Government proposes employee consultation reforms

In February 1998, the Labour Government issued proposals for amending UK legislation on employees' information and consultation rights in the event of redundancies and business transfers. We review the background to this initiative and the significance of the planned changes.

On 16 February 1998, Ian McCartney MP, Minister of State at the Department of Trade and Industry (DTI), launched a public consultation exercise on government proposals for new rules on consulting representatives of employees affected by redundancy or a change in ownership of the business for which they work. The existing statutory requirements were amended as recently as 1995 by the previous Conservative Government in response to rulings by the European Court of Justice (ECJ) that UK legislation inadequately implemented the EU Directives on collective redundancies and transfers of undertakings. The 1995 changes have, however, been strongly criticised, particularly by trade unions, and questions have continued to be raised as to whether current provisions fully comply with EU law. The Government says that its new proposals are designed to end this uncertainty and create a clearer legal framework.

Background

The EU collective redundancies and transfer of undertakings Directives were originally implemented in the UK via the Employment Protection Act 1975 and the Transfer of Undertakings (Protection of Employment) Regulations 1981 respectively. In both cases, the right to be consulted was limited to representatives of trade unions recognised by the employers concerned, and the law provided no mechanism for consulting employee representatives in the absence of union recognition. This and other questions concerning UK implementation led the European Commission to launch infringement proceedings against the UK in 1989. The ECJ upheld the Commission's criticisms in June 1994 (UK9708152F).

Most of the points on which the UK was required to amend its legislation had already been addressed through changes introduced by the Trade Union Reform and Employment Rights Act 1993, which also implemented the provisions of the revised EU collective redundancies Directive adopted in 1992. The outstanding issue, however, concerned the limitation of consultation to recognised unions. On this, the ECJ took the view that the ability of employers which did not recognise unions to frustrate the protection provided for employees by the Directives must be regarded as contrary to EU law. To comply with the ECJ rulings, it was necessary for the UK Government to make provision for the designation of employee representatives for the specific purposes of information and consultation under the two Directives in situations where there are no recognised unions. This resulted in the previous Conservative Government introducing the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995, requiring consultation on these issues either with representatives of recognised unions or with other representatives elected by employees.

Criticism of the 1995 Regulations has focused on the fact that the choice of which type of representatives to consult lies with the employer, and that employers which recognise unions have the option of by-passing existing union machinery and consulting elected employee representatives instead. There are also no provisions specifying how employee representatives should be elected, nor ensuring the independence of the employee representatives from the employer. The adequacy of the sanctions for failing to consult have also been questioned. A legal challenge against the 1995 Regulations brought by three trade unions (GMB, NASUWT and UNISON) was unsuccessful in the High Court, and the unions suspended an appeal pending the outcome of the current Government's review.

The new proposals

The main changes the Government proposes to introduce are as follows.

  • Where an employer recognises any trade union in respect of the workers affected by the proposed redundancies or transfer, consultation must take place with representatives of that union. Consultation with elected representatives of the affected workers may only take place in the absence of a recognised union.
  • In future, it will be specified that the non-union employee representatives must be both capable (ie suitably mandated) and independent. They may be elected either on an ad hoc basis or as a standing body, or may be members of an appropriate existing representative body.
  • Rules for the conduct of elections will be laid down to ensure that representatives are genuinely and independently chosen by the employees (eg no-one who is a member of the affected workforce may be unreasonably excluded from standing for election, and all members of the affected workforce must be entitled to vote and in secret). The employer will have the responsibility of arranging the election, but employees will have the right to challenge the arrangements made.
  • A new provision will be introduced so that where the employer genuinely provides the opportunity for the election of representatives but the employees do not take this up (eg no candidates are willing to stand for election), employers may discharge their obligations by giving the required information directly to the individual employees affected.
  • The new legislation will make clear that, in the case of both redundancies and transfers, the obligation to consult applies in respect of all those who may be affected, either directly or indirectly.
  • Both lay trade union officials and other employee representatives will be entitled to paid time off for training in handling consultations over redundancies and transfers.
  • The level of the "protective award" of compensation available to employees will in future be up to 90 days' pay in all cases of inadequate consultation.

The Government also "has it in mind" to remove the current exemption from the consultation requirements of cases involving fewer than 20 redundancies within a 90 day period, and is seeking views on such a step. Introduced by the 1995 Regulations, this threshold is in line with the provisions of the EU collective redundancies Directive but, according to Government estimates, removed the obligation to consult from some 96% of UK businesses. Under previous UK legislation, the duty to consult applied regardless of the number of employees potentially affected.

Commentary

The Government's proposals have been warmly welcomed by the Trades Union Congress (TUC). Apart from the question mark over the firmness of the Government's intention to abolish the threshold for consultation of 20 redundancies, the proposals meet most of the TUC's concerns about the existing legal position. But ministers' readiness to initiate these reforms in the specific areas of collective redundancies and business transfers, and their belief that "consultation is an important aspect of promoting the partnership approach to employment relations and helps business competitiveness" (DTI press release, 16 February 1998), does not signal a willingness to embrace the European Commission's wider agenda for statutory employee consultation in national enterprises. In particular, the Blair Government has continued to make it clear that it is unhappy about the Commission's current proposals for an EU-wide framework to ensure that Member States' national provisions oblige enterprises to have permanent arrangements for informing and consulting employee representatives on a range of issues (EU9711160N). (Mark Hall, IRRU)

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