Ruling business before employees
7 May 1999
Richard Arthur, partner, Thompsons
Fraser Younson, partner, McDermott Will & Emery
Ronnie Fox, senior partner, Fox Williams
A recent employment tribunal hearing may have toppled the tricky balancing act which listed companies must perform when considering a merger or takeover likely to involve collective redundancies.
EU legislation states that companies have to inform employee representatives of potential job losses in good time, but the Stock Exchange Yellow Book has a rule that to prevent insider dealing, companies can not reveal price-sensitive information. The Yellow Book allows companies to consult representatives of employees "in confidence", but unions have no duty to keep the information confidential.
The ruling in MSF v Refuge Assurance, found that Refuge was not breaking the law on consulting the Stock Exchange before it informed the Manufacturing, Science and Finance (MSF) union of its merger with United Friendly.
So is this tribunal decision a kick in the teeth for employee rights in this country, or a sensible ruling which resolves an ambiguous situation?
Employment partner at trade union firm Thompsons Richard Arthur, whose colleague Stephen Pinder represented MSF in the case, says: "We are very surprised by this ruling and we expect this to be overturned on appeal.
"There is no way the Stock Exchange Yellow Book should override EU legislation. You have to look at this from an employee's point of view.
"Does EU law lay down hard and fast obligations about when companies need to consult? Yes. Is there any reason why that should be overridden by rules that only relate to the company by the fact that it's listed? No."
Arthur suggests the ruling may conflict with the European Convention on Human Rights given the convention's guarantee of freedom of association. "I very much doubt that the EU institutions are going to be happy about this," he adds.
Employment partner at McDermott Will & Emery Fraser Younson is also "surprised" by the judgment.
But he disputes Arthur's suggestion that the ruling could contravene the Human Rights Act, arguing it does not affect the right of association because it does not prevent workers meeting together.
He says: "This is very helpful to employers because it means they can do all sorts of things, such as launching joint ventures, without telling their employees what's happening."
However, he claims the decision has arisen partly because the UK is at odds with its European neighbours in terms of employee representation.
Younson says: "Most mainland EU countries have works councils which represent employees and respect confidentiality so there is no danger of insider dealing.
"In the UK there is no obligation on trade unions not to disclose confidential information, and most of the UK workforce does not even have a defined body of representation or any framework of statutory rights and obligations."
Fox Williams senior partner Ronnie Fox agrees: "This kind of issue is one which could be discussed with a works council. I think this case will be welcomed because this issue is very much discussed."
But he denies the decision is "a step back for employee rights", arguing that an obligation to consult with the workforce might jeopardise a business deal. "A good commercial transaction will protect employee rights," he says.
"One of the difficulties in this case is that it is not clear from the legislation what the point of the consultation is. Is it with a view to avoiding redundancies, trying to persuade the company into another course of action, or arranging how the redundancies should be organised?
"I think the union is on a bit of a crusade to make a political point since it has stated it is appealing before the reasons for the ruling have been given. Union membership is greatly falling and unions have to do things to show they can protect employee's rights," he says.
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