping the
information about e.g. a merger obscure from the public including the workers such a
multinational company is prone to being tempted into ignoring the information and
consultation obligation. In other words, if the sanction is not significant enough it
does not represent a sufficient deterrent and thus some companies might consider
‘buying the violation’ if it is threatened only by an insignificantly low financial penalty
(see also section 3.5 on Financial penalties for corporate violations). The European
Commission is well aware of this threat (at least in some areas of legislation) as it gave
testimony in the Communication ‘Reinforcing sanctioning regimes in the financial
services sector’ (European Commission 2010b: 7) by stipulating that ‘Violations of
financial services legislation can lead to gains of several million euros, in excess of the
maximum levels of fines provided for in some Member States. A fine that is lower
than the gains that can be expected from the violation is unlikely to have much of a
deterrent effect.(…) To ensure that a fine has a sufficiently deterrent effect on a
rational market operator, the possibility that an infringement will remain undetected
must be offset by imposing fines which are significantly higher than the potential
benefit deriving from a breach (…)’. The Commission’s stance on dissuasive character
of sanctions and its relationship to the benefit derived from breaking the law was
reiterated in the statement that the benefit derived from a violation should be taken
into account when providing for sanctions and that ’a fine that is not considerably
higher than the benefit that may be gained from a violation will have only a limited
dissuasive effect’ (ibid. 8). The severity of sanctions as an important factor in
determining the dissuasive potential of punitive measures is therefore to be
considered as a relative quality defined in relationship to the possible perceived
reward and risk of being detected and prosecuted: ‘Indeed, when sanctions applied
across the Union are not sufficiently strict or their level is particularly low even for the
most serious infringements, there is a high risk that they will not have a sufficiently
dissuasive effect, as the perceived reward from the illegal behaviour will far outweigh
the real risk.’ (European Commission 2010b: 9). All in all, it is clear that the European
Commission supports the view that the level of fines is a crucial factor determining
92 Case 14/83 [1984] ECR 1891.
93 Case 79/83 [1984] ECR 1921.
43
the national authorities’ capacity to meet the standards of providing for effective,
proportionate and dissuasive fines94.
As Faure (2010: 260) points out consideration of the deterrent potential of a sanction
should not be made in isolation from other factors such as the probability that the
violator gets apprehended and that the case will be prosecuted (in case of EWC rights
that the worker representatives will bring a case to court and launch litigation). He
also notes that ‘since the probability of a sanction being imposed is usually less than
100% the expected cost (probability multiplied with the sanction) is usually
substantially lower than the sanction which is ex post actually imposed’ (ibid.). This
allows concluding that in order to be assessed as effective and dissuasive ‘sanctions
should be of such type and magnitude that the expected costs are higher than
expected benefits to perpetrator’ (ibid.). A policy relevant guideline is thus a logical
consequence of the latter finding: penalties to be imposed are strongly linked to
benefits that a violation might bring to the perpetrator; they are, however, also linked
to the harm they can represent to society or community: the larger the damage to the
community/affected group or stakeholders and the larger the potential benefit to the
offender the higher the expected sanction will have to be to act as a deterrent and
dissuade from committing the crime (compare Faure 2010: 260). Finally, taking into
account the main assumption that any perpetrator is rational and acts according to
the cost-benefit analysis, an optimal sanction (in terms of its deterrent function) must
include also the probability of being apprehended, the probability of being brought to
court (and/or prosecuted if such a possibility is foreseen) and convicted.
Statistics on the probability of companies being brought to court and convicted for
EWC laws violations are not available. Nonetheless, the number of known EWC court
cases in all the EU27 countries throughout the almost 17 years since the entry into
force of the EWC directive 94/45/EC is relatively moderate and amounts to
approximately 50-60 cases altogether (for details see Dorssemont and Blanke 2010,
Part A). The moderate number of litigation cases seems to result, among other, from
the fact that that workers representatives (either individually or as EWC) often lack
the resources and information to start the proceedings. At the same time
multinational companies have incomparably more means at disposal, which
compares a certain imbalance of which all parties are perfectly aware. Since in many
countries companies’ potential responsibility for violations is limited only to financial
penalties (for an overview see next section and Annex 1) it is possible that the cost-
benefit analysis being fundamental for the worker representatives’ decision to launch
a lawsuit is concluded with a simple ‘it’s not worth the hassle’. In this way the
perception of inevitability of sanctions (an important factor in the general deterrence
function; Kaczmarek 2006: 450) for violations of information and consultation laws
is seriously tainted. Consequently, the dissuasive potential of the system of punitive
measures is significantly weakened. As argued by various research another ingredient
of the deterrence function if also making it known to the general public (Nalewajko
2009: 253; Braithwaite 1989), a factor more important for companies in some
businesses than in others (e.g. in the environmental business the deterrent function of
being stigmatised in the general public was found to be an important driver for
respecting law, see Earnhart 2004: 62-63; similarly in financial industry, compare
Karpoff and Lott 1993).
94 European Commission (2010b: 12) clearly recognises the reasonable market operator theorem by
Becker (1962 and 1968) and Carlsmith (Carlsmith et al. 2002) and thus recommends (with regard to
financial market regulations, but also easily applicable to other fields of EU policy) that ‘In view of the
large gains that could be obtained from violations of financial services legislation, the level of fines
provided for by national law should be sufficiently high to allow national authorities to impose
effective, proportionate and dissuasive fines. In order to dissuade a rational market operator from
breaching the law, the possibility that a violation would remain undetected should be offset by a fine
that could reasonably be considered to exceed the potential financial benefits that could be gained from
a violation, even where those benefits are not capable not capable of calculation. This would be on the
assumption that a rational market operator would take into account the likelihood of detection in
deciding whether to commit an offence, and that not all infringements would be actually detected.’
44
Finally, it needs to be reminded that sanctions of the same level imposed on both
natural and legal persons are unlikely to be sufficiently dissuasive for the latter.
A general conclusion from the above considerations might be that the deterrent
function of sanctions is a complex variable comprising aspects such as severity,
inevitability of the punitive measures, the latter dependent upon EWCs’ resources to
access courts and pursue lawsuits, as well as courts factual jurisprudence that
adjudicates sufficiently severe, rather than too lenient sanctions. If the potenatial
sanctions are not sufficiently deterrent the risk is that enforcement of information
and consultation rights will be undermined and the fundamental worker right to
information and consultation trivialised95 (compare Faure 2010: 262). It is not a
theoretical, but a real threat: in the environmental law execution it was found that
when the sanctions (fines) are too low a ‘perverse learning effect’ occurs (Faure 2010:
263). This learning effect’s mechanism is that companies that violate the law once and
experience that sanctions are not severe enough are inclined to commit crimes again,
knowing for a fact with the benefit of hindsight that the punitive measures are lower
than could have been initially expected. Of course in terms of policy
recommendations the approach must be differentiated as not all violations of law are
committed intentionally and involve lack of information rather than bad will.
Admittedly, this might be the case with some cases of company measures and/or
decisions with a social impact on workers where the implications are not clearly
manifested, indirect or complex and thus the extent and timing of information and
consultation processes blurred. As Faure (ibid.) argues (with regard to environmental
law) such a differentiated approach could involve different measures for the
calculated crime by the Becker-type perpetrators against whom deterrence could be
the primary weapon, and a separate set of sanctions for companies violating the law
because of the mere lack of information. Faure argues that such an approach can be
effective, yet it might occur problematic in view of the fundamental legal principle
ignorantia iuris nocet that does not allow shunning off responsibility due to being
ignorant about a law’s existence.
4.3.3. Proportionality
Proportionality of sanctions can be defined as a relationship between the
infringement and/or its aspects (such as type, severity, harm/damage, wilfulness,
etc.) and the type and magnitude of punitive measures.
As such proportionality is one of general principles of Union law (de Moor- van Vugt
2012: 35; Tridimas 2006) and as a rule anchored in the foundations of the EU, i.e. in
Art. 13 para 2 TEU it is a leading criterion for EU and Member States actions it is
under review of the ECJ. In reviewing proportionality various degrees of strictness are
applied to different policy areas, with most intensive tests administered when
fundamental rights are at stake (de Moor- van Vugt 2012: 36; case 44/79 Hauer
[1979] ECR 3727)96
Faure (2010: 264 ff.) argues that there are two major approaches to applying
proportionality to violations of law:
1) An economy based approach according to which severity of sanctions can be
determined on the basis of economic analysis of the perpetrator’s capacity to pay
the fine. In other words, the bigger the financial ability of the perpetrating
95 Of course the question of compliance with regulations and incentives for non-compliance is a very
complex one and its thorough examination is beyond the scope of this paper. In this context, it seems
worthwhile to point towards a phenomenon of a relatively high compliance with norms not withstanding
low expected sanctions known as the Harrington paradox (more on the issue: Faure 2010: 262;
Harrington 1988 as well as Harrington and Harford 1991). The latter is modified by the companies’
experience and subjective evaluation of the probability and severity of the sanction (see Faure 2010: 263
and Rousseau 2008).
96 At the same time it needs to be noted that doctrine of proportionality (of penalties) is most developed
in competition law
45
company the higher the fine. Such an approach seems to satisfy the popular
feeling of justice, yet it also suffers from the disadvantage of disconnecting the
sanction from the factual harm done by the violation. Therefore it is argued that
the so called ‘marginal deterrence’ needs to be taken into account too. The
doctrine of marginal deterrence argues that if relatively minor violations would be
endangered with major penalties such a system would provide incentives for the
potential perpetrators to drop all restraints and go directly all the way to
committing more/most serious crimes.
2) An approach based on differentiation between the nature and type of
infringement and corresponding penalties. Within this approach 4 basic models
developed with regard to environmental law (proposal by Faure 2010 and Faure
and Visser 1995) are thinkable as relevant for the violation of information and
consultation laws:
a. Model I ‘abstract endangerment’ focused on penalising the very fact of
breach of legal norms/regulations irrespective of the fact whether actual
harm or threat of harm occurred;
b. Model II ‘ focused on both the breach of legal regulations and the proof
that the illegal activity caused harm or threat of harm (presumed or
actual);
c. Model III focused on punishing ‘concrete harm crimes with
administrative predicate’ and requiring proof of actual harm;
d. Model IV focusing predominantly on the harm to stakeholders (workers
and worker representatives) regardless of the violation of underlaying
regulations.
Adopting the latter approach which divides sanctions according to the nature and
type of violations and putting it in context of the actual (or potential) harm
caused by the infringements seems to allow an extensive degree of
proportionality. In this sense it also allows to punish violations according to the
importance of interests at stake (either administrative or factual harm).
Moreover, such type of ranking is capable of including the element of the mental
state of perpetrators and an according differentiation between violations
committed negligently or wilfully (ibid.).
Multifaceted as it may be, the system of proportionality testing at the same time
presents itself as the most complex and, sometimes, awkward to use, too.
4.4. Sanctions and their characteristics according
to the European Commission
When trying to determine what is meant by the European legislator (the Commission) by
‘effective, proportionate and dissuasive sanctions’ one should not simply accept that the EWC
directives do not provide any specification in this regard, but seek for guidelines in other acts
and official documents that might provide useful hints about the content of these criteria. The
following section looks at such guidelines firstly in European institutions’ official documents
and, subsequently, in jurisprudence of the European Court of Justice.
Firstly, in pursuit of relevant sources it seems worthwhile to refer to the European
Commission’s Communication (2010) 716 on ‘Reinforcing sanctioning regimes in
the financial services sector’ (European Commission 2010b). Admittedly, this communication
even remotely does not refer to sanctions for breach of information and consultation rules.
However, it is being quoted here to demonstrate that the European Commission is not
consistent in its denial of providing more detail concerning the meaning of ‘effective,
proportionate and dissuasive’ sanctions and claims a mandate to intervene in the field of
consistency and efficiency of national systems of enforcement of EU directives. Because it
would be difficult to argue that the protection of rights and interests of stakeholders in
financial markets is more important than safeguarding fundamental rights (such as the right
to information and consultation) it seems that explaining the European Commission’s
46
approach (below) and applying the same guidelines to the area of protection of rights of
workers is in this case justified.
The Communication (2010b) 716 provides valuable instructions on its involvement into
scrutinising the enforcements systems of financial market regulation that are of general
applicability. Firstly, by means of reference to an earlier report on financial supervision97 it
recognises that ‘supervision cannot be effective with weak, highly variant sanctioning
regimes. It is essential that within the EU and elsewhere, all supervisors are able to deploy
sanctioning regimes that are sufficiently convergent, strict, resulting in deterrence’ (par.
201; European Commission 2010b: 2). The important element of the Commission’s view in
this regard is that excessive divergence can be detrimental as well as the insistence on
‘sufficient’ convergence of the national punitive systems. This approach and statements on the
degree of heterogeneity of implementation seem to bee at stark odds with the European
Commission’s views in the Implementation Report on European Works Councils from 2000
(European Commission 2000). It seems indeed the case that the European Commission’s
position in this view evolved, or at least differs among various fields of legislation. An
interesting point in case is the European Commission’s approach to financial markets
regulation (European Commission 2010b). The Commission indicates there that the ‘financial
crisis has put into doubt whether financial market rules are always respected and applied as
they should be across the Union’ and that ‘[l] ack of enforcement of EU rules in one Member
State may have significant implications for the stability and functioning of the financial
system in another Member State’ (ibid. 2); while the correctness of these statements cannot
be argued with it occurs as a relevant question why has the European Commission been less
reactive with regards to similar signals coming from the field of social legislation field
(Eurofund 2009; European Parliament 2007; reports from ETUC and EESC indicating
shortcomings in the field of enforcements, see Jagodziński 2009)? The European Commission
should be praised for the decisive declarations in the communication stipulating that
Ensuring proper application of EU rules is first and foremost the task of national
authorities (…) but national authorities need to act in a coordinated and integrated
way’ (ibid.). ;
‘Efficient and sufficiently convergent sanctioning regimes are the necessary
corollary to the new supervisory system’ (ibid.);
‘(…) a proper enforcement of EU legislation requires that all national authorities
have at their disposal appropriate sanctioning powers’ (ibid. 3);
‘the existing legal framework, Member states enjoy considerable autonomy in terms
of choice and application of national sanctions. However, this autonomy should be
balanced with the need for effective and consistent application of European law’
(ibid. 5);
‘In general, competent authorities will only be able to impose a sanction that is
optimal in terms of effectiveness, proportionality and dissuasiveness, if they have a
wide range of different sanctioning powers’ (ibid. 6);
Some competent authorities cannot address administrative sanctions to both
natural and legal persons’ (ibid. 8);
‘(…) divergences in sanctioning regimes may create distortions of competition in the
Internal Market. If sanctions applied in different Member States for similar
infringements are considerably different, financial institutions could be tempted to
engage in regulatory arbitrage when deciding on their place of establishment or the
location of branches in order to benefit from the least stringent sanctioning regimes’
(ibid. 9);
‘In the Commission's view, for violations of each key provision of an EU legislative
act, compliance with which is essential for the practical effectiveness of the act and
therefore for the well-functioning of financial markets, a core set of administrative
sanctions should be provided in all Member States. Such sanctions should be of a
nature so as to allow the competent authorities to impose, in each specific case, a
sanction that is likely to be optimal in terms of effectiveness, proportionality, and
dissuasiveness.’ (ibid. 11);
97 Report of the High-level Group on Financial supervision in the EU chaired by Jacques de Larosière,
25.2.2009.
47
‘Sanctioning regimes will better prevent other potential offenders from future
violations, if those are aware that the sanctions provided for by law are actively
applied and enforced and there is a real risk that violations will be detected and
sanctioned by the authorities.’ (ibid. 12)
The pursuit of these goals is, quite rightly, deemed a sufficient reason ‘to conduct a
stocktaking exercise of the coherence, equivalence and actual use of sanctioning powers in
the Member States, in order to help determining whether sanctioning regimes are
sufficiently equivalent’ (ibid.). The European Commission also bases its mandate to pursue
the agenda of ‘strengthening sanctioning regimes’ and promoting ‘convergence of sanctions
across the range of supervisory activities’ (ibid.) on ‘studies carried out by the Committees of
Supervisors [that] cover the sanctions applied by the Member States for violations of
national rules transposing some of the most important EU directives applicable in the
banking, insurance and securities sectors’ (ibid.). One cannot help but notice that similar
goals and mandate that would justify a need for similar exercise exists in the field of
information and consultation rights (including those of EWCs).
The said Communication includes also an explanation of the key term ‘effective,
proportionalte and dissuasive’:
‘(…) sanctions can be considered effective when they are capable of ensuring compliance
with EU law, proportionate when they adequately reflect the gravity of the violation and do
not go beyond what is necessary for the objectives pursued, and dissuasive when they are
sufficiently serious to deter the authors of violations from repeating the same offence, and
other potential offenders from committing such violations.
Whether sanctions meet these requirements, depends on a number of factors, such as the
nature and level of the sanctions provided for by law, the institutional and procedural
settings governing their application, the effective detection of infringements and the actual
application’ (ibid. 4).
A similar understanding of qualitative requirements concerning sanctions was expressed by
the EESC in its Opinion 2001(553) where it stipulated:
‘3.2 Sanctions can be considered effective when they are capable of ensuring compliance
with EU law, proportionate when they adequately reflect the gravity of the offence and do
not go beyond what is necessary for the objectives pursued, and dissuasive when they are
sufficiently serious to deter the authors of violations from repeating the same offence, and
put off other potential offenders.’ (page 3).
These qualitative criteria of sanctions determine, however, also minimum standard and
demarcation lines between implementation autonomy and minimum requirements for the
Member States in terms of implementation:
‘3.3 Under the existing legal framework, Member States enjoy considerable autonomy in
terms of choice and application of national sanctions. However, this autonomy should be
balanced with the need for effective and consistent application of European law.’ (ibid.).
This understanding of the relationship of implementation autonomy and respecting some
non-negotiable minimum standards concerning sanctions is also shared by the European
Parliament (2007). When providing comments on collective redundancies directives within
the context of impact assessment of EU directives in the field of information and consultation
the Parliament pointed out that:
‘Even though the directive leaves sanctions to the discretion of the Member States, the
European Court of Justice has ruled that certain sanctions are inadequate and must be
tangible for the employer, i.e. have a certain level of severity, and national governments
have been obliged to modify their arrangements, including in Germany and the United
Kingdom.’ (European Parliament 2007: 11).
It seems that the European Commission is aware of these requirements and intends to apply
them in the ‘Fitness check’ on the information and consultation framework Directive
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2002/14/EC and the Directives on collective redundancies 98/59/EC and Directive
2001/23/EC on transfers of undertakings. The three directives were subject recently to a ‘fit
for purpose’ test on behalf of the European Commission (Deloitte, 2012) which comprised
analysis of the following aspects:
- relevance the extent to which the content of the Directives addresses ‘the needs of
employers and employees in the EU social market economy’;
- effectiveness the extent to which the above needs are met in practice by the
Directives;
- efficiency – the extent to which the needs are met in the most cost-effective way;
- coherence the extent to which the needs are met in a comprehensive and
compatible way.
Inclusion of the two criteria (effectiveness and coherence) relevant in view of the present
study deserves praise. The final evaluation was presented by the European Commission in
2013 (European Commission 2013). It concludes that the directives are ‘broadly fit for
purpose’ in terms of promoting a minimum level of information and consultation (I&C)
throughout the EU/EEA, yet identifies specific problems with enforcement of these directives
based on application of effectiveness considerations.
It is also important to note that the Commission considers sanctions as a term sensu largo (at
least in this Communication) and ‘refers to "sanctions" as a broad notion covering the whole
spectrum of actions applied after a violation is committed, and intended to prevent the
offender as well as the general public from committing further infringements’ (ibid.). In this
sense it supports and confirms the approach of the present study that considers e.g. a court
declaration of invalidity (or in other words the arguably ‘natural’ consequence of null and
void) of managerial decisions taken in violation of information and consultation rights as part
of the national enforcement systems (see section 5.2). In this sense the Commission is ready
to go to great lengths to protect financial markets from abuse and is not shy of proposing very
severe sanctions with regard for non-observance or respective regulation: it points out that ‘in
6 Member States there is no possibility to withdraw the authorisation in case of violations of
the market Abuse Directive’ and that ’15 Member States do not provide for the
disqualification/dismissal of the management and/or supervisory body in cases involving
market manipulation’; it finds out that ‘[t]hose powers may be useful to effectively sanctions
violations, and therefore prevent market abuse’ (ibid. 7). Such resolution in ensuring proper
enforcement of EU directives and the decisiveness and level of specificity given to the Member
States are most welcome, yet in stark contrast to preservative statements of representatives of
DG Employment on the limitations of the European Commission’s authority to shape national
sanctions in regard to the EWC directive 2009/38/EC (Jagodziński 2009).
Moreover, the European Commission’s review of the sanctioning regimes in the field of
financial market regulation allowed it to find ‘divergences across Member States’ that ’may
stem from many factors including differences in the national legal systems of the Member
States, constitutional requirements, the functioning of national administrations and the role
of courts (administrative or criminal)’ (ibid.) all being factors very similar to those found in
course of the review of enforcement of information and consultation rights of EWCs
conducted in the present study. Again, the European Commission showed a much welcome
firmness and resolution by questioning whether the enforcement of financial regulation is fit
for purpose, i.e. ‘whether sanctions are fully effective, proportionate and dissuasive’,
whether the fact that existence of divergences as to the level of enforcement plays any role,
and whether it can be accepted that in ‘some Member States no sanctions were applied for
more than two years’ (ibid.).
Furthermore the Communication identifies a number of weaknesses in national sanctioning
regimes of financial regulation that resemble problems identified in the present study of
enforcement of EWC rights (ibid. 6 ff):
1) Lack of important types of sanctioning powers for certain violations;
2) Varying types of sanctions for the same type of infringement;
3) Significant variations in the levels of administrative pecuniary sanctions (fines) and in
some of the Member States sanctions being too low. (for further details see section 3.5 in
the present paper);
4) In the said communication the European Commission indicates also the
49
On these premises one could expect and demand that the same approach of the European
Commission be applied to social legislation and the information and consultation rules. There
seems to be no apparent reason to treat legislation on workers’ information and consultation
differently and, thus, if the EU employs a decisive stance concerning enforcement of financial
regulation it should be comparably bold in other areas, too. The latter is especially valid for
EWCs which are an EU originating institution not known on national level before. This view is
shared by authors of a study on ‘Impact Assessment of EU Directives in the field of
“Information & Consultation”’ commissioned by the European Parliament (2007) who find
that ‘[p]olitical pressures for improved governance are strong in relation to legislation in a
number of policy areas at EU level – notably in relation to the internal market – but the
arguments are not commonly heard in relation to social legislation, least of all labour law,
despite general concerns expressed by the social partners about implementation on some
Member States’ (ibid. : 6). The report points out also that the European Commission has been
‘less active in addressing enforcement procedures and sanctions’ than in pursuing simple
infringement procedures.
4.5. Conclusions
In view of the above considerations the evaluation of the Member States obligations to
transpose and comply with Recitals 3598 and 36 (effective, proportionate and dissuasive
sanctions) gains a new dimension. As a result the evaluation of the national implementation
of those obligations should be respectively extended beyond the formal minima in order to
consider the requirements, and criteria that sanctions need to meet in order to perform their
designed functions. Trivial as it may sound the desired effect or objective of sanctions is
punishment for violation of law. An effective sanction should thus provide for a punishment
that is not only objectively effective and proportionate (the latter being subject to subjective
evaluation), but also one that is perceived as such, i.e. is deterrent. All these elements together
create a complex, interdependent and mutually influencing system; collectively they
determine the sanction’s severity that needs to be high enough to be deemed a sufficient
retribution for an offence.
98‘The Member States must take appropriate measures in the event of failure to comply with the the
obligations laid down in the Directive’
50
Chapter 5: Policy relevant questions
Irrespective of the fact whether this policy recommendation will find its way into the next
legislative amendment of the EWC directive or whether the European Commission will not go
beyond a mere implementation report on the transposition of directive 2009/38/EC several
dilemmas need to be addressed.
Firstly, the choice between financial penalties or incarceration of perpetrators. It needs to be
pointed out that incarceration can be applied only to individuals acting as organs or
representatives of companies. Financial penalties can be applied to corporate entities, i.e.
legal persons. Also, importantly, when optimal dissuasion can be achieved equally through
fines and prison sanctions (see above in this chapter) it is the financial penalties that are the
preferred choice since they are less costly to execute than prison sanctions (Faure 2010: 266;
Polinsky and Shavell 1979). On basis of the economic calculations many economists argue
therefore against prison sanctions and why many have qualified financial penalties as the
ideal sanction for corporate crimes (Faure 2010: 266). Arguably, however, the deterrent
potential of financial penalties is lower for individuals in key decisional positions as their
personal actions and decisions in case of conviction are warranted with impersonal (i.e. not
their own) property, but that of a company; therefore, it is argued that incarceration due to its
severity increases the deterrent potential of sanctions and fulfils the function of dissuasion
better than financial penalties (Comey 2009). In legal theory, there is one more argument
raised against financial penalties: in cases where the fines are extremely high they might
exceed the company’s economic capacity to pay and cause insolvency; however, with regard to
EWC legislation on national level this argument does not apply as according to the
comparison of the amount of maximum fines potentially payable in individual Member States
they are of a relatively small size compared to multinational companies’ revenues and profit.
This could of course change if the legislators took into account considerations on the optimal
penalty level according to which when determining financial sanctions’ levels one needs to
consider the deterrence potential and outweigh the low detection rate (see above in this
chapter; also Faure 2010: 267). As long as this is not the case it is possible to argue that some
mix of financial and prison sanctions be in place. Such systems can add substantially to
expected costs for the perpetrator and thus are positively correlated with the deterrence
potential of the sanction system at large (ibid. 268).
Secondly, it is pointed out that monetary sanctions can in principle have both an
administrative and