Diageo concludes innovative EWC agreement

A revised European Works Council (EWC) agreement was unveiled in October 2002, at Diageo, the UK-based owners of Guinness, the major Irish brewer. The new Diageo Europe Forum (DEF) agreement contains a number of novel features, including improved consultation rights, a code of practice on redundancies, an extension to encompass central and eastern European operations, and a new steering committee.

On 8 October 2002, the conclusion was announced of a revised agreement governing the European Works Council (EWC) at Diageo, the UK-based multinational. The agreement governing the Diageo Europe Forum (DEF) replaces the original DEF agreement, concluded in 1998 following the formation of Diageo plc from the merger of Guinness UDV Ireland and Grand Metropolitan. The company now specialises in the production of a variety of alcohol brands across the spirits, beer and wine categories, including Guinness, Johnnie Walker, Smirnoff, Baileys and Cuervo. Its headquarters are in London.

The new DEF agreement contains a number of novel features, particularly in comparison with other Anglo-Irish EWC agreements:

• its definition of consultation goes a good deal further than many other EWC agreements (TN9807201S), in the sense that it provides for timely consultation before decisions are made, rather than merely information after decisions are taken;

• it incorporates a code of practice on redundancies and relocation - effectively a substantive agreement – a feature that is very rarely found in EWC agreements;

• the agreement has been extended to encompass Diageo operations in central and eastern Europe; and

• a steering committee has been introduced, which can meet to discuss procedural and constitutional issues whenever the need arises.

The contents of the agreement were finalised after discussions between management and employee representatives at an annual meeting in Edinburgh. Tom Hayes of EIRI Associates, a European employee relations consultant specialising in EWC agreements, assisted the parties in drawing up the accord. The main points of the new agreement are outlined below.

Contents of agreement

Aim and scope

The agreement defines the scope, role, membership and operation of the Diageo plc Europe Forum (DEF), which fulfils the company’s obligations under the 1994 EU Directive on European Works Councils (94/45/EC).

Operations covered

The agreement is relatively unusual in that, as well as covering Diageo operations across the European Economic Area (EEA), it now encompasses countries such as the Czech Republic, Hungary, Poland and Slovakia. Companies where Diageo plc, or one of its subsidiary companies, has more than 50% of the shares, or where Diageo is a controlling undertaking, will be represented at meetings of the DEF.

Role

The DEF is an information and consultation forum made up of management and employee representatives, who meet to engage in a dialogue on the business performance and prospects of Diageo's European operations. The DEF is stated not to be a forum for collective bargaining.

The DEF neither replaces, nor duplicates, nor supersedes in any way the established procedures for informing, consulting and involving employees or their representatives at other appropriate levels in Diageo's European operations, including local, regional and/or national structures.

In its meetings, the DEF will concentrate first and foremost on Diageo's performance, general strategy orientation and commercial and financial situation, as well as the employment situation and its likely development. It will also focus on: investments; basic changes in the organisation; the introduction of new working and production methods; the relocation of production; amalgamations, 'downsizing' or closure of companies or plants, or important parts of these units; and significant redundancies. The DEF may agree to discuss other subjects.

The definition of consultation is one of the more advanced to be incorporated in an Anglo-Irish EWC agreement. Consultation is defined as an exchange of views and establishment of a dialogue. It is agreed that consultation must provide for employee representatives views to be heard, and for management to respond to these in a timely manner. It is agreed that for consultation to be meaningful, and in good time, it must occur as early as possible, and prior to a final decision being made, so that the employee representatives have the possibility of their comments being taken into account.

To ensure that consultation is meaningful, it is agreed that employee representatives will be given the opportunity to propose properly formulated responses, which can be taken into account by management when finalising decisions.

It is also agreed that many of the issues that fall within the scope of the DEF are also likely to be subject to consultation at local level in line with local law and practices. Where issues fall under the scope of both local processes and the DEF it is agreed that the DEF’s duties appropriately cover the European dimension. The purpose of the DEF is, however, not to cut across or duplicate local consultation.

Membership

There are two core senior management representatives on the DEF, which will be supplemented on a needs basis by other management representatives, depending on the subject matter at meetings. A Diageo spokesperson said that the agreement has commitment from senior executive level down.

There are a total of 35 employee representatives on the DEF, drawn from Diageo operations in countries across the EEA. The UK has the most representatives (10), followed by Ireland (seven).

In terms of the breakdown of employee representation, all seven representatives in Diageo Ireland are trade union representatives from the Guinness joint union forum. The unions involved in Ireland include the Guinness Staff Union (GSU), which represents technical and administrative staff, the Services Industrial Professional and Technical Union (SIPTU), which represents general workers, and a variety of craft unions. In contrast, half of the UK representatives are trade union representatives (predominantly from Scotland), and half are non-union representatives (predominantly from London).

DEF representatives may be: nominated and/or selected from the body of permanent employees of the company; or trade union officials who are involved in information, consultation, or negotiating fora at local level. The representatives of employees (or their deputies) are nominated and selected according to local law and custom and practice. Any additional attendee at DEF meetings for specific agenda items will be permitted with the agreement of both the management and employee-side chairpersons. Any such request will be made at the meeting to set the agenda held one month prior to the DEF meeting. The joint decision of the chairpersons will not be the subject of challenge or debate at the DEF.

Coordination committee

The agreement now makes provision for a steering or coordination committee, which was absent from the original agreement. This coordination committee will deal with constitutional and procedural issues that may arise and coordinate the business of the DEF between annual meetings. The group will include the employee-side chairperson, and five other employee representatives. The coordination committee representatives will aim to ensure appropriate representation of Diageo's 'demand', 'supply' and 'global' functions. Management representation will be determined by the issue for discussion.

Operating framework

The normal term of office for employee representatives will be four years. In the event of an employee representative leaving the company, or resigning from the DEF before completing their term of office, the deputy representative will complete the term of office. However, an election will be held for the selection of a new deputy.

Only elected members will attend the annual meeting of the DEF, which will normally coincide with the Diageo annual results announcement. The company and the employee representatives will each select a chairperson. The joint meetings of the DEF will be coordinated and facilitated by the company chairperson. Additional meetings may occur, should the company and employee representative chairpersons agree that there are matters of sufficient significance to warrant such meetings.

During the course of the year, management will use the established mechanisms (outside the DEF) for employee communication at national and/or local levels to ensure that employees and their representatives are informed and consulted on issues that relate to their undertaking. This does not preclude the recalling of the DEF on significant issues.

The date and venue of the annual meeting will be confirmed at least three months in advance. The company and the employee representative chairperson will publish the agenda at least one month before the date of the annual meeting. The company will arrange and finance all travel, accommodation, interpretation and translation costs associated with the annual joint meeting, the employee representatives' pre-meeting and any other agreed meetings with or without management.

The members of the DEF will not be treated less favourably than any other employee on account of carrying out their duties. They will not be subject to disciplinary action or coercion arising from responsibilities they have to employees whilst carrying out their legitimate DEF duties.

Duration

The agreement will last for five years from the date of signing by both parties. Subsequent to review in the fourth year of the currency of the agreement, the parties will meet to consider its renewal and/or extension.

Legal basis

The agreement is intended by the parties to be legally binding. It will be governed by, and construed, in accordance with the laws of the Republic of Ireland.

Whilst the parties agree and believe that the agreement complies in full with all the requirements of Article 13 of the EWCs Directive (ie is a voluntary agreement concluded before the Directive came into force, and thus not subject to many of the Directive's provisions), in the event that its compliance with Article 13 is challenged by any party, the central management of Diageo plc (the controlling undertaking for the purposes of the Directive and located in the UK) nominates and appoints Diageo plc in the Republic of Ireland as its representative within the Member States (as defined in the Directive) for all purposes.

Statement of best practice in redundancy/redeployment

Diageo has drawn up a statement of best practice guidelines on redeployment, redundancy and outplacement - appended to the DEF agreement - which will be adopted by all its European enterprises in such circumstances.

Diageo says that it is committed to ensuring that its treatment of those affected by redundancy will be 'sensitive, fair and constructive'. Ideally, it is suggested, if the redundancy and outplacement process works well, each individual leaving the company will feel pride in having worked for Diageo, will feel they have been treated fairly and equitably and would want to rejoin the company if ever presented with a future opportunity to do so.

The agreement states that the decision to make a job redundant is an 'unpleasant and difficult' one in any circumstances. For the employee concerned, the decision that he or she is not to be a part of the new structure can be a 'traumatic' one. It is therefore essential that the entire process is handled in the most 'professional and sensitive' manner. The process begins with the decision that a job is to be made redundant, resulting in a person being made redundant. This should occur after all alternative options have been explored through the internal 'resourcing' process. The individual should be informed, as soon as possible following the decision, that their job is redundant and that no other opportunities exist for them in the new structure. In relation to redundancy terms, the agreement states that the individual should be informed as soon as possible of the terms of their leaving. including information on: leave dates; payments due; treatment of pension and other benefits; outplacement support; and who to ask for further clarification. This information should be confirmed in writing.

In relation to outplacement, Diageo says that it aims to support each 'leaver' in ways that help to equip individuals to address/achieve their 'personal goals'. The actual support will vary from individual to individual and between parts of the organisation.

Guinness Dundalk

The new EWC agreement comes in the wake of trade union criticism over the perceived lack of consultation relating to the decision in 2000 to cut 300 of the 360 Guinness jobs in Dundalk, Ireland (IE0010212N). The unions claimed that the job cuts were not adequately discussed in the EWC prior to the company’s announcement, and that they should have been consulted prior to the decision. Hence, in the new agreement, the timing and nature of consultation has now been comprehensively and explicitly defined, which is not very common in other EWC agreements.

A union spokesperson from Guinness said that the new DEF agreement was a very good one, pointing to increased consultation rights and the benefits of the new coordination committee. Further, he believed that both parties – management and employees/unions – had learned a lot from the Dundalk experience.

Commentary

The new Diageo DEF agreement contains a number of novel features, particularly in comparison with other Anglo-Irish EWC agreements. Interestingly, the provisions of the agreement have been extended to encompass Diageo-owned subsidiaries in central and eastern Europe, in preparation for the accession of many such countries into the European Union. The scope of consultation also goes some way beyond many other EWC agreements, and the code of best practice on redundancy and redeployment, which essentially takes the form of a substantive agreement, is also an unusual and key feature. (Tony Dobbins, IRN)