Industrial relations under new Labour: an update

The election of the new Labour government in May 1997 heralded radical changes in the UK's system of industrial relations. Stemming both from Labour's domestic agenda and from EU legislation, these are now underway. This feature reviews developments during the 18 months or so of Labour government up until December 1998.

The election in May 1997 of a Labour government undoubtedly marked a turning point in the long march towards a deregulated labour market in the UK. An EIRO record written just after the election (UK9704125F) reviewed the changes in prospect, commented on their radical nature and argued that "to suggest that [new Labour's] approach is minimalist is wide of the mark". In terms of "headline" measures, the initial turn in direction has been rapid indeed. The first 18 months have seen new Labour: sign up to the Maastricht"social policy Agreement" from which the previous UK government "opted out", resulting in new employment rights for Britain's workers; fulfil its manifesto commitment to implement a national minimum wage; and publish proposals to extend individual employment rights and put in place a statutory procedure for trade unions to secure recognition by employers. Interpretations of the impact of these measures continue to differ. Prime Minister Tony Blair has insisted that even in the face of these measures, "Britain will have the most lightly regulated labour market of any leading economy in the world" (according to the Fairness at work white paper). However, Robert Taylor, employment editor of the Financial Times, argues that new Labour's approach, in combination with the effects of EU membership (now fully embraced), amounts to a "softly-softly revolution" in workplace relations in the UK: "By the end of next year, the UK will have the most intricate and comprehensive framework of labour legislation that it has ever had" (Financial Times, 18 June 1998).

Although radical change to important aspects of the UK's system of industrial relations is underway, new Labour's approach does also embody some important continuities with that of Conservative governments from 1979 to 1997. The turn is less than 180 degrees. In its own terms, new Labour is looking to chart a "third way" between a return to a labour market regulated by powerful, autonomous collective institutions and the deregulated ideal of its Conservative predecessors. The consequences of a more flexible labour market in terms of job insecurity are to be addressed by active employment and training policies aimed at enhancing "employability". Beyond that, a central component is a further shift in emphasis in UK labour law towards constructing a framework of individual rights and entitlements. The framework of collective employment rights is being transformed too, by the proposal for statutory union recognition but also by a series of EU measures which require universal employee rights to information and consultation on certain matters. Charting a "third way" also involves the promotion of partnership at work between employers and employees in place of conflict.

Flexibility, training and skills

Continuities are evident in new Labour's emphasis on the virtues of a flexible labour market. However, an important difference to its Conservative predecessors lies in the means by which new Labour seeks to promote greater labour market flexibility. Measures taken by the Conservatives were largely aimed at promoting numerical forms of flexibility, eg temporary and fixed term contract s and sub-contracting. In contrast, new Labour is stressing the importance of increasing qualitative flexibility, through training and the acquisition of new skills, so as to make workers more adaptable. To this end, the Government is launching a "University for Industry" (though its actual name is likely to change), offering continuing training on an open and distance learning basis, and expanding educational provision in the tertiary sector for mature students and those from disadvantaged backgrounds. Plans for the introduction of individual learning accounts, to enable adults to purchase courses to meet their training and development needs, were announced in the February 1998 green paper The learning age (UK9804115F). However, training is not to be one of the issues on which collective bargaining should take place where unions are granted recognition under the proposed statutory trade union recognition procedure (see below).

As well as enhancing the competitive potential of Britain's economy, the emphasis on training and skill acquisition has a second strategic purpose: that of promoting greater social inclusion. In addition to the above measures, the New Deal "welfare-to-work" programme (UK9707143F) offers young unemployed people various forms of subsidised work, each of which involve day release for education or training leading to a qualification. New Deal embodies an element of compulsion too: failure to take up any of the options on offer may result in state benefits being removed.

Individual rights and minimum entitlements at work

A flexible labour market is to be underpinned by a new framework of individual rights and entitlements. Elements of this framework derive both from new Labour's own domestic agenda and from its obligations to implement EU measures, including those decided under the EU social policy Agreement during the UK's opt-out.

Specific proposals in the Fairness at work white paper (UK9806129F), likely to be the subject of legislation during the course of 1999, include: reducing the qualifying period for protection against unfair dismissal to 12 months; prohibiting the "blacklisting" of trade unionists; and giving employees the statutory right to be accompanied by another employee or trade union representative in grievance and disciplinary cases. In addition, Fairness at work proposes to introduce new "family-friendly" employment rights. These include: implementation of the EU parental leave Directive (96/34/EC) (TN9801201S), which will establish an entitlement of up to three months' parental leave; and the extension of the length of statutory maternity leave from 14 to 18 weeks.

The package of minimum entitlements is completed by the implementation of the National Minimum Wage from April 1999 (UK9807135F) and by legislation implementing the EU working time Directive (93/104/EC) (UK9810155N). Such comprehensive statutory substantive entitlements represent a significant departure for UK industrial relations. Up until now the UK and Ireland were the only EEA countries to have no overall minimum wage provision (Ireland is now also introducing statutory provisions -IE9804246F) . Minimum wage protection did exist in certain sectors of the UK economy under the Wages Council system, but this was dismantled in 1993. The EU working time Directive, which was transposed into UK law from October 1998 by the Working Time Regulations 1998, introduces for the first time a statutory framework regulating a wide range of aspects of working time. Historically, the legal regulation of working time in the UK has applied only to certain groups of workers (eg women and young workers).

Collective employment rights

Much attention has focused on the proposal to introduce a statutory procedure for union recognition, legislation for which is expected in the current parliamentary session. Where a union secures recognition through the procedure, Fairness at work further specifies that if the parties subsequently fail to reach a procedure agreement, a statutory default procedure will apply. In a break with Britain's voluntarist tradition, this default procedure would be legally binding and provide for collective bargaining over pay, hours and holidays as a minimum (UK9806129F). The impact of the procedure proposed is difficult to gauge. In certain cases where employers have derecognised unions in recent years, despite substantial union membership, unions will quickly be able to establish recognition by demonstrating that more than 50% of the relevant workforce are members. Yet overall, such workplaces account for only 2% of those without any union recognition.

Of perhaps greater significance is the growing impact on the UK's "single-channel" system of employee representation, based on voluntary recognition of trade unions by employers, of legislation introduced as a result of EU law. A succession of Directives and decisions by the European Court of Justice (ECJ) is highlighting the incompatibility of this traditional system with the universal employee rights to information and consultation, and therefore representation, envisaged by EU measures (UK9708152F). Thus, UK legislation is having to be revised, following a ruling by the ECJ that UK implementation of the Directives on collective redundancies and the transfer of undertakings was deficient because it failed to guarantee all employees in such situations, whether unionised or not, the right to be consulted (UK9803109F). The unrelenting decline in union density and the coverage of collective bargaining in the UK (UK9811159F) is exacerbating the problem of what has been called the "representation gap" at enterprise level further.

By signing-up to the social policy Agreement, the pressure on new Labour to address the "representation gap" will mount. Implementation of the European Works Council (EWC) Directive (94/45/EC), due in December 1999, will extend the principle of universal rights to employee information and consultation to a wide range of matters of a transnational nature. Ensuring that these rights can be exercised by employees not organised by trade unions will require the parties in many cases to address the representation gap. Already in a number of existing EWC arrangements, hybrid systems of representation have been established to select the UK members: established representatives of the unionised workforce sit alongside directly-elected representatives of those sections of the workforce not organised by unions. The draft Directive published by the European Commission in November 1998 to provide national-level rights to employee information and consultation (EU9812135F) would, if adopted, be even more far-reaching in its impact on Britain's single-channel system of trade union representation.

Partnership at work

If the promotion of "partnership" between employers and employees is the principle that informs the Labour government's approach to industrial relations, it remains hard to identify what this means in policy terms (UK9811158F). The relative absence in the UK of robust institutional structures at economy-wide and sector levels on which to build partnership arrangements means that the process will turn largely on developments at enterprise level. Here, a central consideration in assessing the prospects for partnership arrangements is the means by which employees are able to secure a voice in decisions concerning the business. A report by the Involvement and Participation Association (IPA) (Towards industrial partnership, 1997) identified mechanisms which give employees "a distinctive and recognisable voice" and greater input into business decisions, both at the workplace and at more strategic levels, as a key ingredient of successful partnership in organisations. British employers have considerable scope to choose the form by which such a voice might be exercised.

In companies where trade unions are organised, the development of partnership arrangements has involved the renewal or transformation of existing arrangements between management and trade unions representing the workforce. The bargaining agenda has been widened, to embrace matters such as employment security, training and employee development. Consultation through established representative structures has been extended and deepened and/or specific mechanisms have been set up for communication and consultation about particular initiatives. Where unions are absent, employee representation structures are unusual. A leading supermarket chain, J Sainsbury, provides an example of a partnership arrangement built upon a non-union, employee-based representative structure. Otherwise, the implication is that partnership arrangements in many non-union companies will have to be built around agreements with individual workers. Research evidence suggests, however, that the personal contracts of employment that might form the basis on which partnership with individual employees might be forged are far from widespread and that where they do exist, they rarely provide the basis for an extension of employee voice and influence.

Commentary

The legislative measures being enacted are taking UK industrial relations in new directions. Most evidently, there is a distinct shift in emphasis towards conferring enhanced rights and minimum entitlements on the individual employee, with only limited moves to restore collective rights which bolster the ability of trade unions to organise, take industrial action, and extend the coverage of collective agreement s.

The extended framework of individual employment rights and minimum entitlements moves Britain even further from its traditional system of "voluntarism", in which there was minimal intervention by the state and the law in shaping the terms and conditions of employment. Legislative measures providing a degree of individual employment protection had already been introduced in the 1960s and 1970s. By providing individual entitlements on major substantive matters - namely pay and working time - the present measures further transform the legal framework of industrial relations.

The renewal of collective rights is taking a new direction too, in the form of the growing encroachment of the principle of universal employee rights to representation common elsewhere in western Europe. The development and extension of such representation rights, for the purposes of information and consultation, constitutes something rather different from measures to promote a substantial reverse in the long decline of union recognition and collective bargaining (on which a statutory union recognition procedure may have some effect).

Yet the fulfilment of all of new Labour's aspirations to transform industrial relations appear unlikely. Ambitions to secure a sustained "upskilling" of Britain's workforce may well founder because new Labour has accepted the premise that training provision should be employer-led and voluntary. The spread of partnership arrangements is also likely to be partial. Promotion of partnership arrangements at enterprise and workplace levels would be best guaranteed by conferring statutory rights to information and consultation on all employees. However, new Labour remains ambivalent on the key issue of employee representation. On the one hand, a statutory union recognition procedure reaffirms the traditional single-channel system. But the large parts of the workforce which unions are unlikely to be able to organise and secure recognition for will remain without representation rights on most matters. On the other, new Labour has signed up to the "social chapter" in the Amsterdam Treaty (EU9707135F) and the existing and potential measures embodying universal employee rights which flow from that. However, it is resistant to the proposed EU Directive to provide general employee rights to information and consultation at national level. On the issue of employee representation, a radical change in direction is less than clear cut. (Paul Marginson, IRRU)