Trade unions say the Commission’s pledge that labour law is “unaffected” does not close loopholes in the flagship 28th regime. Lawmakers cannot agree on how to fix them.
The EU’s plan for a single, digital company form is stuck on a question that has split lawmakers for weeks. Whose workers’ rights apply when a company incorporates in one country but employs people in another?
The Council adopted its negotiating position on 23 October. In Parliament, the Legal Affairs Committee’s votes on EU Inc. were cancelled twice this month because political groups could not agree on employee participation. A new committee vote is scheduled for 5 November, with a plenary vote set for 12 November.
The European Trade Union Confederation (ETUC) argues that the Commission’s reassurance that employment law is unaffected only answers part of the problem.
Individual rights versus collective rights
Labour lawyers broadly accept that ordinary employment rights survive. Under EU conflict-of-law rules, choosing another country’s law generally cannot strip a worker of the mandatory protections of the country where they habitually work.
The gap, unions say, is in rights tied to the company itself, especially board-level worker representation. Under the Commission’s proposal, participation rights for an EU Inc. follow its registered office. Because the company can register in one country without locating its headquarters or workforce there, founders could effectively choose the participation regime when they incorporate.
“We do see that risk,” ETUC Deputy General Secretary Isabelle Schömann told Euronews, pointing to evidence from existing European companies. She says the practice is established: “We already have evidence that businesses are looking for a letterbox company.”
She cited data from the European Trade Union Institute showing that 63% of existing European Companies (SEs) are empty “shelf” entities.
What unions want
ETUC wants the safeguards written into binding articles rather than recitals, which guide interpretation but are not enforceable. Its main demands are:
- A workplace rule. Collective and participation rights should apply where employees habitually work. “European legislation is not there to downgrade existing protection for workers,” Schömann said.
- Non-regression. Where several national regimes apply, the highest level of participation should prevail.
- Workforce aggregation. Employees in branches, subsidiaries and controlled group companies should count towards national co-determination thresholds, so companies cannot split their headcount to stay below them.
- An anti-circumvention clause. This would cover artificial structures, not just “wholly artificial” arrangements.
- Data and enforcement. Labour inspectors and unions would get access to workforce data. Workers and unions could sue in the country of work, and serious abuse could lead to loss of EU Inc. status.
The loopholes unions see
The Council’s mandate adds an optional safeguard for branches. Host countries with participation rules can opt in. A foreign company whose branch workforce passes their threshold must either create a local subsidiary or grant equivalent rights. Unions say this falls short because it is optional, covers branches rather than every group structure, and could keep workers away from the parent board.
Its anti-abuse provision, allowing national authorities to act against “wholly artificial” arrangements, is case-by-case and reactive. A firm with some genuine activity in its country of registration might escape it even if it chose that country partly to avoid co-determination.
Other concerns include the speed of the process. Schömann said “48 hours is too short to allow for the preventive checks that any business has to undertake,” and warned that fast closures could leave workers unable to trace unpaid wages and social contributions.
Stock options are the other flashpoint. ETUC says they must not substitute for pay: “you can’t pay your electricity bill with it,” Schömann said. “If you want to retain talent, you have to pay those talents.” Parliament’s draft would make option plans voluntary and bar them from replacing wages or cutting social-security contributions.
Startups: ‘getting it right’
Startup groups reject the idea that they want to weaken labour protection. Simon Schaefer, CEO of the startup network Factory, signed a 15 October letter warning EU leaders that negotiations were hollowing out the proposal. His priority is preserving free choice of administrative headquarters, which he sees as what makes EU Inc. a true alternative to Delaware.
On fraud, he was direct. “We agree with every try and effort to prevent fraud,” he said. “We’re in unison with the trade unions that we do not want to abuse workers’ rights,” he added.
He argues that targeted rules, such as barring stock options from pushing pay below the minimum wage, are better than excluding entire industries. Schaefer said he is prepared to see the file delayed if it worsens. “For us, getting it right is almost more important right now than the actual speed,” he said.
What’s next?
The sticking point is the fallback if management and workers cannot agree on participation. Social Democrats and Greens treat a protective default as a red line, while Renew and business-friendly lawmakers object to exporting one country’s co-determination model across borders. A compromise reported in Parliament would require companies to create a local subsidiary once they pass a host-country threshold, but that could leave the parent board untouched. If the 5 November vote goes ahead, it will show if the gap can be bridged.
Source: www.euronews.com
