Under the ‘EU Inc’ proposal launched in March, which is also known as the ‘28th company regime’, companies of any size would be able to register in a different country to where they employ workers, regardless of where they have economic activities and where workers are employed.

Without strong safeguards, the proposals would undermine collective bargaining systems across Europe. According to the Commission proposal, there is the strong risk that workers would be covered by the labour law of the country of registration of the company, not of the country of employment. Companies would be encouraged to register in member states with the fewest rights or lowest pay, starting a race to the bottom across Europe

Although marketed for "innovative" startups, the scope of the "EU Inc." Regulation is not limited to any specific sector or size; it is open to all companies, including large multinational groups (MNCs). This allows established firms to "opt-in" to the regime to bypass more robust national regulations.

In particular, the proposal creates the following unacceptable risks:

  • Social dumping: Workers could be covered by the employment rights and conditions of the country of registration of the company. Companies would be incentivised to register in Member States with the lowest social standards, even if they have activities and employ workers elsewhere.
  • Wages: Companies could be allowed to offer stock options in place of wages or an employment contract.
    Redundancies: Plans to fast-track insolvencies do not recognise the rights of workers to receive their wages first, potentially leaving them without recourse for unpaid wages or severance pay.
  • Representation: Companies could easily circumvent the right of workers to co-determination, board-level representation .
    Information and consultation: By fragmenting operations into "EU Inc" subsidiaries, employers would be able to stay below the workforce size for works councils and information and consultation rights.
  • Enforcement: The proposal puts at risk the necessary legal certainty that real scrutiny and verification of national fiscal and social authorities provide, as well as effective judicial protection.
The proposed legal base and choice of legal instrument are also reason of strong concern. The Commission relies on Article 114 TFEU, which is intended for harmonizing existing national laws, not to create a parallel, optional regime. Article 114(2) explicitly prohibits using this legal basis for acts relating to the rights and interests of employed persons. Also, the choice of a Regulation makes it impossible to reinforce workers' protections and safeguards at national level in the process of transposition.

The Executive Committee of the European Trade Union Confederation (ETUC) discussed in Brussels last week the risks linked to EU Inc.

The ETUC is now calling on Ministers to demand safeguards for workers when national ministers meet to discuss EU Inc in Brussels at the EU’s ‘Competitiveness Council’ on May 28.

The European Commission has promised that workers’ rights will be fully protected as part of the plan, but the safeguards needed to prevent companies exploiting legal loopholes are nowhere to be seen in the draft regulation.

The ETUC says the proposal must not continue without binding safeguards to guarantee that national labour laws, collective agreements and workers’ rights are fully respected.

ETUC General Secretary Esther Lynch said:

“EU Inc represents a serious risk to the standards won by working people at national level over more than 100 years.
“Without proper safeguards, it would create loopholes that make it easier for companies to circumvent basic rights, including the right to a guaranteed wage or employment contract. That would put pressure on all other companies to lower wages and working conditions.The ETUC does not believe this proposal should proceed unless binding safeguards are put in place to guarantee that national labour laws, collective agreements, board-level representation and workers’ and trade union rights and their enforcement are fully respected.”

Judith Kirton-Darling, General Secretary of industriAll Europe, said:

"We cannot build a future-proof European industry on a race to the bottom for workers' rights. Through our Good Industrial Jobs Campaign, we demand that any industrial framework protects domestic workforces. 'EU Inc.' does the exact opposite by creating parallel regimes that bypass collective agreements and national laws."