Draft information and consultation legislation published

In July 2003, the UK government published draft Regulations that will implement the EU information and consultation Directive. The approach adopted in the Regulations is based on a framework agreed between the government, the Confederation of British Industry and the Trades Union Congress.

On 7 July 2003, the Department of Trade and Industry (DTI) published a consultation document setting out how the UK government proposes to implement the EU information and consultation Directive (2002/14/EC) (EU0204207F), and inviting comments on draft Regulations. The approach taken by the draft Regulations is based on a framework established in discussions between ministers and representatives of the Confederation of British Industry (CBI) and the Trades Union Congress (TUC), who agreed an 'outline scheme' for the implementing legislation which is incorporated in the consultation document. The draft Regulations also take account of responses to the DTI discussion paper published in July 2002 (UK0208101N), and views expressed at a series of round-table discussions held around the country. The government is now consulting on the detail of draft Regulations, their practical operation, and the sort of guidance that employers and employees will need in applying the new legislation. The government has set a four-month consultation period (ie until 7 November 2003) during which interested parties may submit comments and a second set of round-table discussions will be held.

This feature highlights the key features of the proposed approach to implementing the Directive in the UK, and employer, trade union and political reaction.

The draft Regulations

The Regulations will be called the Information and Consultation of Employees Regulations 2005 (and will no doubt become known as the 'ICE Regs'). They will come into force on 23 March 2005, the transposition deadline set by the Directive. The Regulations will eventually apply to undertakings (ie legal entities such as companies) with 50 or more employees but, in line with the transitional arrangements permitted by the Directive in EU Member States currently without 'general, permanent and statutory' systems of information and consultation and employee representation, the Regulations will apply to undertakings with at least 150 employees from 23 March 2005, those with at least 100 from 23 March 2007, and those with at least 50 from 23 March 2008.

The trigger mechanism

The draft Regulations will enable employees to request negotiations with their employer on the establishment of information and consultation procedures. Such a request must be made by at least 10% of the employees in the undertaking, subject to a minimum of 15 employees and a maximum of 2,500. Where a valid request is made, the employer will be obliged to enter into negotiations with elected employee representatives to reach an agreement on information and consultation arrangements within the undertaking.

However, where there is a pre-existing information and consultation agreement in place (and the request has been made by fewer than 40% of the workforce), the employer may, instead of opening negotiations, hold a ballot of all the employees to ascertain whether the request is endorsed by at least 40% of the workforce. Where this proves to be the case, the employer must enter into negotiations on a new agreement. Where fewer than 40% of the employees support the request for negotiations, the employer need not do so. This endorsement procedure will apply where there exists one or more written agreements, covering all the employees in the undertaking, which have been approved by the employees and which set out 'how the employer is to give information to the employees or their representatives and to seek their views on such information'.

Where employers indicate their intention to hold a ballot on a pre-existing agreement, an employee representative or employee (where there are no employee representatives) may complain to the Central Arbitration Committee (CAC) if they dispute whether the claimed agreement satisfies the conditions above. Where the CAC finds the complaint well-founded, it will order the employer to enter into negotiations instead of holding a ballot.

The government says that it will issue guidance on how employee approval of pre-existing agreements can be demonstrated. This will be based on the outline scheme agreed by the CBI and TUC, which states that methods by which employee approval of pre-existing agreements could be demonstrated would include support indicated by:

• a majority in a ballot of the workforce;

• a majority expressing support through signatures; or

• the agreement of employee representatives (including, where appropriate, officials of independent trade unions in workplaces with a recognised union) who represent a majority of the workforce.

The outline scheme adds that: 'Pre-existing agreements ... may not consist of arrangements unilaterally imposed by management without any discussion with employees and where employees have had no opportunity to signify their approval.'

Negotiating an information and consultation agreement

Where a valid employee request for negotiations has been made, or where employers decide to initiate negotiations themselves, employers must make arrangements for the employees to appoint or elect negotiating representatives. The draft Regulations do not lay down detailed requirements on how this is to be done. The consultation document states that 'guidance will elaborate on who might be considered genuine representatives of the employees for the purpose of the negotiations'. The negotiations may last for up to six months, though this period can be extended by agreement between the parties. The draft Regulations specify that negotiated agreements must be in writing, cover all the employees in the undertaking, and set out the circumstances in which the employer must inform and consult the employees. Moreover, such an agreement must either:

• provide for the appointment or election of 'information and consultation representatives' who will be informed and consulted by the employer; or

• provide that the employer will inform and consult the employees of the undertaking directly.

Agreements must be signed either by all the negotiating representatives, or by a majority of them in which case the agreement must also be approved in writing by at least 50% of the employees or approved by 50% of employees who vote in a ballot.

Standard information and consultation provisions

Where the parties do not reach an agreement within the six-month time limit or any extended period agreed by the parties, 'standard information and consultation provisions' will become applicable. These effectively 'copy out' the requirements of Article 4 of the Directive. The employer is required to arrange for a secret ballot to elect one information and consultation representative for every 50 employees or part thereof, up to a maximum of 25, according to balloting requirements set out in a schedule to the Regulations. Once these have been elected, which must be within six months of the expiry of the period for negotiations, the employer will be obliged to provide them with information on:

(a) the recent and probable development of the undertaking’s activities and economic situation;

(b) the situation, structure and probable development of employment within the undertaking and any anticipatory measures envisaged, in particular, where there is a threat to employment within the undertaking; and

(c) decisions likely to lead to substantial changes in work organisation or in contractual relations, including decisions covered by the legislation on collective redundancies and transfers of undertakings.

This information must be given at such time, in such fashion and with such content as are appropriate to enable, in particular, the information and consultation representatives to conduct an adequate study and, where necessary, to prepare for consultation.

The employer must consult the information and consultation representatives on the matters referred to in paragraphs (b) and (c) above. This consultation must be conducted:

• in such a way that its timing, method and content are appropriate;

• on the basis of the information supplied by the employer and of any opinion expressed by the information and consultation representatives;

• in such a way as to enable the information and consultation representatives to meet the employer at the relevant level of management depending on the subject under discussion, and to obtain a reasoned response to any opinion they give; and

• in relation to matters falling within paragraph (c) above, with a view to reaching agreement on decisions within the scope of the employer’s powers.

The government envisages providing guidance on what these requirements might mean in practice, including examples. The outline scheme agreed by the CBI and TUC states that changes to pension schemes are among the issues that should be discussed.

The employer and the elected information and consultation representatives may at any time reach an agreement that provisions other than the standard requirements shall apply, subject to approval by a majority of the representatives.

Enforcement

Where a negotiated agreement has been reached under the statutory procedure, or the standard information and consultation requirements apply, complaints may be made to the CAC by employers, information and consultation representatives or employees, as appropriate, that the terms of the agreement or, where relevant, the standard provisions, have not been complied with. This would include a failure on the employer’s part to establish the agreed or required procedure, or, having established it, a failure to inform and consult in accordance with the agreement or the standard provisions. Where a complaint is upheld, the CAC may order the defaulter to take the necessary steps to comply. As under the Transnational Information and Consultation of Employees Regulations 1999 (which implemented the European Works Councils Directive [94/45/EC] in the UK - UK0001146N), 'no order of the CAC ... shall have the effect of suspending or altering the effect of any act done or any agreement made by the employer'. Appeals against a CAC decision may be made to the Employment Appeal Tribunal (EAT). Where the CAC upholds a complaint against an employer, the complainant may also apply to the EAT for a penalty to be imposed on the employer, up to a maximum of GBP 75,000.

Confidentiality

The draft Regulations prohibit negotiating representatives, information and consultation representatives or experts assisting them from disclosing any information or document provided by the employer in confidence. Unauthorised disclosure of such information would render them liable to civil proceedings for breach of statutory duty (except where this constitutes a 'protected disclosure' under the Public Interest Disclosure Act 1998). The representatives can appeal to the CAC if they believe that disclosure of the information or document would not be likely to prejudice or cause serious harm to the undertaking, and the CAC will make a ruling as to the reasonableness of the employer’s requirement for confidentiality. The draft Regulations also provide that the employer may withhold any information or document if, according to objective criteria, its disclosure would seriously harm the functioning of the undertaking or would be prejudicial to it. Disputes as to whether withheld material meets this definition may be referred by either side to the CAC, which is empowered to order disclosure where appropriate. Again, appeals against the CAC’s decisions may be made to the EAT on a point of law.

Protections for representatives

The draft Regulations provide that employees who are negotiating representatives or information and consultation representatives are entitled to reasonable paid time off to perform their functions, enforceable through employment tribunal claims. Employees are also protected against unfair dismissal or detriment by an employer when acting as representatives, standing as a candidate for election or otherwise exercising their rights under the proposed legislation. However, the draft Regulations make it clear that an employee who makes an unauthorised disclosure of confidential information will lose the right to protection against unfair dismissal and detriment otherwise afforded by the Regulations.

Reaction to the proposals

Announcing the proposals, trade and industry secretary Patricia Hewitt said: 'I want these changes to lead to a "no surprises" culture at work where employers and employees discuss common ground and find solutions to mutual problems. I want to see an end to the climate where people only hear about job losses from the media, over their breakfasts. We have reached this agreement with the CBI and TUC through constructive dialogue and discussion. It’s exactly the spirit in which we all want new rules on information and consultation to operate in workplaces across Britain.'

Brendan Barber, general secretary of the TUC, hailed the proposals as a 'breakthrough' and 'a real milestone in the long march to winning information and consultation rights in Britain’s workplaces'. He said: 'These new rights could lead to the biggest change in workplace relations for a generation. But that’s not a threat, it’s an opportunity for both employees and employers to improve the quality of working life and boost productivity.'

The CBI director-general, Digby Jones, commented that 'The government has made sense of a poor piece of EU legislation. It has protected the good consultation which already exists ... and avoided overly rigid rules and damaging one-size-fits-all solutions. Employers won’t welcome the new law but they recognise that the government has taken CBI concerns on board.'

The Chartered Institute of Personnel and Development (CIPD), representing the UK’s personnel and human resources managers, endorsed the government’s 'flexible approach'. Mike Emmott, the CIPD’s head of employee relations, commented: 'The good news for employers is that they can agree with their employees that existing good practice will continue, and will satisfy the requirements of the Regulations. This means for example that where employers currently inform and consult their employees directly, rather than through representatives, they can continue to do so provided their employees are happy with the arrangements. The threat that all employers would be required to squeeze into a single legal straitjacket, and establish works councils, has not materialised.'

However, the opposition Conservative Party’s trade and industry spokesperson in the House of Commons, Tim Yeo, said that the proposals would 'damage competitiveness'. He added: 'Compelling companies with as few as 50 employees to consult and inform their workforce about a range of managerial decisions is potentially burdensome and not necessarily the best way to achieve best practice.'

Commentary

This is the first time that the UK’s strategy for implementing an EU employment law Directive has been agreed in tripartite discussions between the government, the CBI and the TUC. The TUC in particular sees important political benefits in achieving a national 'social partner'-style framework agreement as the basis for the UK’s transposition legislation. While the agreed outline scheme has established the main elements of the UK’s approach to implementing the Directive, some important issues of detail remain to be clarified as a result of the current consultation process. These include the interface between the new information and consultation requirements and the existing statutory provisions on redundancies and transfers, which prioritise consultation with representatives of recognised unions where they represent the employees concerned. The status and specifics of the supplementary guidance to be drawn up on the practical application of the Regulations will also potentially be very important, particularly given the 'minimalist' nature of the 'standard information and consultation provisions' which constitute the statutory fallback model applicable where employers and employee representatives are unable to reach a negotiated agreement.

The main focus of the DTI/CBI/TUC outline scheme concerns the procedure for triggering negotiations over information and consultation arrangements. This is also the area where the key compromises between the CBI and the TUC have been reached. The CBI’s main objective was to protect existing company arrangements whereas the TUC argued that arrangements that are not based on genuine agreement with the workforce must be capable of being challenged. The agreed outcome is that, where there is an existing information and consultation agreement but 10% of the workforce still seek to trigger negotiations on new arrangements, employers will be able to hold a ballot in which at least 40% of the workforce must endorse the request for new negotiations otherwise existing arrangements can be maintained. This is clearly a significant hurdle, but as the TUC points out, it would not be desirable to expose existing agreements, which may include union agreements, to 'easy challenge'. In any event, where employers seek to hold a ballot on existing arrangements which may not meet the statutory criteria, including demonstrable employee approval, employee representatives or employees may challenge this before the CAC and, if their complaint is upheld, negotiations on new arrangements must take place.

It is now clear that, under the draft Regulations, British companies and other undertakings falling within the requisite employment thresholds face a range of options similar to those which faced 'Community-scale' undertakings or groups under the European Works Councils (EWCs) Directive. Prior to the relevant commencement date (ie March 2005, March 2007 or March 2008, depending on the number of employees the undertaking has), undertakings have the opportunity to put in place information and consultation arrangements that cover all employees and have been approved by the workforce, with the aim of pre-empting the use of the Regulations. In many cases, this may mean overhauling existing arrangements or underpinning them by formal agreements. Other companies will decide to introduce employee consultation arrangements for the first time. After the Regulations come into force, employers need not do anything unless employees trigger negotiations, but where this happens, the negotiation of an information and consultation agreement will take place against the benchmark provided by the 'standard information and consultation provisions' which may ultimately be enforced on the undertaking in the event of a failure to agree. Moreover, where a negotiated agreement is reached via the Regulations’ procedures, or the standard information and consultation provisions apply, the Regulations’ enforcement mechanisms (including the confidentiality provisions) involving the CAC and the EAT will become applicable, which is not the case in respect of agreements reached before the commencement of the Regulations.

The experience of both the EWCs legislation and the UK’s trade union recognition legislation (UK0201171F) suggests that there may be relatively few cases where the statutory fallback model is imposed on companies. The overall impact of the Regulations may be a kind of 'legislatively-prompted voluntarism', similar to what has happened as a result of the statutory trade union recognition procedure, with the new legislation driving the spread of voluntary information and consultation agreements, reached either ahead of its entry into force or as a consequence of its trigger mechanism being used.

One aspect of the draft Regulations which may come under particular scrutiny during the current public consultation exercise concerns the scope for negotiated agreements to provide for 'direct' forms of information and consultation rather than informing and consulting via representatives. The Directive allows the provisions of negotiated agreements to differ from those set out in Article 4, but the Directive’s definitions of information and consultation as procedures taking place between employer and employee representatives would still appear to apply, implying that agreed information and consultation arrangements that do not involve employee representatives may not meet the requirements of the Directive. While the scope provided by the draft Regulations for agreeing direct forms of information and consultation has been welcomed by employer organisations, there may be questions over the compatibility of this approach with the Directive’s requirements. (Mark Hall, IRRU)