Managing restructuring – is legal regulation necessary?

Newsletter articles

1 Feb 2014

Employment Studies Issue 19

Andrea Broughton, Principal Research Fellow

The past five years have been extremely challenging in economic terms in the European Union, with public sector financial constraints and austerity measures having a massive impact on the labour market in many countries. Many individual businesses have been suffering in this climate and have tried to remain competitive by restructuring, usually involving the shedding of labour. While it is accepted by all stakeholders, including trade unions, that restructuring is a way of life for companies, which must adapt to the ever-changing business environment in order to remain competitive, there have been repeated calls from some quarters to the European Commission to provide some kind of overarching framework to regulate this. We examine recent developments.

The Commission first started looking at this issue around a decade ago, and encouraged the EU-level social partners (the European Trade Union Confederation (ETUC) for trade unions, BusinessEurope and UEAPME for private-sector employers and CEEP for public sector and third-sector employers) to negotiate on best practice in managing restructuring. A joint text was agreed in 2003[1], but the Commission wanted to take the issue further, as there were concerns about the implementation of the text in Member States. Over the past couple of years, there have been hints that the Commission might be willing to put forward some kind of proposal on the anticipation and management of restructuring. Certainly, the European Parliament has been encouraging the Commission to issue a proposal for a legal act, although not necessarily a binding one.

IES involvement in evidence gathering

The Commission has, over the past few years, been gathering evidence on what is being done in Member States to anticipate and manage restructuring, with the aim of building a comprehensive picture of available practices and tools. Anticipation of restructuring generally revolves around forecasting systems for labour market movements and skills needs, ultimately matching skills supply with demand. Management of restructuring engages more with the individuals affected by the restructuring, and especially those who are being made redundant, helping them to increase their skills base and their employability, and giving concrete advice and guidance in the search for a new job.

IES has been involved in some of these evidence-gathering exercises, looking, for example, at anticipating and managing restructuring in all EU Member States[2] and at the transferability to the Baltic states of anticipation schemes in Finland[3]. IES is also currently involved in providing expert assistance to a European Commission-funded project aiming to encourage the sharing of good practice on the anticipation and management of change between France, Germany, Bulgaria and Romania. This will result in a set of transnational guidelines on the anticipation and management of change.

New quality framework for anticipation of change and restructuring

The Commission has recently issued a proposal for what it terms an EU Quality Framework for the anticipation of change and restructuring[4], based on the experiences of companies. The framework contains elements such as the strategic long-term monitoring of market developments, continuous mapping of jobs and skills needs, measures for individual employees such as training and assistance to facilitate professional transitions, involvement of external actors at an early stage, and making full use of EU structural funds.

It is made up of a series of sections describing good practices, according to the different actors involved, such as employers, employee representatives, individual employees, the social partners, sectoral organisations and national and regional authorities. However, it includes no mechanism for legal enforceability, and this has severely disappointed European trade unions, which have been campaigning for legal regulation in this area. By contrast, European employer representatives have been vocal in their opposition to the introduction of any kind of legal regulation governing restructuring.

Is a legal framework necessary?

The question of whether some sort of legal framework is necessary to improve the overall management of restructuring is a moot point: trade unions argue that the issue is traumatic for workers and that actual company practice is largely not meaningfully regulated, beyond European Directives in areas such as the information and consultation of workers, employee rights during business transfers, and notice periods under the collective redundancies Directive. Trade unions therefore believe that there is a need for an over-arching European framework which would set out workers’ rights, place certain obligations on employers during restructuring situations and contain sanctions for any breaches. However, employer representatives argue that enough regulation at EU level already exists, thus adequately protecting workers, and that it is imperative that no more regulatory burden be placed on businesses, which are already suffering enough in the current economic climate. Employer representatives are also concerned to ensure that restructuring, while needing to be carefully managed, is not made more costly and protracted.

Whichever view one takes, it looks as though EU-level regulation of the anticipation and management of restructuring will remain, for the foreseeable future, in the form of guidelines and best practice, even though the Commission has left the door open to possible legislation in the future, by stating that a review of the Framework in 2016 will establish whether further action is necessary, including a legislative proposal.

Footnotes [back]

[1] Orientations for reference in managing change and its social consequences: http:// ec.europa.eu/social/BlobServlet?docId=2750&l angId=en

[2] The ARENAS project. Bergström O, Broughton A, Triomphe C E (2010). 27 National Seminars on Anticipating and Managing Restructuring – A.R.E.N.A.S.. 2008/0667, European Commission

[3] Broughton A (2012). Social partnership for anticipating change and restructuring: Mutual learning: Finland and the Baltic countries. International Labour Organisation (ILO).

[4] Communication (COM (2013)882 final) on an EU Quality Framework for anticipation of change and restructuring, 13 December 2013.