Cover Package: Regulatory Compliance European Directives: Born and Bred

Though influential, European Union directives are widely misunderstood.

By Susan Heylman Feb 1, 2013
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0213cover.gifThe largest economy in the world isn't the United States or China, according to the Central Intelligence Agency World Factbook. It's the European Union.

This group of 27 member states has also been at the forefront of employment law trends, addressing topics ranging from conditions of employment and leave laws to digital data privacy protections.

For employers to conduct business in the world's largest economy, HR professionals must know what the region's employment laws are and how they are developed.

Most EU employment laws are enacted as directives. Like regulations, directives are binding on the member states and have precedence over domestic laws.

Don't make the mistake of thinking they work like U.S. employment laws. Directives don't tell companies how to treat employees, for example. Rather, directives set an objective or policy and then "direct" the governments of member states to take steps to meet that objective. A directive sets a minimum standard or base line, and each EU member state must pass legislation to give effect to that standard or base line.

Because most of today's directives were enacted 10 or 20 years ago, they may not reflect court interpretations; changing work patterns that have resulted from globalization, technology, a more diverse workforce or work intensification; and competitive pressures. For this reason, the European Commission says they need updating.

How Directives Come into Being

The European Commission represents the interests of the EU as a whole. It has the right of initiative to propose directives. In most cases, it acts under EU treaties or at the request of another EU institution, country or stakeholder. In addition, since April 2012, citizens who gather a million signatures may petition the commission to propose a directive.

Before it issues a draft directive affecting social or employment issues, however, the commission must assess the economic, social and environmental effects, and must go through a dialogue process with the EU's social partners.

Social partners include trade unions, employer groups and industry organizations such as the European Trade Union Confederation. If the social partners agree on the proposed measures, the result becomes a framework agreement that is incorporated into the proposed directive.

Over the years, there have been seven framework agreements. Some, such as agreements on parental leave and fixed-term work, have been transformed into directives; others, such as agreements on work-related stress and harassment and violence at work, have not.

If the social partners can't agree, the commission is free to decide whether to proceed.

European Union Decision-Making

After consultation with the social partners, the European Commission votes on the draft directive. If at least 17 of 27 commissioners agree, the draft directive is sent to the Council of the EU and the European Parliament. Both institutions must vote to adopt the directive. It's not always smooth sailing for the commission's proposals, however, because of the differences in the makeup of these two bodies.

The Council of the EU represents individual countries. It has one minister from each member state, and ministers differ by policy area. When employment issues are being considered, for example, appropriate specialists sit as the Employment, Social Policy, Health and Consumer Affairs Council (EPSCO). When EPSCO meets, usually around four times a year, and votes on employment directives, a qualified majority—a weighted voting system based on state populations—is required.

The European Parliament directly represents EU citizens. It is made up of 754 elected state representatives; the number of representatives for each country is roughly set in proportion to the country's population. Members of the European Parliament are organized along political lines—not by nationality—and divided into 20 committees, including the Employment and Social Affairs Committee. A majority of the votes cast must be in favor of the directive for it to pass.

Implementing Directives

Many directives do not really harmonize anything, because all they do is set up a minimum base line, says Dan Dowling, international employment attorney with White & Case in New York. And member states have latitude to implement them to different degrees.

If a country has a law that meets the directive's base line, it may ignore the directive; another country may enact a national law that is stronger than the directive. If a country already has in place a stronger law, however, it cannot lower its standard to the base line.

For example, Directive 2010/18/EU—the result of a framework agreement enacted in March 2010—extended parental leave to four months for each parent following the birth or adoption of a child. A country may either enact a law that provides that minimum or provide more time—like in Sweden, where parents may receive 16 months.

So, if you are an EU employer—a factory owner in Germany with 80 employees, for example—you don't think in terms of directives. "You know you have to follow the law, but you think in terms of following German law. If there's a new directive that caps the maximum hours of a workweek, and if the German law doesn't meet the objectives of that directive, then the German legislature has to change its law. But you, the employer, just follow the German law, until your legislature makes that change," Dowling explains.

Enforcement

Sometimes member states don't meet the two-year deadline for implementing directives, and sometimes they have difficulty getting legislatures to pass a law that meets the directive's goals. What happens then?

The European Commission monitors implementation. Generally, if a country has not acted, the commission opens informal infringement proceedings. For example, in October 2012 the commission issued a request to Denmark to implement the temporary agency workers directive into national law after it missed a deadline. If the country still does not act, the commission can refer it to the EU's Court of Justice for an enforcement ruling.

Social partners may push the commission to act. A federation of Swedish staffing and outplacement recruitment companies filed a complaint in November 2012 alleging that Sweden had missed the deadline to implement the temporary agency workers directive and that its draft legislation did not properly put into practice the directive's prohibition against unjustified restrictions on the use of temporary workers.

If a country's legislation doesn't fulfill a directive, the commission may bring the issue to court. When Hungary enacted legislation that lowered the compulsory retirement age for judges and prosecutors to 62 from 70, the commission brought judicial action, saying the law constituted age-related discrimination prohibited by the EU's equal treatment rules under Directive 2000/78/EC.

In November 2012, the Court of Justice ruled that Hungary's law—having forced hundreds of early retirements—violated the directive. The commission will monitor the measures that Hungary takes to comply with the ruling and may ask the court to impose financial penalties if Hungary does not reinstate those who were forced to retire.

When It's Time to Update

Directives get rusty and must be updated periodically.

For example, the 1993 working time directive ensures minimum protections for all workers in working hours, regular rest periods, night work and paid annual leave.

Member states have difficulty implementing the directive, however, and applying it to new work situations, explains Chris Ivey, an employment attorney with Freshfields Bruckhaus Deringer in Paris.

Also, the directive allows member states to opt out of the provision setting a 48-hour workweek limit and allows workers to contract to work longer hours. In all, 16 member states currently allow the opt-out to varying degrees. In France, for instance, the possibility of opting out of the 48-hour maximum workweek is applied in a restricted manner compared to the United Kingdom's opt-out provisions.

There is uncertainty related to the application of the directive on the use of on-call time in the workplace, also, generally with respect to health care professionals. "The working time directive does not consider on-call work as working time, but the European Court of Justice has done so in several cases," Ivey notes.

Hence, the European Commission has proposed updating the working time directive. During consultation, social partners have been discussing whether the court's rulings interpreting on-call time as working time should be integrated in the revision. "While employers are looking for flexibility, employee unions are seeking a higher level of protection of employees' health and safety," Ivey explains.

Initially, the goal of EU employment law was to ensure that creation of the single market did not result in deterioration of labor standards and working conditions. Since 1992, the EU has legislated broadly in many areas—from working time and redundancies to anti-discrimination and equal treatment. But with economic challenges affecting so many member states, that may be changing.

Representatives for a growing number of member states are objecting to new regulations to avoid burdening companies at a time when some are battling to survive, notes Audrey Williams, an employment law attorney with Eversheds in London. There is a call for deregulation in response to the global economic downturn and the need to increase competitiveness. Given the already comprehensive coverage of EU employment law, she says, such a trend will be welcomed by employers.

The author is an attorney and freelance legal writer and editor based in the Washington, D.C., area.

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