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Keeping up with EU Directives

  • Europe
  • Employment law

30-06-2022

Employers, are you ready for the latest developments?

There is currently a myriad of EU Directives being implemented by EU Member States or progressing through the EU legislative process. All employers operating in the EU are likely to need to make at least some changes to their current arrangements to take account of the requirements of those Directives.

Each Directive is at a different stage of progress. When coupled with the different local speeds of implementation and requirements, keeping on top of the developments and planning for local legislative variations can be a significant challenge for employers.

In this briefing, we summarise some of the salient parts of the Directives that may impact employers operating in the EU and suggest some practical tips for employers wanting to keep ahead of the game. We also highlight the potential impact for employers operating outside the EU, provide a tracker of the current status of the Directives and set out how we can help.

Jump to section:
Whistleblowing
Transparent and predictable working conditions
Work-life balance
Pay transparency
Platform workers
Gender balance on company boards
Minimum wage
Corporate sustainability due diligence
Impact outside the EU
Directive tracker
How we can help
Contacts

Whistleblowing

The Whistleblowing Directive[1] aims to strengthen whistleblower protections by imposing new duties on employers to introduce effective and secure reporting channels, reinforced by significant legal safeguards for whistleblowers.

The Directive extends whistleblower protection to include a much wider group beyond existing workers, including job applicants, former workers, the self-employed, and those working for third parties.

Employers must operate internal whistleblowing channels meeting minimum criteria on diligent investigation and response. This includes a requirement to acknowledge reports within seven days of receipt and provide feedback within three months of the acknowledgement.

Although the deadline for Member States to transpose the Directive into national law has now passed, several countries have not yet implemented the Directive. This has led to the EU triggering legal action for the delay, including giving written notice to several Member States to remedy their failure to act.

For further details, see our briefing The EU acts to accelerate implementation of the Whistleblowing Directive across Member States.

Three key practical actions for employers to take now:

1.    Revisit whistleblowing policies and procedures. A gap analysis against the minimum requirements of the Whistleblowing Directive will identify any changes which will, at a minimum, need to be made to EU-wide policies and procedures.

2.    Monitor local implementation and variationsAlongside differences in the timing of implementation, local differences are being seen in the way the Directive is being implemented and penalties for breach. These differences will need to be considered in any updated policies and procedures.

3.    Train your teams. Qualifying whistleblowers have enhanced legal protection. Training should ensure that staff understand the importance of whistleblowing procedures and protections and the potential risks of non-compliance.

See how we can help below.

Transparent and Predictable Working Conditions

The Directive on transparent and predictable working conditions[2] provides rights for workers to more foreseeable and secure working terms and arrangements.

The Directive’s provisions include a right to receive certain written terms within a week of engagement, a limit on the duration of probationary periods, restrictions on the use of exclusivity clauses, and a right to refuse a work assignment outside previously defined reference hours/days without suffering adverse consequences. Additionally, the Directive will introduce an obligation for employers to provide cost-free mandatory training to workers.

Recognising the numerous ways in which workers are now engaged, the Directive seeks to ensure that all categories of workers, whatever the nature of the arrangement, receive certain key information as to their working conditions in writing at the outset of the arrangement and that there exist effective mechanisms in the event of non-compliance.

Although current indications are that some jurisdictions will miss the deadline, Member States have until 1 August 2022 to implement the EU Directive into domestic law.

For further details, see our briefing EU Directive on transparent and predictable working conditions.

Three key practical actions for employers to take now:

1.    Review existing standard terms of employment. An updated and more complete information package applies, with additional information required to be given to workers with variable work schedules. Any probationary periods should generally not exceed six months and the use of exclusivity or incompatibility clauses are generally prohibited.

2.    Look at existing processes for contract issue and amendments. Most information must now be provided between the first and seventh calendar day of employment. Any variations must be notified to the worker, at the latest, on the day on which the change takes effect.

3.    Consider training provision. Employers must provide workers with training free of charge where such training is required under EU law, national legislation or collective agreements. The training should be performed during working hours and count as working time.

See how we can help below.

Work-life Balance

Member States have until 2 August 2022 to transpose the provisions of the EU Work-life Balance Directive[3] into national law. The Directive aims to increase the participation of women in the labour market, increase the take-up of family-related leave and flexible working arrangements by men and provide opportunities for workers to be granted leave to care for relatives who need support due to serious medical reasons.

Across the EU, there are a raft of different rights to family-related leave and flexible working. The Directive seeks to provide some consistency in this respect, including by providing for minimum individual rights related to paternity leave, parental leave, carers’ leave, and flexible working arrangements for workers who are parents, or carers. It also gives additional legal protection for those applying for or making use of family-related leave and flexible working arrangements.

In their drive for social progress and improved working conditions, many Member States have been enhancing family-related leave for many years. However, further enhancements are still likely to be required in some Member States to ensure that the minimum standards required by the Directive are met. In particular:

  • Paternity leave: From the first day of employment, fathers or equivalent second parents will have the right to take paternity leave of 10 working days on the birth of a child. Generally, the right is to paid leave (at the national sick pay level), although Member States have the option to make the right to a payment or an allowance subject to periods of previous employment, which must not exceed 6 months immediately prior to the expected date of the child’s birth.
  • Parental leave: Each worker will have an individual right to 4 months paid parental leave, 2 months of which are non-transferable between the parents. At least 2 months of parental leave per parent must be paid “at an adequate level”. Again, Member States have the option to make the right to a payment or an allowance subject to periods of previous employment, however for parental leave this can be up to 1 year. Member States must ensure that workers have the right to request that they take parental leave in a flexible way, such as on a part-time basis or in alternating periods of leave separated by periods of work.
  • Carers’ leave: Carers are defined as workers caring for relatives requiring support due to serious medical reasons. Each carer will be entitled to take 5 working days per year.
  • Flexible working arrangements: Workers with children up to a specified age, but at least 8 years old, and carers have the right to request flexible working arrangements for caring purposes. These arrangements include the use of remote working arrangements, flexible working schedules, or a reduction in working hours. Member States may make the right to request flexible working arrangements subject to a period of work or length of service qualification, which must not exceed 6 months.

Three key practical actions for employers to take now:

1.    Revisit family leave, carers leave and flexible working request policies. A gap analysis against the minimum requirements of the Directive will identify any changes which will, at a minimum, need to be made to EU-wide policies and procedures.

2.    Review flexible work request processes. Employers must deal with requests within a reasonable period and provide reasons for refusing or postponing such arrangements.

3.    Monitor local implementation and variations. The Directive allows flexibility for Member States to decide how to implement the Directive in several respects. As such, variations between Member States are likely.

See how we can help below.

Pay transparency

The proposed EU Directive[4] to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms, is currently progressing through the EU legislative process. The EU Parliament recently voted to move forward with the proposal by entering into negotiations with EU governments.

Once agreed and formally adopted, Member States are likely to have two years to transpose the requirements of the EU Directive into local law. As such, the impact of the EU Directive is unlikely to be seen in most Member States before at least 2024.

The proposed Directive lays down several minimum requirements, including a right to certain information on pay at the job application stage and during employment, transparency over the criteria used to determine pay levels and career progression and pay reporting requirements. In some circumstances, there will be an obligation to carry out a joint pay assessment with the workers’ representatives and develop an action plan.

Given the scope and content of the matters covered by the EU Directive, it is likely that, even where Member States have existing equal pay and pay gap reporting legislation, national laws will still need changing to reflect the additional or different requirements set by the EU Directive. 

For further details, see our Pay Transparency briefing.

Three key practical actions for employers to take now:

1.    Develop a strategy to understand current pay practices and identify any pay differentials. Consider what information is already available and the scope of any audit to gain additional information. If an audit is undertaken, consider whether it should be completed subject to legal professional privilege.

2.    Start to identify where changes to current policies and processes may need to be made. For example, changes may need to be made to recruitment practices to comply with the pay information requirements at the job application stage, transparency may need to be built into pay and career progression structures and changes may need to be made to any existing pay reporting.

3.    Monitor the progress of the Directive. The requirements may shift as the Directive goes through the legislative process and as it is implemented locally.

See how we can help below.

Platform workers

Digital labour platforms (often referred to as the 'gig' or 'platform' economy) have become an increasingly prominent feature of the newly emerging social and economic landscape, with the number and size of labour platforms constantly growing. Estimates of revenues in the digital labour platform economy in the EU vary, but some put this at over 500% growth in the last five years, with around 30 million people working through such platforms.

Digital labour platforms often classify people working through them as self-employed. Although some digital platforms are starting to put in place certain benefits packages for self-employed platform workers, it is often the case that self-employed status results in workers being denied such benefits and key statutory rights. This means that such workers do not receive the minimum wage, collective bargaining rights, working time and health and safety protection, the right to paid leave or access to protection against work accidents, unemployment and sickness benefits, as well as pension rights.

In December 2021, the European Commission proposed a set of measures to improve the working conditions of platform workers and to support the sustainable growth of digital labour platforms in the EU. The Directive[5] aims to introduce measures to correctly determine the status of people working through digital labour platforms and new rights for both workers and self-employed people regarding algorithmic management (i.e., automated systems that support or replace managerial functions at work). The provisions would increase transparency around the use of algorithms by digital platforms and give platform workers the right to contest automated decisions.

To determine status, a list of criteria is proposed to be applied to determine whether the platform is an “employer”. If the platform meets at least two of those criteria, it is legally presumed to be an employer. Workers would then enjoy the labour and social rights that come with worker status. Platforms can contest that presumed status but would then have the burden of demonstrating that the presumed status is incorrect.

Three key practical actions for platform business employers to take now:

1.    Assess the proposed Directive for impact on current business models. Some companies may have to reclassify the status of some of their workers, with a consequent impact on their people models and strategies.

2.    Review current automated decision-making processes. Considerations should include the current level of transparency around the use of algorithms and whether workers have the right to contest automated decisions.

3.    Monitor the progress of the Directive. The requirements, including the criteria to be applied to determine whether the platform is an “employer”, may shift as the Directive goes through the legislative process.

See how we can help below.

Gender balance on company boards

Progress on gender diversity on company boards has been slow across the EU, with many Member States still having less than 25% of women represented on the boards of many of the largest listed companies.

The Council of the EU and European Parliament have recently agreed that a new Directive[6] will require that with effect from 30 June 2026, listed companies should aim to have at least 40% of their non-executive director positions held by members of the “under-represented sex” (usually women) by 2026. If it is decided to apply the new rules to both executive and non-executive directors (it should be noted that this is a decision for Member States, not employers), the target is 33% of all director positions by 2026.

If companies cannot reach the targets, they must put in place transparent procedures for the selection and appointment of board members designed to rectify the situation – such as a comparative assessment of the different candidates based on clear and neutrally formulated criteria.

Member States will also have to ensure that companies give priority to candidates of the under-represented sex when choosing between candidates who are equally qualified in terms of suitability, competence and professional performance.

The EU will not set out sanctions, leaving it to the Member States to ensure “effective, proportionate and dissuasive” remedies in the event of non-compliance.

Three key practical actions for employers to take now:

1.    Plan ahead to drive forward a cultural shift. In light of the track record of slow progress to date, it is likely that a cultural shift will be needed in many Member States and organizations to ensure a smooth transition to the new requirements.

2.    Think about recruitment. Companies should have in place transparent and fair senior recruitment processes. Such processes may need to include giving priority to candidates of an under-represented sex when choosing between equally qualified candidates.

3.    Monitor the progress of the Directive. The requirements may shift as the Directive goes through the legislative process. Further, national adjustments are possible. For example, any Member State which, before the entry into force of the Directive, has either achieved progress coming close to the targets or put in place equally effective legislation, can suspend the Directive's requirements related to the appointment or selection process.

See how we can help below.

Minimum wage

Failure to pay the appropriate minimum wage rate, whatever the reason, can lead to public embarrassment, time and expense in responding to enforcement action, and penalties. With the growing focus on ESG factors, minimum wage breaches can have repercussions amongst investors and other stakeholders.

A proposed new Directive[7] on minimum wages aims to create a framework to improve the adequacy of minimum wages and increase the access of workers to minimum wage protection in the EU. It proposes to do this in three ways: through improved adequacy of statutory minimum wages (where they exist); the promotion of collective bargaining in all Member States; and through better enforcement and monitoring.

The proposal does not seek to harmonise the level of minimum wages across the EU, nor to establish a uniform mechanism for setting minimum wages. Instead, Member States with statutory minimum wages will be required to put in place certain controls for adequate statutory minimum wages, including setting clear and stable criteria, providing for regular and timely updates, and effective involvement of social partners. The proposed Directive also aims to improve adequacy by limiting the use of variations to statutory minimum wages for specific groups and deductions from remuneration.

Recognising that compliance and effective enforcement are essential for workers to benefit from access to minimum wage protection, the proposed Directive provides for improved enforcement and monitoring in all Member States. Member States will need to report their national minimum wage protection data each year.

Three key practical actions for employers to take now:

1.    Audit pay arrangements to check for minimum wage compliance. Identify when and how to apply the minimum wage requirements in the operating locations and the minimum wage responsibilities.

2.    Risk-proof processes. Understand how to protect against errors and to address allegations of underpayment. Once the Directive is implemented, employers should anticipate greater scrutiny of arrangements to check for compliance and heightened enforcement activity.

3.    Monitor the progress of the Directive. The requirements may shift as the Directive goes through the final stages of the legislative process and as it is implemented locally.

See how we can help below.

Corporate sustainability due diligence and reporting

Recognising that identifying adverse human rights and environmental impacts in operations and supply chains is key to fostering sustainable and responsible corporate behaviour, a new corporate sustainability due diligence Directive[8] has been proposed.

The proposed Directive will require large EU companies and non-EU companies with significant EU activity to conduct human rights and environmental due diligence. In-scope companies will be required to integrate due diligence into their internal arrangements, including having a due diligence policy and code of conduct, which are updated annually. They must also establish and maintain a complaints procedure, monitor the effectiveness of their due diligence policy and measures, and publish an annual statement.

Some variations apply to smaller companies, but generally all in-scope companies must take appropriate measures to identify, prevent, mitigate, end or minimise actual or potential adverse impacts arising from their own operations, their subsidiaries and, where related to their value chains, from their established business relationships. Such measures may include prevention action plans, seeking contractual assurances from business partners, and collaborating with other companies to raise standards.

Directors of in-scope companies will be responsible for putting in place and overseeing the company’s actions to comply with the Directive. They will be required to report to the board, and to adapt the corporate strategy to take account of any identified adverse impacts.

A corporate sustainability reporting Directive[9] has also been proposed, which seeks to extend the scope of the current reporting requirements, including by extending the types of disclosure that companies must make and broadening the in-scope companies. The proposed additional disclosures include sustainability targets set and progress made towards achieving them, the role of administrative, management and governance bodies in relation to sustainability factors and policies in relation to sustainability matters.

For further details, see our briefings: EU Corporate Sustainability Due Diligence law would apply to non-EU companies; and EU Corporate Sustainability Reporting Directive

Three key practical actions for employers to take now:

1.     Monitor the progress of the Directives. Additional guidance will be issued to assist companies with their obligations. For example, the EU Commission is expected to publish standards (which the European Financial Reporting Advisory Group would be responsible for developing) to assist firms with their sustainability reporting, which will include further detail on content, a format for reporting to ensure consistency of approach, and sector specific requirements.

2.    Start to identify where changes to current processes and documents may need to be made. Understanding current practices will be key. Reviews should include considering existing policies, procurement and operational procedures, contract terms, codes of conduct, due diligence processes, staff training, ethics programmes, and reporting.

3.    Consider additional training and resourcing. Once the Directives are in force and local implementing legislation starts to be seen, additional training is likely to be required to ensure that staff are aware of and can effectively implement the new requirements.

See how we can help below.

Impact outside the EU

Countries outside the EU will not be required to implement the EU Directives. Except for some corporate sustainability due diligence and reporting requirements, non-EU companies are therefore unlikely to be directly impacted by the Directives.

However, the implementation of the Directives across the EU, will result in the position of other countries being out of kilter with the EU Member States. Businesses with European operations looking for consistency of approach to arrangements with workers may therefore seek to “level-up” obligations across all operations, resulting in changes to non-EU practices.

Directive status tracker

As the EU continues to promote social progress, seeks to improve living and working conditions and strives to meet the ambitious targets set out in the European Pillar of Social Rights action plan, several EU Directives continue to progress to support those broad aims.

Our tracker below sets out the current status of the various employment-related Directives.

Directive

Current status

Whistleblowing Directive

In force. Local implementation deadline: 17 December 2021.

Directive on transparent and predictable working conditions

In force. Local implementation deadline: 1 August 2022.

Work-life Balance Directive

In force. Local implementation deadline: 2 August 2022.

Directive to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms

Pending. The Council and European Parliament agreed their positions on the proposal on 5 April 2022. The proposed Directive is currently going through the EU’s ordinary legislative procedure. Currently no deadline for local implementation.

Directive to improve the working conditions of platform workers and to support the sustainable growth of digital labour platforms

Pending. The EU Commission adopted the proposed Directive on 9 December 2021. The proposed Directive is currently going through the EU’s ordinary legislative procedure. Currently no deadline for local implementation.

Gender balance on company boards Directive

Pending. Informal agreement on the proposal was reached on 7 June 2022. The proposed Directive is currently going through the EU’s ordinary legislative procedure. Currently no deadline for local implementation.

Directive on adequate minimum wages

Pending. Currently no deadline for local implementation. Provisional agreement on the final text of the draft Directive was reached between the European Parliament and the Council on 7 June 2022. Currently no deadline for local implementation.

Directive on Corporate Sustainability Due Diligence

Pending. The EU Commission adopted the proposal on 23 February 2022. The proposed Directive is currently going through the EU’s ordinary legislative procedure. Currently no deadline for local implementation.

Corporate Sustainability Reporting Directive

Pending. The EU Commission adopted the proposal on 21 April 2022. The proposed Directive is currently going through the EU’s ordinary legislative procedure. Currently no deadline for local implementation.

How we can help

Our extensive global footprint means that we are well placed to support global employers in their current and future HR plans, wherever they have a presence. Our lawyers are not only experts in the complexities of different laws, but also in the management of projects spanning jurisdictions and driving those projects to maximize the strategic aims and benefits.

The advice and practical support of our specialist teams can help with reviews of existing contractual documents and arrangements, gap analysis against the latest and proposed EU Directives and local implementation requirements and practical action plans.

Please contact any of our global team should you require advice or assistance.

[1]                 (EU) 2019/1937

[2]                 (EU) 2019/1152

[3]                 (EU) 2019/1158

[4]                 COM/2021/0093

[5]                 COM/2021/762

[6]                 COM/2012/614

[7]                 COM/2020/682

[8]                 COM/2022/71

[9]                 COM/2021/189