European Commission consults on company restructuring

The European Commission launched a consultation in January 2012 aimed at identifying successful practices and policies in the management of company restructuring and anticipation of change. The issues raised include managing skills and jobs, involving employees and mitigating the employment effects of restructuring. 

On this page:
Background
Planned social partner consultation
Green Paper
Key questions
Identifying best practice
Controversy over delay.

Background

Since the late 1990s, the European Commission has been promoting the anticipation and "socially responsible" management of company restructuring. Restructuring refers to processes such as mergers, takeovers, internal reorganisations, relocations, outsourcing, bankruptcies and closures. The basic idea is that, in the short term, restructuring should be managed in a way that mitigates the negative effects on employment and supports those employees who are made redundant. In the longer term, change should be anticipated so as to prevent in advance traumatic job losses, prepare employees for the future and provide companies with the skills and people they need in a rapidly changing environment.

The Commission has taken a wide range of non-legislative initiatives to promote this approach, and has sought to incorporate it into the EU's broader employment policy. One strand of the Commission's work has been to involve EU-level trade union and employers' organisations, and encourage them to agree some form of EU-wide standards or good practice on managing restructuring.

The Commission first consulted the social partners on restructuring in 2002. In response, the cross-industry partners - the European Trade Union Confederation (ETUC), BusinessEurope (private sector employers), Ueapme (small and medium-sized firms) and Ceep (public sector services employers) - agreed a set of "orientations for reference in managing change and its social consequences" in 2003, which identified factors that can help prevent or mitigate the negative employment and social effects of restructuring. The status and expected impact of the document were not clear and it contained no provisions on implementation or follow-up. It has arguably had little effect.

In 2005, the Commission consulted again on restructuring, asking the social partners to engage in further work on this issue and agree on best-practice guidelines. The partners' response was limited to an agreement to promote and assess their 2003 joint text, and the organisation of a series of national seminars and reports on restructuring in the member states.

Planned social partner consultation

With the outbreak of the global economic and financial crisis in 2008, the Commission revived its efforts to persuade the EU-level social partners to reach a more substantial EU-level agreement on anticipating and managing restructuring. In 2010, it announced, in a Green Paper on industrial policy, that it would consult the social partners during 2011 on the idea of drawing up a European framework for good practice in company restructuring. This commitment was reiterated in a number of other Commission initiatives in 2010 as part of the EU's Europe 2020 jobs and growth strategy, such as the Single Market Act and the "agenda for new skills and jobs".

The European Commission's planning documents for 2011 included a consultation of the social partners on an "EU code of conduct in the field of change and restructuring that will act as a reference framework for all the stakeholders involved". They also implied that the Commission would propose an EU Recommendation on the issue if the social partners did not reach agreement.

However, the consultation did not occur during 2011 and, on 17 January 2012, the Commission issued a Green Paper entitled "Restructuring and anticipation of change: what lessons from recent experience?" (COM[2012]7 final) (PDF format, 103K) (on the Europa website). This launched a general public consultation on the issue, rather than a specific consultation of the social partners.

Green Paper

The Green Paper aims to identify successful practices and policies in the field of restructuring and adaptation to change in order to promote employment, growth and competitiveness as part of the Europe 2020 strategy. It is also intended to contribute to "improving synergy between all relevant actors" in addressing challenges related to restructuring and adaptation. The Commission wants to "renew the terms of the policy debate" on restructuring in the light of factors such as the lessons learned from the economic crisis, and deep changes in economic and competitive contexts worldwide.

The Commission will build on the outcome of the consultation to consider new ways to better disseminate and implement good practices, including at EU as well as national level, for dealing with both immediate concerns related to the economic crisis and long-term competitiveness objectives. Further, the consultation will contribute to "steering a renewed debate at EU level on a possible approach to, and framework for, restructuring". The Commission therefore appears to have stepped back from moving to a full social partner consultation and possible EU action, in order to hold further debate and consideration of the issues.

The consultation will also feed into EU employment strategy more widely, and into renewed work on the Europe-wide principles of "flexicurity" adopted in 2007. Flexicurity is an approach to employment policy that combines flexibility in labour markets, work organisation and employment relations with employment and social security.

The Green Paper covers a wide range of issues, affecting employers, employees and the public authorities at various levels. These include:

• lessons from the economic crisis;
• economic and industrial adjustment;
• adaptability of businesses and employability of workers;
• creating synergies in the process of industrial change;
• the role of regional and local authorities; and
• the impact of restructuring operations.

In each area, the Green Paper asks a number of questions and invites responses from all interested parties, including employers' organisations, trade unions, national, regional and local authorities, academics, NGOs, other stakeholders and individual citizens. Responses can be submitted online (external website) and must be received by 30 March 2012.

Key questions

The questions raised in the Green Paper that most directly relate to the employment relationship include the following:

• What can EU member states, the Commission or the social partners do to exchange, disseminate and encourage wider application of best practices that have emerged in dealing with restructuring during the economic crisis? These practices notably relate to short-time working schemes (whereby employers can lay off employees temporarily or cut their working hours in order to avoid redundancies).
• How can the existing orientations and guidelines on restructuring (including those agreed by the EU-level social partners) be improved in the light of the lessons learned from the crisis and new economic and social challenges, and how can the lessons from the crisis be disseminated and implemented?
• What can be done to encourage strategic long-term and innovative approaches to the management of change, including employment and skills issues?
• How can effective practices for anticipating employment and skills needs within companies be further encouraged, and how can training be developed as a permanent feature of HR management?
• How can companies and their workforces be encouraged to engage in early and appropriate preparation of restructuring processes, favouring acceptance of change, and what best practices exist in this field?
• To what extent can mutual trust and shared diagnosis (notably involving company management and employee representatives) play a role in the good management of restructuring, and how can this be promoted within companies and more broadly?
• What can companies and employees do to minimise the employment and social impact of restructuring operations, and what role can public policies play in facilitating these changes?
• What can companies, local authorities and all other stakeholders usefully do to minimise the regional impacts of restructuring?
• How can companies affected as a result of the restructuring of another company be supported in their own adjustment process and, in particular, how can small and medium-sized firms be better informed and assisted in the restructuring process?
• What role can the evaluation and reporting of past restructuring operations play in increasing knowledge and improving stakeholders' practices?
• What role could social dialogue (between employers' and employees' representatives) play in better disseminating and encouraging best practices for the anticipation and management of restructuring?
• Do some aspects of employment protection systems (for example, legislation on dismissal and job security) need to be reviewed in the light of a transition towards anticipation and proactive protection of employment?

In many of the areas listed above, the Commission also asks how synergies can be achieved between, and/or responsibilities allocated among, companies, the social partners and public authorities.

Identifying best practice

The Commission hopes that the consultation will help to identify specific restructuring measures that could help deal with employment and social challenges, and help companies improve competitiveness through innovation and a fast (but smooth) adaptation to change.

Presenting the Green Paper, László Andor, the EU commissioner for employment, social affairs and inclusion, said: "To be able to react better in the future, we have to understand the reasons behind the success of some measures in some countries, or sectors during the crisis. We have to look at how measures, like for example short-time work, can be used to deal with the challenges we are likely to face in the coming period ...We also want to see how we can best anticipate the employment and skills needs of the future, especially in the light of new challenges and growing social inequalities across member states. And last, but not least, we want to see how the social impact of restructuring can be limited."

Controversy over delay

For several years, the Commission has been planning to consult the EU-level social partners on a Europe-wide code of conduct for company restructuring and, if the social partners prove unable to agree on the issue, to propose EU action in this area. It has now delayed the formal social partner consultation and instead decided to hold a general public consultation on restructuring, covering a wider range of issues than the possible code of conduct. This change of tack may in part be due to the poor prospects of any kind of substantive agreement between the social partners. While the ETUC is generally in favour of an EU-wide initiative on restructuring, employers' groups, and especially BusinessEurope, are less keen.

The ETUC reacted very negatively to the Green Paper exercise. It commented: "After a decade of consultations (in 2002 and 2005), European projects and hand-wringing at the sight of large-scale uncoordinated restructuring, the Green Paper effectively puts 'old wine into new bottles' by returning to a full-scale public consultation rather than addressing concrete steps for EU action on anticipation and restructuring."

Judith Kirton-Darling, an ETUC confederal secretary, said: "As the very systems cushioning workers from the brutal impact of economic change are being undermined through austerity and deregulation, worker representatives are increasingly considered only as a means of ensuring the acceptance of change. On the contrary, it is only through consistent and stronger worker participation that change can be managed in a socially acceptable manner, trust is nurtured and anticipation policies can develop. With economic forecasts pointing downwards now is not the time for the Commission to sit on its hands and intensify the pain for workers. Workers will not be taken in by this charade. We demand concrete anticipation measures today, not in another 10 years."

BusinessEurope has not yet responded to the publication of the Green Paper, but is likely to be happy with the delay. It believes that there is already an EU-wide framework in place for restructuring, in the form of Directives on information and consultation, collective redundancies and transfers of undertakings. A code of conduct or binding principles on the management of restructuring would ignore the diversity of real-life situations and make it more difficult to adapt measures to them.

This article was written by Mark Carley, international editor.

International policy, practice and law, February 2012