The way we work

The Information & Consultation Directive, due in 2005, has been heralded as one of the most significant pieces of employment legislation ever introduced in the UK. John Clinch and Fraser Younson go head-to-head to offer their views on what it will mean for unions and employers

A man not usually noted for hyperbole, former TUC general secretary John Monks described the Information & Consultation Directive as “potentially the most significant piece of employment legislation ever to be introduced in the UK”. Can this extravagant claim be right?

To answer that we must pause to consider the domestic background against which it is being introduced. Unions may have risen over the last few years in the public consciousness and we have compulsory recognition laws that for the most part seem to work. The problem is that the level of employee representation generally remains stubbornly low.

So when Europe adopted the directive last year – a directive that concerned the establishment of compulsory works councils for possibly all undertakings with at least 50 employees – it caused quite a stir. Could this be the answer to persistently thin representation in the UK economy? If so, where would this leave traditional trade union organisation where it currently exists and works?

It is now some time since Jacques Delors, former president of the European Commission, helped many trade unionists realise that Europe had a useful social dimension, that it was not just a capitalist club. Europe could drive the agenda in the workplace and we could look forward to the effects from that notorious European social model crossing the Channel. Mandatory employee representation is part of that agenda. But the doubts remain and there is deep ambivalence about the directive. There are trade unionists who see it as an irrelevance, or even a threat. They are dismayed that the draft regulations issued under the directive did not, as they could have done, build on existing workplace representation. They could, for example, have given precedence to the position of unions as the Transfer of Undertakings (Protection of Employment) Regulations (Tupe) consultation provisions do.

But there are others who see it as an opportunity and a way to improve representation, both in terms of coverage where there is currently none at all, and in terms of the quality of representation for everyone, even where there may be effective trade union representation already. They say that trade unions can adapt to the new structures and, in fact, that they are uniquely qualified to sit on works councils and make them properly effective.

They can point to the ‘default’ model under the draft regulations. If and when it applies, for the first time ever employers will have to consult with a view to reaching agreement about decisions likely to lead to changes in work organisation or contractual relations. It is easy to see that the scope of this obligation could be very wide and very deep. Although the concepts may appear distinct, you could not put much more than a sheet of paper between ‘negotiation’ and ‘consultation with a view to reaching agreement’ (a European law concept with which we may be familiar in a collective redundancy or Tupe context). And the information provisions are potentially significant, the employer being required to inform about the development of the undertaking’s economic situation – an end, let us hope, to the appalling practice of ‘text message redundancies’.

So why am I disappointed? Well, first, the new system does not apply automatically. The draft regulations allow for employers to set up their own works councils to avoid ever having to deal with what is sure to be the more effective default model. Also, we have had no guidance yet as to how good employers’ work councils have to be. Second, and even more worrying, in a provision that smacks of being a classic sop to business interests: the draft regulations admit the possibility of employers satisfying their obligations by consulting with employees directly and not through their representatives. I just cannot see how it is possible to implement this directive by allowing employers simply to send around emails. It potentially drives a coach and horses right through it. And third, the maximum penalty for non-compliance is a measly £75,000 fine – a far cry, arguably, from the requirement under the directive for penalties to be “effective, proportionate and dissuasive”.

For domestic works councils to be really effective and transform UK working culture (and I am with Monks on that one), at the very least these serious deficiencies will have to be corrected before they appear in the statute books. But that is the whole point: the Government’s heart was never in this legislation. It is no coincidence that this feeble transposition of the directive was drafted by a government that found itself isolated in Europe as the only country left opposing it. Janus-faced, it looks to the social model across the Channel and at the same time to the neo-liberal model across the Atlantic. These watered-down regulations are the result. Fraser Younson is life vice-president of the Employment Lawyers Association and a partner and head of employment at McDermott Will & Emery

The Information & Consultation of Employees Regulations (Icer) will in time come to signal a change in employee relations in the UK. At present, less than 30 per cent of the UK’s workforce is represented collectively. The draft regulations – effective on 1 April 2005 for undertakings with 150-plus employees – will change the way in which many employers interface with their employees.

Current Government policy has been to encourage employers to deal with their employees collectively. Under the Working Time Regulations 1998 and the Maternity and Parental Leave Regulations 1999, employers can stay with the straitjacket of parts of the legislation or have greater flexibility through collective or workplace agreements. Icer is more upfront. Just 10 per cent (minimum 15 and maximum 2,500 employees) of the workforce of an undertaking can requisition the establishment of an information and consultation (I&C) body, known as a ‘works council’.

Employers have, in effect, four choices. The first option is to do nothing – but this is really not an option at all, because once a formal requisition is made, employers have about one month to get their ducks in a line. This involves deciding their strategy, training and briefing their management negotiating team, educating senior and line management, managing employee expectations, deciding and drafting the employee communications documents and drafting an I&C agreement. One month is simply not long enough if employers want to avoid being on the back foot during the six-month negotiating process.

The second option is to agree to the default model, which in effect means the employer will be agreeing to a form of collective bargaining on “decisions likely to lead to a substantial change in work organisation and contractual relations”. The scope of this is very wide and covers terms and conditions of employment, how, where and when work is done, how many people do it and with what equipment and support. In addition, unlike the current rules under Tupe, employers will have to consult, “with a view to reaching agreement”, on the actual decision to outsource or sell a business by asset transfer, including possibly even the choice of transferee.

The third choice is to agree to an I&C agreement ahead of April 2005 and then be on the front foot if a formal requisition is made. This opens a potential window of opportunity for employers. Icer provides that, if an employer has a pre-existing I&C written agreement covering the whole of the workforce and approved by it, then this can be used to stop an Icer requisition in its tracks. In this situation (provided the original requisition is not by at least 40 per cent of the workforce), the employer can ballot its workforce on whether it wants the Icer request to proceed. If there is less than 40 per cent support for it, the existing Icer agreement will remain in force and no other Icer requisition can be made for three years. For some organisations this will represent a real opportunity to keep out the ‘default model’ I&C structure. If so, they will need to begin the process now so that the voluntary I&C structure has been running for at least six to nine months before Icer comes into force in April 2005.

If a company decides that it does not want to be proactive now, but it nevertheless wants to have its ducks in a line ahead of 2005, it will need to make 2004 the year when it prepares the strategy and documentation to be rolled out if and when it gets a formal requisition under Icer. In-house counsel and HR directors cannot afford to have no answer when their chief executive officer asks in April 2005: “Why haven’t we strategically prepared for this earlier?”

Icer represents a double-edged sword for those employers that are trying to resist union infiltration into their organisation. On one hand it may give a union the platform from which to exert its influence in the organisation; on the other, it could dilute union influence. No answer fits all organisations, but it should be noted that, unlike the rules on union recognition, Icer requires only 10 per cent support by employees. In addition, the subject matters for ‘negotiation’ in the default model are much wider – eg it is work organisation and contractual relations (not just pay, hours and holiday pay). So Icer may well be used by trade unions as a more effective vehicle for establishing their influence within organisations.