EU Directive on transparent and predictable working conditions

• Europe

• Employment law
• ESG

09-06-2022

What employers need to know before the 1 August 2022 deadline

The EU Directive on transparent and predictable working conditions (EU Directive) provides rights for workers to more foreseeable and secure working terms and arrangements. Its 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 EU Directive will introduce an obligation for employers to provide cost-free mandatory training to workers.

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.

Overview

Over 30 years since the last Directive on worker’s rights to information on terms of employment (Directive 91/533/EEC) was adopted, the latest EU Directive seeks to update workers’ rights to information. Alongside the drive to enhance social rights, the EU Directive seeks to reflect the new working landscape. For example, arrangements such as platform work, zero hours contracts and hybrid working were rarely seen 30 years ago and are now very much a part of the new working environment.

In addition, the EU Directive aims to create consistent new minimum higher standards of protections, to prevent two-tier markets within the EU and a “race to the bottom in standards applying in new forms of work”. Member States can introduce and maintain more favourable provisions, but local implementation should not introduce provisions that fall below the minimum standards of the EU Directive.

Recognising the numerous ways in which workers are now engaged, the EU 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.

Scope

The EU Directive generally applies to all workers. The only possible exception Member States can introduce is concerning workers with predetermined and actual working hours of three hours per week or less in a reference period of four consecutive weeks. Those on zero hours and on-demand contracts are covered, regardless of the number of hours they actually work.

The definition of worker is wide, relying on the criteria established by the Court of Justice of the EU, including the performance of effective and genuine economic activities, remuneration and subordination. Provided the relevant criteria are met, included within the scope are employees, workers, casual workers, domestic workers, platform workers, trainees and apprentices. Genuinely self-employed persons are not covered.

Key requirements of the EU Directive

Some of the key elements include:

• an updated and more complete information package. The list of information employers must provide to workers has been extended, now also including all components of remuneration and the frequency and method of payment, the procedure to be observed by the employer and the worker when the employment relationship is terminated, the duration and conditions of probation, training entitlements, overtime arrangements and pay, any arrangements for shift changes and the determination of variable working schedules for those on certain casual contracts.
• probationary periods should be for no more than six months. Only in exceptional circumstances should probation extend beyond six months, for example where a longer duration is justified by the nature of the employment (e.g., managerial positions), or where it is in the worker’s interest (e.g., an extension following long illness). In the case of fixed-term contracts, the length of the probationary period must be proportionate to the expected duration of the contract and the nature of the work.
• 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.
• additional information must be provided to workers who are to be posted abroad, including the currency in which their salary will be paid, the anticipated duration of the posting, and any information on repatriation.
• the use of exclusivity or incompatibility clauses that prevent employees from taking up parallel employment with another employer are generally prohibited. However, Member States may lay down provisions for the use of such restrictions for legitimate reasons, such as health and safety, the protection of business secrets or for the avoidance of conflicts of interests.
• the timescale for providing information to workers has been shortened. Most of the information must now be provided between the first and seventh calendar day of employment. Certain secondary information (including relating to training entitlement, the amount of paid leave to which the worker is entitled (or the procedures for allocating and determining such leave), and the procedure and notice period on termination of employment) must be provided to the worker within the first month of commencement.
• the information must be provided in writing (which can be electronically) and written in a clear, transparent, comprehensible, and easily accessible manner. It should be noted that some jurisdictions are considering local implementing legislation to include a requirement for a “wet ink” signature of the employment contract.
• any variations to the terms of employment must be notified to the worker at the earliest opportunity and, at the latest, on the day on which the change takes effect.
• workers with at least six months service with the same employer and who have completed their probationary period have a right to request to transition to a more predictable and secure position, provided an opportunity is available. In the event of any refusal, the employer must provide detailed written reasons, generally within one month of the request, explaining the rationale behind the decision.

Workers with variable work schedules

The EU Directive aims to protect against uncertainty regarding applicable rights and social protection for workers with unpredictable work patterns by:

• requiring employers to inform workers of: (i) the number of guaranteed paid hours; (ii) the pay for work performed in addition to those guaranteed hours; (iii) the reference hours and days within which the worker may be required to work; (iv) the minimum notice period the worker is entitled to receive before the start of a job; and (v) the deadline for the employer to cancel a job assignment.
• if an assignment falls outside the reference hours and days or if the employer fails to give the required notice of the assignment, workers can refuse the work without suffering adverse consequences. Where a work assignment is agreed, the worker should receive compensation in the event of a late cancellation by the employer.

Workers on on-demand/zero hours contracts

Recognising that the use of on-demand or similar employment contracts can result in abuse, the EU Directive requires Member States to establish effective measures to seek to avoid any unfair arrangements. For example, by introducing limitations to the use and duration of such contracts and/or establishing a rebuttable presumption of an employment relationship with a minimum number of paid hours based on the average hours worked during a given period.

Penalties for breach of requirements

Member States are required to provide for effective, proportionate and dissuasive penalties for any breach of the requirements, including where workers are dismissed or suffer other adverse treatment for exercising their rights.

The EU Directive requires Member States to build favourable presumptions for workers into their systems for redress. In addition, workers should be entitled to written reasons for dismissal or equivalent measures and have the option to submit complaints to a competent authority after notifying the employer of any failure.

It will be for each individual Member State to decide precisely how rights under the EU Directive should be enforced and what the legal sanctions should be for non-compliance, taking account of the minimum requirements of the EU Directive. However, whatever the legal consequences and particularly considering the current environment where fairness and transparency are seen to be key elements of responsible business practices, there will also be reputational risks for defaulters.

Member States’ progress on implementing the EU Directive

Many Member States have draft legislation in place to implement the EU Directive and are on track to implement by the 1 August 2022 deadline. The remaining countries are expected to act before the end of the year or early 2023.

The EU Commission will continue to monitor implementation and, as has been seen recently with the implementation of the Whistleblowing Directive, is likely to apply pressure to secure implementation, including through the threat of formal legal action for non-compliance where necessary.

The table below summarises the current position across a selection of Member States:

Implications for the UK

No longer an EU member, the UK is not required to implement the EU Directive.

While the UK has existing legislation requiring employers to provide employees and workers with a written statement of particulars of employment at the outset of the employment relationship, the EU Directive goes further than the UK legislation in several respects. For example, the EU Directive requires employers to provide the key information within 7 days of the start of employment and any secondary information within the first month, whereas UK employers have two months to provide secondary information. Further, in the UK there are no limits on the duration of probation periods and generally no right to request to transition to a more predictable and secure position.

Once the EU Directive is transposed across the EU, the UK position will therefore be out of kilter with the rest of Europe. Businesses with European operations looking for consistency of approach to contractual arrangements with workers may therefore seek to “level-up” obligations across all operations, resulting in changes to UK practices.

Practical implications for employers

Considering the earlier Directive 91/533/EEC, all Member States have existing laws requiring employers to inform employees of the conditions applicable to the contract or employment relationship. However, national laws will need to be updated to reflect the increased standards set by the new EU Directive. Therefore, all employers operating in the EU should:

• monitor the progress of the implementing legislation in the jurisdictions of operation.
• pending details and implementation of local legislation, employers should start to consider arranging for a gap analysis between their existing contractual arrangements and the local requirements in the EU countries of operation. Once draft legislation is available, the gap analysis will identify where changes will, at a minimum, likely need to be made.
• review existing processes for contract issue and amendments, taking account of the timescales in the EU Directive.
•  review existing probationary periods arrangements, paying particular attention to any periods of over six months and those contained in fixed-term contracts.
• consider any training needs to ensure that staff understand the new requirements

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 EU Directive requirements and practical action plans.

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