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Company A, which belongs to a group of companies B, is a Cypriot-owned company but headquartered in London and focuses on the UK market. The company specialises in the design and manufacture of textiles (clothes). The group currently has around 1 200 employees.
Since the closure of the company’s Cypriot production facilities, the group’s activities are divided between the UK, where the design and logistics departments are located, and Bulgaria, where the manufacturing takes place.
In total, the group comprises 3 companies, one in the UK, one in Bulgaria and one in Cyprus.
The first phase of the relocation from Cyprus to Bulgaria was announced in 2007; however, the relocation of the entire production process was not completed until 2008. Once the relocation had been completed, the group developed a number of other activities as a result of which the number of staff increased from 300 to 1 200 people.
The two main factors behind the decision to relocate activities to Bulgaria were high and rising labour costs in Cyprus and growing labour shortage. The decision regarding the closure of the production facilities in Cyprus was met in London by the management of the UK company.
In Cyprus were employed mainly women, 80% of whom were aged over 50 years, and many had worked for the company since its inception. When the relocation was imminent, the main concern of the trade unions was to find alternative employment for the redundant staff in other sectors of the economy. Some of them were relocated to Bulgaria. The redundant staff didn`t get any compensation nor the last 2 salaries, because the cypriot company went bankrupt (insolvency).
Before the production units were relocated to Bulgaria, a total of 3 factories were in operation in Cyprus.
Trade union representatives report that the intention to relocate the factory abroad was announced to the employees two months in advance. Nevertheless, the employees had already anticipated such a move since companies in the Cypriot clothing industry had repeatedly expressed the view that they needed to relocate jobs to lower labour-cost countries. The main focus was therefore on ensuring appropriate compensation for the workers concerned, on the basis of the relevant legislation. The closure of the factory was completed in a single phase.
Although no specific public support was given, other than that was normally available to unemployed people, trade union representatives consider that 90% of the workers who lost their jobs succeeded in finding work in other economic sectors – a fact related to the low unemployment in the Cyprus economy. However, while many workers were absorbed by the services sector – working as cleaners, for example – they often found pay levels to be significantly lower than in their former jobs.
Production in Bulgaria started March 2007. The relocation process began January 2007 and, by 2008, the company had moved its entire production operations to Bulgaria. Around 150 employees were relocated form Cyprus to Bulgaria.
The company manufactures light textiles wear for women, which is sold through nine major chain stores in UK. Several different types of jobs were created. For the production side, the company employed industrial garment tailors and assembly line operators for ladies textiles wear; for the Moda Division, designers and drawers were hired and, for the Britannica Division, the company employed distributors, quality controllers and transport organisers. The recruitment policy of the UK company changed. UK central administration ordered the Bulgarian management to employ mainly women close to the retirement age.
Case Study Presentation Format
Read the case study and answer the questions below.
Mention the fundamental freedoms-values based on the EU Treaty. Find two such values in the case and fairly balance them (one from the aspect of the employer- company- and one from the aspect of the employee).
Which are the institutions of the EU? Name main competences of the European Commission, European Parliament and Council of Ministers. Name the 2 new offices-posts established by the Lisbon Treaty, which came into force on 1 December 2009.
Name some Human and social Rights (rights and freedoms) covered by the Treaties, and are related to the case.
Identify in this case the problem(s) and describe the defence of the worker`s rights.
What is the impact of fundamental rights of EU law on cases concerning third country nationals (lawfully residents in one of the Member States of EU).
Can you see any case of discrimination-unequal treatment in this case? If yes, then describe possible ways of defence.
In reference to the Conventions proposal, the European Union is founded on values of respect for human dignity, liberty democracy, equality, the rule of law and respect for human rights. These values are shared in common with respect to the member states. Furthermore these societies are defined by pluralism, tolerance, justice solidarity and non-discrimination.
The moral foundations of the European Union are centred around the principle that freedom results directly from peace, unity and equality; and with this in mind, freedom of movement beyond borders dividing member states for workers, freedom of establishment, freedom to provide services, free movement of goods and freedom of capital movements. These founding principles of fundamental freedom ensure businessmen the freedom of decision making, workers the freedom to choose where they work, and consumers the freedom of choice between the widest variations of product. The freedom of competition allows for businessmen to offer their products/goods to a wider range or spectrum of consumer/customer. Workers can look for employment and/or change their place of employment according to their own needs or wishes throughout the European Union. And finally the consumer is provided with the ability to select the most affordable and best products from the wider range of goods available to them as a direct result of increased competition.
The institutional structure of the European union consists of five main institutions; the European Parliament, Council of Ministers, Commission, Court of Justice and Court of Auditors, and four other important bodies (European Economic and Social Committee, Committee of the Regions, European Central Bank and European Investment Bank).
As of recent, alongside the five main institutions (European Parliament, European Council, Council of Ministers, European Commission and Court of Justice) there are two secondary institutions (Court of Auditors and European Central Bank). So it can be said that there are seven bodies officially recognises as institutions.
The Commission is responsible for proposing policy and legislation. It is the guardian of all European Treaties and Laws and can initiate action against Member States which do not comply with EU rules.
The European parliament is the only directly elected EU body. It represents the people of the EU in contrast to the Council of Ministers, which represents the governments. The European parliament’s powers have steadily increased with each change of the EU treaties. Most new laws in member states now stem from the need to implement European legislation – and most of that is amended and adopted by the European Parliament.
The council of ministers is an institution that has the final vote on legislation proposed by the European Commission and approved by the European Parlaiment, in some cases the council, unlike the parliament, may initiate new laws.
The EU Treaties now cover the four internal market freedoms, namely free movement of goods, services, people and capital. It also bans all discrimination based on nationality, gender, race, ethnic origin, religion, disability, age or sexual orientation. It emphasizes the right of residence throughout the EU for all its citizens. And it allows them to vote and stand in local and European elections in every Member State. In addition, there is the Community Charter of Fundamental Social Rights of Workers.
The Union is founded on the principle of liberty, democracy, respect for human rights and fundamental freedoms and the rule of law, principles which are common to the Member States.
The Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to the Member States, as general principles of Community law.
The Union shall respect the national identities of its Member States.
The Union shall provide itself the means necessary to attain its objectives and carry through its policies.
Health & Safety at work: EU health and safety legislation includes, for example, directives on health and safety in specific types of workplaces (eg construction sites), protection of groups of workers such as pregnant workers or young people; and rules on working time.
Migrant workers’ rights A core right of EU citizens is the freedom to work in any Member State. For a long time the EU has been developing legislation to enable people to take advantage of this right. This includes, for example, legislation co-ordinating social security systems so workers do not lose out on benefits such as pensions if they work in different EU countries, and recognition of qualifications from other countries.
Dialogue with labour and management The EU has the role of promoting dialogue between labour and management (the social partners) and their participation in the formation of EU law and policy. The outlook is positive, and a more formal role for the social partners is being discussed. The Green/EFA Group support this and are also working for a legal base in the new Treaties for the inclusion of civil society.
Information and consultation of workers: This includes the right to information and consultation of workers, and the right to collective bargaining and action. The takeovers directive (see below) will cover this issue, as does one on Works Councils and on a company statute for the involvement of employees. The Group aims to guarantee the inclusion of employees in company decision-making.
Gender Equality: The principle of equal pay for equal work has been in the Treaties since 1957 and has led to, among others, directives approximating national laws, and shifting the burden of proof in cases of discrimination based on sex. Since 1997 the Treaties have included the principle of equality between men and women and non-discrimination based on sex. Various programmes aim to reduce inequality through training programmes for women, and helping develop strategies to enable a work/life balance, to name just a few examples. The Green/EFA Group is pushing for more action to fully mainstream gender equality throughout employment-related and social policies.
Anti-Discrimination Since 1997, the EU has adopted directives aimed at fighting all sorts of discrimination in employment, including that based on sexuality, race, or disability. These are currently being transposed into national law by the Member States.
Promoting Employment Since 1997 the EU has promoted the exchange of best practice between Member States in the area of employment policy. This works through the ‘open co-ordination method’ involving adoption of EU employment guidelines, and national action plans. The EU also promotes employment and vocational training through the allocation of funding from the Structural Funds. Action is in line with the EU ‘Employment Strategy’ adopted in 1998, which has four main aims: improving employability; developing entrepreneurship; encouraging adaptability in businesses and employees; and strengthening policies for equal opportunities.
The main problem in this conflict over the consequences of this relocation, is that, such strategic moves bear both winners and losers. It is logical for one to consider the firm to be the winner and the employee the loser to free movement between borders (globalization). With this in mind it can be put forth that companies are in a better position to capitalise on the freedoms offered by the European Union. From here it is obvious that the business will locate itself in a area which can offer the lowest production costs and highest profits irrespective of the outcome or consequences at home.
The situation is different for employees. Job losses resulting from a company’s change of location mean unemployment. Additionally for those employees who lose their jobs and have to seek alternative employment on the open labour market, there is the uncertainty that the levels of pay or general working conditions will not be the same when compared to what was lost. Unless they posess skills that are in demand. Even if on paper the outcome of this situation seems satisfactory for all concerned in retrospect, it may not reflect the more traumatic reality imposed on those directly in the line of fire and their families.
The EU is in the course of developing policy on what minimum rights should be accorded to nationals of non-EU countries employed legally in the EU. The Green/EFA Group believes that they should have a high level of social rights, including mobility between states.
There are signs of discrimination when examining the employment policy of the company which mainly employs middle aged women over the age of 50 (close to retirement age). The defence can argue that on this basis it is extremely difficult to find employment after being left without employment by the company in question.
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