On 27 October 2025, the revised version of the Directive on European Works Councils (EWC) was adopted. The reform is based on the European Commission’s proposal of January 2024 and aims to strengthen social dialogue in multinational companies and to ensure the effective enforcement of employees’ information and consultation rights at EU level.
The new directive significantly reshapes the existing regulatory framework: while strengthening the rights of employee representatives, it also imposes stricter and more complex obligations on companies. Like other Member States, the Hungarian legislator must transpose the directive into national law within two years and apply it no later than three years thereafter.
The reform focuses on three main areas:
- the expansion of the concept of transnational matters,
- the clarification and tightening of information and consultation obligations,
- and the strengthening of enforcement mechanisms.
Extension of the Concept of “Transnational Matters”
One of the most important innovations of the revised directive is the introduction of a presumption of transnational character. Any measure shall be considered transnational that:
- is reasonably expected to affect the undertaking or group of undertakings as a whole, or
- affects at least two undertakings or establishments located in different Member States.
A key novelty is that not only direct but also indirect effects become relevant. Accordingly, it is sufficient if a measure – even if implemented in only one Member State – has foreseeable effects on employees working in another Member State.
In practice, this means that even a restructuring, workforce reduction or site-related decision planned in Hungary may trigger the involvement of the EWC if its consequences materialise in other countries, for example in the form of increased workload, redistribution of tasks or indirect employment effects.
For Hungarian subsidiaries, this entails enhanced assessment and documentation obligations and places a number of decisions previously regarded as “local” into a Union-wide context.
Earlier and Substantive Consultation – Genuine Involvement, but No Veto Right
The legislator’s explicit objective was to ensure that the EWC’s information and consultation rights are not merely formal but genuinely effective. The new directive therefore requires consultation to take place “in due time and in a meaningful manner,” particularly in exceptional circumstances such as:
- relocation or closure of establishments,
- significant organisational restructuring,
- collective redundancies.
Companies must provide information at an early stage of the decision-making process and with sufficient detail to enable the EWC to form an opinion before a final decision is taken. If the EWC issues an opinion and the company adopts a different decision, it must do so in writing and provide reasons for the deviation—again before the decision is finalised.
It is important to stress that the EWC’s opinion is not binding and that it continues to have no veto right. The aim of the reform is not to hinder corporate governance, but to improve the quality of decisions and to integrate employee perspectives at an earlier stage.
Practical advice: it is advisable to clearly define consultation deadlines and procedures in the EWC agreement itself, which also provides a high degree of legal certainty in Hungarian practice.
Number and Format of Meetings – Physical Presence as the General Rule
Under the new rules, meetings between the EWC and central management must take place in person at least twice a year. Online or hybrid meetings may only be held on an exceptional basis and by mutual agreement.
In addition, it must be ensured that representatives of the countries concerned can also participate in meetings of the select committee. Although two plenary meetings per year were already common practice in many companies, the new regulation places a stronger emphasis on mandatory physical presence.
Limitation of Confidentiality – Transparency Takes Centre Stage
The previously broad possibilities to impose confidentiality obligations are significantly curtailed. In the future, confidentiality may only be imposed if:
- there is an objective and legitimate interest,
- the justification is specifically stated,
- and it can be demonstrated that disclosure of the information would seriously jeopardise the company’s operations.
Another novelty is that confidentiality is time-limited: it may only last as long as the underlying reason exists. This requires Hungarian companies to rethink their internal information management and communication processes.
Strengthening Gender Balance
The directive requires efforts to ensure that the composition of both the EWC and the special negotiating body includes at least 40% representation of women and men respectively. If this target is not achieved, the reasons must be explained to employees. This will also affect Hungarian election and nomination practices.
Enforcement and Sanctions – Hungarian Specificities
The directive requires Member States to introduce effective, proportionate and dissuasive sanctions for breaches of EWC rights. Although an EU-level maximum fine similar to that under the GDPR was ultimately not included, the Hungarian legislator must review the currently relatively low level of fines under the Hungarian Act on European Works Councils (EBRG).
In Hungary, the EWC is already entitled to initiate court proceedings, and the company must bear the costs to the extent necessary. The new directive reinforces this principle and also allows alternative solutions (e.g. legal cost funds or insurance).
It is important to note, however, that there is still no EU obligation to introduce interim measures (such as the suspension of decisions), and therefore no such change is expected in Hungarian law either.
More Companies Fall Within the Scope of the Directive
The exemption for so-called “Article 13 agreements” concluded before 1996 is abolished. This means that in many companies—including those with Hungarian involvement—EWC agreements must be renegotiated if at least 100 employees from at least two Member States request it. If negotiations fail, the statutory “default model” automatically applies, which is often disadvantageous for both parties.
What Should Hungarian Companies Do Now?
The revised EWC Directive requires longer decision-making processes, more thorough preparation and closer coordination. Hungarian companies and corporate groups should therefore already now:
- review their existing EWC agreements,
- reassess internal systems for evaluating transnational impacts,
- prepare managers and HR professionals for the new obligations,
- and, where appropriate, conclude new, more flexible agreements in order to avoid the statutory default model.
The reform represents not only a legal challenge, but also an opportunity to improve the quality of social dialogue and to prevent conflicts—provided that companies prepare in a timely and conscious manner.
Contact:
Dr. Géza Katona, LL.M., Attorney at Law (Rechtsanwalt / attorney at law)
Katona & Partners Attorneys’ Association
H-106 Budapest, Tündérfürt utca 4
Tel.: +36 1 225 25 30
Mobile: +36 70 344 0388
Fax: +36 1 700 27 57
g.katona@katonalaw.com
www.katonalaw.com