Opinion of the European Economic and Social Committee on Social dialogue and employee participation, essential for anticipating and managing industrial change
Date: 2005-09-29
Institutions: European Economic and Social Committee
Subjects: EU policy, competitiveness, economic and social cohesion, industrial policy, industrial restructuring, social dialogue

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Opinion of the European Economic and Social Committee on Social dialogue and employee partici-
pation, essential for anticipating and managing industrial change

(2006/C 24/17)

On 1 July 2004 the European Economic and Social Committee, acting under Rule 29(2) of its Rules of
Procedure, decided to draw up an opinion on Social dialogue and employee participation, essential for antici-
pating and managing industrial change.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's
work on the subject, adopted its opinion on 12 September 2005. The rapporteur was Mr Zöhrer.

At its 420th plenary session, held on 28 and 29 September 2005 (meeting of 29 September), the European
Economic and Social Committee adopted the following opinion by 138 votes to two with seven absten-
tions:

1. Introduction and objectives

Industrial change is a constant process in which an
1.1
industrial sector adapts to changing conditions in its economic
environment in order to remain competitive and create growth
opportunities.

technologies,

industrial change is a necessary adaptation to
1.2
Thus,
shifts in markets,
legal or social conditions,
economic policy, and society in general. Ideally, such shifts are
anticipated or deliberately brought about so that the sector
concerned can take a proactive position, effect a gradual
process of adaptation and minimise the negative impacts of the
adaptation process.

1.3
If there is no response to change, or the response comes
too late, this will generally lead to a loss of competitiveness
and the threat of job cuts. Restructuring that is carried out only
in response to change usually has painful effects, especially for
employment and working conditions. Poorly managed restruc-
turing may result in a loss of image for the company or for an
entire sector, and create a general mood of resistance to
change.

1.4 Whatever form it takes, industrial change is an ongoing
process in the economy, but one which can and must essen-
tially be shaped by stakeholders. It takes place in companies,
affecting everyone connected with them (workers, employers,
regions, etc.)

1.5
The success of this process can be measured by the
competitiveness and ability to innovate of the companies or
sector concerned on the one hand, and the safeguarding of jobs
and the social management of adverse repercussions on the
other.

Certainly, this can work most effectively if those affected
1.6
are involved in managing change. The fact
that change is
managed at every level of sectors and companies, not just at
in terms of a
management

is not only significant

level,

successful consensus-based adaptation process, but is also an
important condition for competitiveness. Both social dialogue
and worker involvement and participation are thus important
elements of the European social model.

1.7
A review of recent European Commission initiatives
relating to industrial policy demonstrates the increasing impor-
tance it attaches to identifying synergies and involving stake-
holders in achieving structural change. Such measures can
allow industrial change to be managed in a socially acceptable
way if the social partners are systematically involved in antici-
pating and managing change, and the dual objective of making
businesses competitive and minimising the negative social
impact is consistently pursued.

1.8
In its opinion on Industrial change: current situation and
prospects (1), the Committee recommended that the future work
of the CCMI should include the following areas:

— seeking positive common approaches to anticipating and
managing industrial change and seeking ways in which the
EU and the Member States can improve firms' competitive-
ness and profitability, encouraged by social dialogue and
cooperation between all the parties concerned;

— seeking common approaches

to promoting sustainable
development and improving social and territorial cohesion,
in order to give an impetus to the Lisbon strategy, and
promoting a framework and conditions allowing industrial
change to take place in a way compatible both with firms'
need for competitiveness and with economic, social and
territorial cohesion (2).

Of

course, managing change

successfully involves
1.9
numerous measures at various levels. At Community level,
change must be approached from a horizontal perspective and
flanked by a range of measures (for example, relating to macro-
economic conditions, employment and social policy, financial
support instruments, industrial policy etc.).

(1) Rapporteur: Mr Van Iersel; co-rapporteur: Mr Varea Nieto.
(2) Ibid, point 1.7.

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1.10
The purpose of this opinion is to highlight the impor-
tance of social dialogue, and of worker involvement and parti-
cipation, as the key to effective management of
industrial
change, and to draw conclusions for the future development of
social dialogue and Community measures.

2. The contribution of social dialogue to managing indus-

trial change

2.1
Social dialogue takes place at various different levels and
involves various different players. Each level, whether national,
regional, European, company, sectoral or cross-sectoral, can
make an important contribution of its own to preparing for
change and managing its impact in a socially acceptable way.
However, in order to fulfil its function, social dialogue must
meet certain conditions, and there must be coordination
between the various levels on which action takes place.

2.1.1
To manage change with foresight, the social partners
must develop joint long-term objectives. This requires a conso-
lidated and trust-based partnership and culture of dialogue, on
the basis of which long-term approaches as well as consensual
solutions can be achieved in times of crisis. The existence of
representative and stable structures in the organisations of the
social partners is an important prerequisite for action.

ment of Living and Working Conditions has an important role
to play here.

2.4
In addition, sector-specific EU initiatives are of great
importance; these recommend specific measures to achieve and
maintain competitiveness, based on an analysis of the current
position and future prospects of a particular sector through an
extensive consultation process involving the social partners.

Sectoral social dialogue was first initiated at European
2.5
level by the ECSC Treaty. Continuous
social dialogue,
conducted under ECSC auspices and involving ongoing market
monitoring, research and innovation programmes, price and
competition policies, and measures
to help workers and
regions to adapt, has demonstrated that industrial change and
restructuring can be managed in a socially acceptable manner.
Today too, change should be managed using all the tools avail-
able under the Treaties.

2.5.1
Even after expiry of the ECSC Treaty, current Euro-
pean sectoral dialogue — conducted through sectoral social
dialogue committees — would do well to take this comprehen-
sive approach on board. These committees could then, in addi-
tion to debating social issues, play a stronger role as consulta-
tive bodies for all EU initiatives impacting on the industrial
development of a given sector.

It is thus also of crucial

2.1.2
importance to support the
in developing and strengthening the
new Member States
machinery of social dialogue, in order to jointly meet the chal-
lenges of
industrial change resulting from the integration
process.

2.1.3
In order to promote a positive attitude to change, it is
important at an early stage to come to a shared understanding
of what change actually means and of social partners' scope to
shape it by creating a business culture geared to participation.
At the same time, long-term preparations for change can be
made through measures such as basic training, multi-skilling
and lifelong learning. These measures should also specifically
pursue the goal of worker employability.

3. Including and involving workers and their importance

for industrial change

Industrial change has implications for workers, ranging
3.1
from the need to obtain new qualifications due to technological
innovations and changes in work organisation and working
conditions to loss of employment. It is therefore crucial that
workers should be able to adapt to these different conditions
and that the right measures be taken to minimise any negative
impact on them while optimising the positive effects. At the
same time, it is also important for workers to be informed of
change in good time and in an appropriate manner, and to be
able to be involved in this process.

At a hearing held by the Commission in January 2002,
2.2
its
the social partners discussed the issue of restructuring,
consequences and how to manage them. Case studies were
used to demonstrate best practice. The social partners then
produced ‘reference guidelines
for managing change’. The
Committee would like to see this work being continued and
put into practice.

3.2
This is the only way to ensure that change takes place
and is accepted — not just at company management level but
also in the minds of workers. If industrial change cannot be
managed in a way that is socially acceptable for workers, then
conflict will ensue.

In order to anticipate change,

2.3
information is required
about its causes and correlations. Regular exchanges between
the social partners on the outlook for their sectors and compa-
nies are therefore essential. The European Monitoring Centre
on Change of the Dublin-based Foundation for the Improve-

3.3
The inclusion and involvement of workers and their in-
house representatives and trade unions is therefore crucial to
managing change in a socially acceptable way and maintaining
employability, and thus to avoiding conflict. Ideally companies
should develop into interactive entities
that operate pro-
actively. This promotes
innovation and ultimately also a
company's competitiveness.

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transnational channels of worker

3.4
Given that business decisions are increasingly taken in a
global business context, and often within multinational compa-
nies,
representation are
becoming much more important as an adjunct to the opportu-
nities and facilities for worker involvement available at national
level.

3.5
European works councils have a special role to play
here. There are already some examples of agreements on
restructuring measures reached by companies with European
works councils. There are also examples of agreements reached
with European trade union federations. This experience can
certainly be considered positive, since there is a risk especially
in international companies that reducing the social impact in
one place will have an adverse effect on another.

3.6
Clearly, transnational social dialogue is continuing to
forge ahead at company level. However, the Committee has to
say that this trend does raise certain issues for those involved.
Agreements reached in this way lack a watertight legal frame-
work to settle questions of legal enforceability and pay due
regard to the rights and traditional roles of the social partners,
i.e. employers and authorised employee representatives. The
same also applies to the proposal to provide an optional frame-
work for transnational collective bargaining announced by the
Commission in its Communication on the Social Agenda for
the 2005-2010 period.

3.7
The Committee is aware that instruments and systems
for employee participation among SMEs are not as well devel-
oped as those in larger companies. However, we believe that
the same, a partnership-based
even if conditions are not
for managing change in these
approach is very important
smaller companies as well.

4. Community policy with regard to industrial change

4.1 Legislation

4.2 Industrial policy

4.2.1
The Commission launched a new era in European
industrial policy with its Communication on Fostering structural
change: an industrial policy for an enlarged Europe of April
2004 (3).
In its opinion of December 2004, the Committee
welcomed the Commission's strategy. Once again, it should be
emphasised that the Commission has brought about a para-
digm shift, putting industrial policy back right at the top of the
European agenda.

4.2.2
The Committee's main concern now is to deepen the
sectoral approach, enabling tailor-made solutions for individual
sectors to be found. It is important not only to look at sectors
which are in crisis, but also to analyse as many sectors of Euro-
pean relevance as possible, in order to respond to change at an
early stage and manage it proactively. Social dialogue has a
special role to play here.

4.3 Social dialogue

4.3.1
At its spring summit in 2004, the European Council
called on the Member States to build ‘partnerships for change’
involving the social partners, civil society and public authori-
ties.

4.3.2
In view of this and of the mid-term review of the
Lisbon strategy, the Commission has published a Communica-
tion entitled Partnership for change in an enlarged Europe —
Enhancing the contribution of European social dialogue (4).

4.3.3
The purpose of this Communication is to promote
awareness and understanding of the results of the European
social dialogue,
to improve their impact, and to promote
further developments based on effective interaction between
different levels of industrial relations.

4.1.1
A great deal of Community legislation already has a
direct or indirect bearing on industrial change and restruc-
turing, and the impact thereof. There are various directives on
information and consultation rights, the protection of workers
from the consequences of restructuring (European works coun-
cils, European companies, legislative frameworks for informing
level, employer insol-
and consulting employees at national
vency,
the
right to be consulted in competition proceedings).

transfer of undertakings, collective redundancies,

4.3.4
In its Communication, the Commission demands that
social dialogue should yield tangible results. It therefore recom-
mends that social partners should publicise texts issued by
them more forcefully, make them clearer and more effective
(for example by using easily comprehensible language), ensure
that they are followed up, and standardise categories of text. In
this connection it should be pointed out that the effectiveness
of European social dialogue is increasingly dependent on the
quality of labour relations at national level.

4.1.2
All of this legislation relates either to a very general
framework for informing and consulting employees or to
specific consequences of change or restructuring, and, to a
large extent, the individual provisions can be applied indepen-
the
dently of one another. Building on these foundations,
Committee feels that Community law must be assessed, conso-
lidated and, if need be, further developed in order to anticipate
change.

In its Communication, the Commission puts forward a
4.3.5
series of proposals to enhance synergies at different
levels
(European, national, sectoral, company) and to strengthen the
structures of social dialogue while boosting its effectiveness and
impact.

(3) COM(2004) 274 final, 20.4.2004.
(4) COM(2004) 557 final.

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The Committee does not at

4.3.6
this time intend to
comment on the Commission's proposals in any more detail,
since the initial response should come from the social partners,
as autonomous agents.

opments’, but should apply to any situation in which the social
partners consider that there is a need for action. This would be
more in keeping with the objective of anticipating and accom-
panying restructuring.

However,

4.3.6.1
it does welcome all efforts to promote
social dialogue, particularly in the new Member States, where
there is still significant ground to make up. The Committee
notes that in relation to training, for example, a great deal of
work still needs to be done to strengthen infrastructure and
provide technical support, particularly in terms of
funding.
Hence, the Commission's proposal to allocate a part of the
resources in the Structural Funds for this purpose seems both
logical and coherent.

In the new Member States, restructuring processes result in
considerable job losses and largely involve privatisation. Effec-
tive social dialogue is needed to negotiate appropriate and
legally enforceable social packages before these processes begin.

4.3.6.2
The Committee also supports the Commission's
intention to encourage new sectors to launch a social dialogue
and to contribute to the achievement of the Lisbon objectives.

4.4 Restructuring and employment

4.4.1
Both the Social Agenda adopted on 9 February 2005,
and the Communication on the review of the sustainable devel-
opment strategy envisage that the Commission will develop a
strategy for managing restructuring operations focused on
improved interaction between the relevant European policies,
greater involvement of the social partners, enhanced synergy
between policies and financial levers and the adaptation of the
frameworks of legislation and wage agreements.

4.4.2
The Commission's Communication of 31 March 2005
on Restructuring and employment (5) sets out the measures to be
developed or strengthened in relation to the various means that
the Union can mobilise to this end through cross-cutting and
sectoral action. It also proposes a range of measures in various
EU policy areas.

The Committee will draw up a separate opinion on
4.4.3
this Communication. At all events,
it welcomes the broad
multidisciplinary approach chosen by the Commission. From
the perspective of the current opinion, several of the Commis-
sion's proposals are of particular relevance.

Particular emphasis should be placed on strength-
4.4.3.1
ening sectoral social dialogue. The Committee shares the
Commission's view that the social partners, given their special
knowledge of the sectors concerned, have a role to play in
alerting the authorities. However, this option should not be
restricted to times of crises nor to ‘particularly worrying devel-

(5) COM(2005) 120 final.

The Committee awaits with interest

4.4.3.2
the planned
Communication on corporate social responsibility which will
focus in particular on positive initiatives being taken by firms
and the various stakeholders to address restructuring. After all,
it is a matter not only of developing the legal foundations, but
also going beyond that, of publicising and promoting good
the
practice in the management of change.
Committee would point out that those indirectly affected by
the restructuring of
individual undertakings (e.g. suppliers,
service providers, etc.) should also be taken into consideration.

In particular,

4.4.3.3
The Committee also welcomes the establishment of
a ‘restructuring’ forum, whose mission is to monitor the rele-
vant changes and to ensure that the various initiatives are prop-
erly dovetailed. The forum brings together the Commission, the
other European institutions, the social partners and outside
specialists. This is consistent with the cross-cutting approach
followed in the Communication. The Committee is happy to
work with this forum and will bring its expertise to bear.

The Commission is also planning a second phase of
4.4.3.4
the European social partners on company
consultation of
restructuring and European works councils As mentioned in
points 2.2, 3.5 and 3.6 above, the Committee feels there is a
need for action on these issues.

5. Conclusions

5.1
Europe needs to face up to the key challenge of success-
fully managing industrial change while at the same time main-
taining and restoring competitiveness to businesses and sectors;
this in turn makes a decisive contribution to achieving the
objectives of the Lisbon process.

The success of this process of change is measured not only in
terms of the competitiveness of a company or sector, but also
of safeguarding jobs and managing the adverse social impact.

5.2
Alongside a range of measures at various levels, social
dialogue and the inclusion and involvement of workers are
crucial to the successful management of industrial change.

5.3
Social dialogue needs to build on consolidated, trust-
based partnerships and a culture of dialogue, marked by effec-
tive representation and stable structures. The Committee
welcomes all efforts to promote social dialogue, particularly in
the new Member States, where there is still significant ground
to make up.

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The social partners need to be given stronger analytical
5.4
tools. The European Monitoring Centre on Change of
the
Dublin-based Foundation for the Improvement of Living and
Working Conditions has an important role to play here.

5.5
Sector-specific EU initiatives are of great importance;
these make specific recommendations for measures to achieve
and maintain competitiveness, based on an analysis of the
current position and future prospects of a particular sector
through an extensive consultation process involving the social
partners. The Committee therefore supports the Commission's
intention to encourage new sectors to launch a social dialogue
and to contribute to achievement of the Lisbon objectives.

5.5.1
It is important, however, not only to look at sectors
which are in crisis, but also to analyse as many sectors of Euro-
pean relevance as possible, in order to respond to change at an
early stage and manage it proactively.

5.6
The inclusion and involvement of workers and their
representatives and trade unions is therefore crucial to mana-
ging change in a socially acceptable way at company level.
Among other things, this promotes a company's innovation
and, ultimately, its competitiveness as well.

5.7
European works councils have a special role to play
here. Transnational social dialogue at company level is clearly
forging ahead, as shown by the example of agreements on
restructuring measures reached by companies with European
works councils and/or European trade union federations. The
same also applies to the proposal to provide an optional frame-
work for trans-national collective bargaining announced by the
Commission in its Communication on the Social Agenda for
the 2005-2010 period.

5.8
The Committee welcomes the broad, multidisciplinary
approach chosen by the Commission in its Communication of
31 March 2005 on Restructuring and employment (6). Particular
emphasis should be placed on strengthening the sectoral social
dialogue, which can do much to anticipate and accompany
restructuring processes.

5.8.1
Communication on corporate social responsibility.

The Committee awaits with interest

the planned

5.8.2
turing forum and will bring its expertise to bear.

The Committee is happy to work with the restruc-

Brussels, 29 September 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

(6) COM(2005) 120 final.