CHAPTER 7: MAIN ECONOMIC AND SOCIAL CHALLENGES: THE RESPONSE OF THE EU

1: PRINCIPLES EXPRESSED IN AND RESULTING FROM THE COMMISSION’S CONSULTATIONS OF EUROPEAN SOCIAL PARTNERS

1.1: THE 2002 CONSULTATION OF THE EUROPEAN SOCIAL PARTNERS ON ANTICIPATING AND MANAGING CHANGE

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  the usefulness of establishing at Community level a number of principles for action which would support business good practice in restructuring situations;
  
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  the method of drawing up and developing these main principles and, in this context, whether they consider that agreements between the social partners at cross-industry or sectoral level represent the appropriate way of proceeding; and
  
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  any other appropriate initiative that should be further considered.
  

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  anticipating and assessing the social consequences of restructuring, including taking into consideration the fact that delaying limited restructuring may lead to more wide-ranging restructuring in the future;
  
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  the principle whereby job losses and redundancies should be a last resort (ultima ratio), to be used in the absence of other, less drastic solutions;
  
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  an effective search (by providing the necessary resources or by achieving certain set targets) for alternative solutions, such as redeployment, training or retraining of the workers concerned. Planned measures should be phased in over time, and efforts should be made to reorganise work, including working time, as a precondition for the use of more radical measures. Help should be provided in relation to jobseeking, occupational guidance, supporting the development of self-employment or the creation of SMEs by the workers affected, and support should be given to workers taking over certain activities of the business;
  
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  examination of the feasibility of finding individuals to take over the business activities that have been affected by the restructuring; and
  
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  the rehabilitation and reallocation of abandoned industrial sites, both as an environmental measure and the absorption of a proportion of the jobs lost as a result of restructuring.
  

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  Managing careers. Good management of human capital makes for a successful changeover to the knowledge-based economy and strengthens the competitiveness of businesses. For this reason, without prejudice to the powers of the public authorities in this field, companies have an interest in helping to maintain their workers’ capacity to adapt to developments in the techniques and knowledge required for work. This could be achieved, for example, through ongoing training and regular and independent skills assessments or other such measures applied in certain countries. More generally, it is important that businesses try to anticipate the competences and skills that will be needed, taking into account as far as possible the rapid obsolescence of knowledge and skills. This responsibility also concerns workers who must avail of the training opportunities offered to them and thus contribute actively to the ongoing adaptation of skills. In this context, the acquisition of entrepreneurial competences plays an important role in improving employability.
  
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  Support for employability and adaptability. When designing and implementing restructuring, faced with the need for workforce adjustment, it is good practice to ensure that employees can continue to work in their chosen occupations. Achieving this involves an active partnership between companies, the public employment service, training bodies and other players concerned. Several types of measures applied in many Member States are relevant in this context: for example, redeployment, help in finding a new job, vocational guidance, support for the development of self-employment or the creation of SMEs by the workers affected by restructuring, and support for workers who take over some of the activities of the business.
  
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  Considering all options. The fact that there must be immediate, real and serious economic grounds to justify job losses, which are only considered after other, less damaging, options have been examined, is widely acknowledged and observed in the EU Member States. This concern for the lowest social cost, which encompasses the idea that any decision leading to job losses should be proportionate to the objective of ensuring the survival or maintaining the competitiveness of the company, needs to guide the practical implementation of restructuring plans. This may result, for example, in the phasing of the planned measures over time or prior reorganisation of work, including working time, before any recourse to job cuts. A clear explanation of the serious nature of the economic grounds underlying the need for job losses is essential.
  

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  Territorial responsibility. Aspects to take into consideration at territorial level include measuring local effects, cooperation with local players, local training, and the rehabilitation of industrial sites.
  
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  Downstream responsibility. Aspects to take into consideration here include the impact of the proposed restructuring on subcontractors by, for instance, concern for the security of orders, participation of the subcontractor’s workforce in training and adopting a global perspective, including subcontractors, when agreeing, adopting and implementing measures relating to the points set out above.
  

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  Involvement of workers. Social dialogue is essential for the successful management and acceptance of change. It can reinforce the effectiveness of the process and minimise its cost. Therefore, all restructuring processes need to involve effective cooperation with workers’ representatives in order to anticipate and successfully manage its social and economic consequences. Both parties need to engage in dialogue on the basis of full and wide-ranging information, while ensuring compliance with the principle of confidentiality.
  
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  Fair compensation. In accordance with well-established practice in all Member States, the provision of fair compensation in the form of, for example, payments or notice periods is an essential element that can smooth the adjustment process where job losses cannot be avoided.
  
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  Prevention and resolution of disputes. There are no measures at Community level for preventing or for helping to resolve collective industrial disputes that have a transnational dimension. Such measures exist at national level only, for disputes restricted to a single country. However, given the usefulness of such national systems for preventing and resolving collective industrial disputes, their potential for application at Community level needs to be explored.
  
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  SMEs. Particular attention should be paid to the way in which restructuring practices are developed by SMEs, taking into account their specific situation and needs and their more limited capacity to act, on one hand, and the need to preserve social cohesion and equity amongst the European workforce, on the other.
  

1.2: THE 2003 EUROPEAN SOCIAL PARTNERS’ WORK ON MANAGING CHANGE

In response to the above first consultation of the social partners, and following a series of seminars and case studies, European social partners’ representatives worked on a joint text entitled Orientations for reference in managing change and its social consequences.²¹⁶ However, the text has never been formally agreed by the social partners.
This text comprises six sections which broadly follow the list of themes proposed by the Commission in its consultation. For a broad outline of the content of this text, see box 7.1 below.
Box 7.1: Overview of the main provisions of the (never formally agreed) draft EU-level cross-sector social partners’ text, Orientations for reference in managing change and its social consequences of 16 October 2003

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  Introduction. The main challenges of the current economic and social situation are listed, among others, as globalisation, new technologies, competition, and modernisation of work organisation. The text stresses the importance of a positive attitude to change, and the existence of good-quality social dialogue, and explains the background to this joint text. It also mentions the European Monitoring Centre on Change (EMCC, based at the European Foundation for the Improvement of Living and Working Conditions, Dublin) as an important instrument of support.
  
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  Explaining and justifying change. This section stresses the importance of explaining and justifying the need for changes to employees, their representatives and managers, in good time, and respecting the obligations of information and consultation throughout the change process, in order to create a climate of confidence and trust. In this regard, several possible instruments for ensuring that this is done effectively are suggested, such as specific annual reports on developments, or documentation prepared for shareholders.
  
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  Developing employability. This section makes an explicit link with the social partners’ Framework of actions for the lifelong development of competencies and qualifications of March 2002,²¹⁷ which emphasises the importance of the ongoing competence development of employees.
  
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  Territorial dimension. This section emphasises the need for partnership at local and regional level between employers, trade unions and public authorities in order to promote the development of new employment-generating activities. It stresses the important role of the European Structural Funds in this regard (for more information on European financial support for restructuring, see chapter 3).
  
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  The specific situation of SMEs. In this section, the important role of SMEs in the local economic and social fabric and their vulnerability in the face of restructuring in regions dominated by one activity are brought to the fore, highlighting the need for a supportive business environment for SMEs, and the importance of involving their employees and/or their representatives in the management of change.
  
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  Managing restructuring. This is the most sensitive section of the text, in which the social partners agree that the management of restructuring must take account both of the needs of enterprises, and of the needs and choices of employees. The text stresses the need to explore all possible alternatives to dismissals (the ‘ultima ratio’ principle, ie that dismissals should be a last resort), including a list of possible options which could be considered as an alternative to redundancy in the case of restructuring. Emphasis is placed on the importance of the time factor in the good management of restructuring.
  

The main shortcoming of the text, however, lies in the lack of any appropriate dissemination and of any mechanism for its concrete application. The Commission therefore felt that it wanted to revisit this issue and subsequently issued a second consultation of the EU-level social partners, set out below.

1.3: THE 2005 CONSULTATION OF THE EUROPEAN SOCIAL PARTNERS ON RESTRUCTURING AND EMPLOYMENT

Following this first stage of consultation and the conclusion of the social partners’ joint text as set out above, a second phase of consultation of the European social partners was launched on 31 March 2005 as part of the Commission’s Communication on Restructuring and Employment.²¹⁸ In addition to the issue of restructuring, this Communication also focused on European Works Councils (EWCs), following a first consultation of the social partners on revising the EWCs Directive in April 2004. This consultation process ultimately led to a Commission proposal for a revised EWCs Directive in July 2008 and the adoption of the revised EWCs Directive in 2009 (Directive 2009/38/EC).
In setting the scene for this second consultation, the Commission stated, in the consultation document, that, in the context of anticipating and managing restructuring, ‘the preservation of social cohesion, which is a distinctive characteristic of the European social model, requires the introduction of accompanying policies designed to reduce the social costs to a minimum and to promote the search for alternative sources of jobs and income.’ It noted further that although restructuring is generally seen as a negative phenomenon, it is essential to the survival and development of enterprises. The negative impact of restructuring should therefore be managed as carefully as possible.
The Commission stated further that a range of factors contribute to restructuring, as follows:

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  the development of the European single market and the opening-up of economies to international competition;
  
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  technological innovation;
  
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  the development of the regulatory framework (the introduction of new regulations or deregulation); and
  
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  major changes in consumer demand, which are taking place as a result of, among other things, the new needs of an ageing population, greater sensitivity to environmental issues or changes in the geography of world demand.
  

The Commission noted that the EU social partners have a ‘decisive’ role to play in helping to mitigate the negative effects of restructuring, in two key areas:

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  within the European sectoral social dialogue committees, it is up to the social partners to develop ways of anticipating structural change, having regard particularly to negotiations at cross-sector level, and to their sectoral and regional monitoring initiatives; and
  
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  given their special knowledge of the sectors, they have a role to play in informing and alerting the authorities at all levels. If the social partners then decide to alert the Commission to a particularly worrying development, the Commission can decide to set in motion an enhanced process of sectoral monitoring.
  

The Commission then called on the social partners to become more involved in anticipating and managing change, noting in the consultation document that they are ‘key players in terms of effective action on the restructuring front’. It noted that this second-stage consultation should primarily consist of inviting the social partners to continue their ongoing work by encouraging the adoption of their best-practice guidelines on restructuring and European Works Councils. Acknowledging the work that the social partners have already undertaken in this area, notably the 2003 draft text, Orientations for Reference in Managing Change and its Social Consequences, the Commission felt, however, that there was a need for more European social dialogue input, and therefore encouraged the European social partners to intensify ongoing work and to start negotiations with a view to reaching an agreement on the requisite ways and means for:

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  implementing mechanisms for applying and monitoring existing guidelines on restructuring (agreed by the EU social partners in 2003), and a discussion on the way forward;
  
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  encouraging adoption of the best practices set out in the existing guidelines on restructuring; and
  
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  devising a common approach to the other points in the Communication which are of concern to them, more especially training, mobility, the sectoral dimension and the anticipatory aspect.
  

In the consultation document, the Commission stated its firm belief that ‘restructuring must not be synonymous with social decline and a loss of economic substance. On the contrary, restructuring can underpin economic and social progress — but only if such measures are correctly anticipated, and provided firms can manage the necessary change quickly and effectively, and provided public action helps ensure that the change is carried out in sound conditions’. It highlighted the following four dimensions as a focus for the response at Community level:

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  A need for consistency between the various policies, if growth and the ensuing restructuring are to avoid destroying human capital.
  
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  A need for a long-term perspective encompassing the various Community policies. If the economic and social players are to act effectively, they need to be able to see the way ahead.
  
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  A need for participation on the part of all the stakeholders, first and foremost the social partners.
  
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  A need to pay heed to the local dimension — it is, after all, at local level that anticipating change is most effective. Looked at from this angle, the European Union’s regional and cohesion policy must act as a catalyst.
  

The EU-level social partners have not concluded a second joint text as a result of this consultation exercise. They have, however, held a series of seminars throughout EU Member States, to discuss ways in which to anticipate and manage restructuring (for more details on this, see chapter 5).

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