Government launches review of redundancy consultation laws

In January 2001, the government announced its intention to review the UK's workforce consultation requirements concerning collective redundancies.

On 18 January 2001, the trade and industry secretary, Stephen Byers, announced in the House of Commons that the government is to undertake a review of UK consultation requirements concerning collective redundancies. This process is likely to result in proposals for their amendment.

The move follows the controversial handling of a number of recent high-profile cases of company restructuring. These include BMW's break-up of the Rover Group (UK0005174F) and General Motors' announcement of the closure of the Vauxhall plant at Luton (UK0012104F). Such cases have raised questions about the adequacy of the UK's legal framework for employee information and consultation and fuelled growing pressure for reform from trade unions and others.

Although the government said that it remained opposed to new European legislation in this area, the announcement of the review also appears to be linked to the progress of negotiations over the draft EU Directive on national information and consultation rules (EU9812135F) and the prospect of the UK being defeated in its attempts to block the Directive's adoption (EU0012285F).

Scope of the review

The review, which will involve the Confederation of British Industry (CBI) and the Trades Union Congress (TUC), will "consider whether the current laws are working and in particular whether more should be done to promote effective consultation with employees". Its focus will be on existing provisions concerning redundancy consultation and European Works Councils.

Mr Byers said: "There are concerns about the way employees find out about large-scale redundancies and the lack of consultation. I share these concerns. It is unacceptable for people to learn from a local radio station that they are to lose their jobs. Our legislation does set down requirements for consultation but I want to look at whether it is effective and whether it could be improved. We need to look very carefully at how the provisions have operated in practice and to consider the steps necessary to provide our own solution to this issue."

The existing legislation on redundancy consultation, set out in sections 188-198 of the Trade Union and Labour Relations (Consolidation) Act 1992, was last amended in 1999 (UK9910134F). The UK's legislation on European Works Councils - the Transnational Information and Consultation of Employees Regulations 1999- came into force in January 2000 (UK0001146N).

Reaction from employers and unions

TUC general secretary John Monks said in a statement: "We welcome the opportunity to take part in the government's review of redundancies with the CBI. It's far too easy for multinationals to shed their UK workers and unacceptable that employees facing the sack often hear it first from the media, not their employer. We believe that the European Directive on information and consultation remains the best way forward, but we certainly see today's announcement as progress."

Digby Jones, director-general of the CBI, was quoted by the Financial Times as saying that he was prepared to discuss "fine-tuning" the legislation which is "already pretty demanding".

Growing pressure for stronger consultation rights

Although the CBI has continued to oppose the draft EU consultation Directive, and reacted negatively earlier in the year to the suggestion that the government might move to strengthen domestic legislation on workers' consultation rights, ministers have faced growing pressure for reform in this area.

The TUC has been pressing hard for the reform of the legislative framework for workforce consultation in the UK, both to enhance employment protection during restructuring and as "a key element in delivering the partnership-productivity agenda" (UK0008184N). In particular, the TUC has repeatedly urged the government to drop its opposition to the draft EU consultation Directive.

Following General Motors' December 2000 announcement that it is to close its Vauxhall plant in Luton, the TUC released the text of a letter to the Prime Minister, Tony Blair, in which Mr Monks wrote:

Once again a successful company has announced a major strategic decision with no prior warning to unions, the local community or the government. British labour law makes it quicker, cheaper and easier to sack workers in the UK. It is intolerable that British workers get such second-class treatment from multinational companies ...

This disastrous episode highlights again the need to strengthen the position of British workers through effective rights to information and to meaningful consultation on company plans. The position of the UK government in seeking to block the proposed European Directive providing a minimum standard for such rights is increasingly indefensible in the face of these events . . .

I urge you to reconsider the government's position. If you fail to do so then I have no doubt that the justifiable anger of Vauxhall workers, and others, confronted with such peremptory decisions by their employers will increasingly be directed at the government too for blocking a modest move which could prevent such high-handed company decisions being made in this way in the future.

Earlier in 2000, a report by the House of Commons Select Committee on Trade and Industry, made up of backbench MPs, was strongly critical of "BMW's disgraceful failure to consult or even inform the workforce" about the break-up and sale of its Rover subsidiary. The Committee called for a "detailed analysis of the lessons which the government considers should be drawn from this affair for government policy on national and EU law on protection and consultation of employees, in particular those of overseas companies" (UK0005174F).

In November, the influential Industrial Society added its voice to the body of UK opinion favouring consultation rights reform. The Industrial Society, which undertakes research and consultancy on workplace issues and whose members include companies, public sector organisations, charities and trade unions, published a policy paper - The silent stakeholders: reforming workforce consultation law- urging the government to extend the UK's legislation on employee consultation to ensure that employees, as "crucial stakeholders in the enterprise", have the right to have their views heard on major business changes.

Commentary

It has been clear for some time that the pressure for legislative reform has had an influence on ministerial thinking. In June 2000, the Times newspaper reported that trade and industry secretary Stephen Byers favoured toughening domestic consultation requirements on companies in the wake of BMW's controversial handling of the break-up of Rover, and that work had started within the government on possible options. Subsequently, press reports of the discussions at the Labour Party's national policy forum in July indicated that union leaders had won concessions from ministers on the issue of consultation rights. While resisting union pressure to drop their opposition to the draft EU Directive, ministers reportedly agreed to a review of employee consultation rights in company restructuring which would look at which elements of the Directive might be adapted to UK circumstances (UK0008184N).

On 13 December 2000, the day after General Motors announced the closure of Vauxhall's Luton car plant, Mr Byers confirmed that the government intended to address concerns about inadequate information and consultation during company restructuring by reviewing current provision.

It is also now apparent that the "blocking minority" of EU member states opposed to the draft EU consultation Directive is breaking up and that the UK will be unable to prevent its eventual adoption (EU0012285F). By signalling the reform of domestic consultation rights in the run-up to the forthcoming general election, ministers may hope that a re-elected Labour government would be able to emphasise the "home-grown" aspects of its consultation rights agenda while seeking to negotiate amendments to the Directive to accommodate UK concerns. (Mark Hall, IRRU)