Lawyers view: The national-level information and consultation directive

Philip Titchmarsh outlines what the new directive will mean and what action
employers will have to take to ensure employees’ rights to information and
consultation

At present, employees in the UK have far fewer rights to information and
consultation than their counterparts elsewhere in the European Union. Most of
the time, in fact, employers in the UK have no legal obligation to keep their
employees informed or to consult with them. Although employers do have to
inform and consult employees in certain specified circumstances – relating to
large-scale redundancies, business transfers and health and safety – at
present, there is no general legal framework in the UK providing for the
information and consultation of employees.

Every EU member state except the UK and Ireland, has laws or legally binding
national agreements which oblige employers to inform and consult with employee
representatives generally. However, the gap between the UK and most of the
other members of the EU will narrow in the not too distant future.

On 23 March 2002, the European directive providing for the information and
consultation of employees at national-level came in to force.

The Directive in detail

The final text of the directive differs considerably from the original text
issued by the Commission in 1998. In general terms, it places more emphasis on
national-level custom and practice. It does not provide for a one-size-fits-all
national works council model and allows for employers to create information and
consultation arrangements which best suit their own organisational structure.

Thresholds

Member states may choose whether to apply the directive to either:

– Undertakings with at least 50 employees in any one member state; or

– Establishments with at least 20 employees in any one member state.

Whereas the original text spoke exclusively of "undertakings", the
final text distinguishes between undertakings and establishments.

This means that countries such as Germany – where employee representation
may be set up in establishments with at least five employees and works councils
may be set up in establishments with at least 20 employees – will choose the
establishment option. Countries such as the UK, where there is no statutory
provision for information and consultation of this kind, will in all likelihood
choose the undertaking option, where the threshold is 50 employees.

The term ‘undertaking’ is not defined in the directive. However, it is clear
that the meaning of the term is not restricted to companies. In European Court
of Justice decisions (predominantly concerning the Acquired Rights Directive
(77/187)), the term has been held to cover public and private entities carrying
out an economic activity, whether or not operating for gain. This will include
companies and unincorporated entities such as partnerships. Potentially, other
organisations such as charities or public sector bodies are also covered where
they are carrying out an economic activity.

Graduated implementation

One of main concessions in the final text of the directive is that certain
member states may avail themselves of a graduated implementation phase.

The directive must be implemented in the member states by March 2005.
However, the implementation timetable can be extended in member states where there
is at the date of adoption of the directive: "no general, permanent and
statutory system of information and consultation of employees nor a general,
permanent and statutory system of employee representation of the
workforce".

The UK is, of course, such a member state and will take advantage of the
graduated implementation phase. Ireland is the only other member state in a
position to do so. The UK and Ireland are entitled to restrict the application
of the directive between March 2005 and March 2007 to undertakings with 150 or
more employees. Then it must apply to undertakings with 100 or more employees
and, after a further year – that is by March 2008 – to those with 50 or more
employees. All other member states must apply the provisions of the directive
to undertakings with at least 50 employees (or establishments with at least 20
employees) from March 2005.

Content of information and consultation

The directive draws the distinction between issues subject to information
only and those on which information and consultation should be conducted. The
rationale for this distinction is that the matters which are subject to
information only are matters which are thought to be generally outside the
control of the employer.

Employees through their representatives will have a right to be informed
about the recent and probable development of the undertakings or the
establishment’s activities and economic situation.

Employee representatives will have a right to be informed and consulted on:

– The situation, structure and probable development of employment within the
undertaking or establishment;

– Measures envisaged which could pose a threat to employment;

– Decisions likely to lead to substantial changes in work organisation or in
contractual relations including those covered by the Transfer of Undertakings
and Collective Redundancies legislation.

The key point here is that the proposed subject matter of information and
consultation contains the two key elements of information, namely the ongoing
health of the undertaking and any plans for changes, especially those in
relation to employees.

Carrying out information and consultation

The directive defines what is meant by ‘information’ and ‘consultation’ and
lays down some rules as to how employers should carry out those processes.

Information concerns the employer’s transmission of data to employee
representatives so they can acquaint themselves with the subject matter in hand
and examine it. Information must be given in such a way (timing, method,
content) as to enable employee representatives to conduct "an adequate
study" and, where necessary, prepare for consultation.

Consultation is a more meaningful process than the provision of information.
Under the terms of the directive, it means an exchange of views and
establishment of dialogue between the employer and the employee
representatives. This is the same definition as that found in the European Works
Councils Directive.

The provisions governing consultation state that:

The timing, method and content should be appropriate

– It should take place at the relevant level of management and employee
representation

– It should take place on the basis of relevant information supplied by the
employer and on the basis of an opinion formulated by the employee
representatives

– It should enable employee representatives to meet with the employer and
obtain a response, including reasons for the response, to any opinion the
representatives might formulate, and

– Insofar as decisions are likely to lead to substantial changes in work
organisation or in contractual relations, consultation should take place
"with a view to reaching an agreement" on decisions within the scope
of the employer’s powers

The employer is, therefore, obliged to enter into consultation "with a
view to reaching an agreement" on significant changes in the workplace.
What that phrase means is not explained in the directive. It is used, however,
both in the context of the Acquired Rights Directive and the Collective
Redundancies Directive.

The phrase does not mean the employer is required to agree with any counter
proposals made by employee representatives. However, consultation must be
entered into with an open mind and with a willingness to be persuaded.

Arguably, what is envisaged is a process akin to negotiation. An employer
who enters into consultation with a closed mind will be found not to have
properly consulted at all, and will be exposed to liability for breach of the
obligations contained in the directive.

In considering whether an employer has discharged his duty to consult, even
where there is no obligation to consult "with a view to reaching an
agreement", the question of the employer’s state of mind at the outset of
the consultation process will be relevant.

Consultation clearly means more than the simple provision of information.
Case law in the context of the collective redundancies legislation may be
instructive. In that context, in R v British Coal Corporation ex-parte
Price,1994, IRLR 72, Glidewell LJ took the view that: "É fair consultation
means:(a) consultation when the proposals are still at a formative stage; (b)
adequate information on which to respond; (c) adequate time in which to
respond; and (d) conscientious consideration É of the response to
consultation."

Glidewell LJ’s summary of fair consultation is consistent with that
envisaged in the directive. Consultation must be entered into by the employer
before decisions are taken. The employer must have an open mind and a
willingness to be persuaded by employee representatives and the consultation
should take place only after appropriate information on the subject matter of
the consultation has been provided to the employee representatives.

Voluntary arrangements

As with the original draft, the final text of the directive provides that
member states may allow management and labour "at the appropriate level,
including at undertaking or establishment level" to define, through
negotiation, practical arrangements for informing and consulting employees.

These arrangements may contain provisions which are different to those
described above, as long as they respect the principles set out in Article 1 of
the directive, including a provision that information and consultation takes
place "in a spirit of co-operation". Any negotiated form of
information and consultation may also be subject to limitations set out by
member states in their implementing legislation.

The UK Government is keen for employers to set up voluntary arrangements
tailored to suit their organisation and it is unlikely that there will be many,
if any, such limitations in the UK.

This opportunity to enter into voluntary information and consultation
arrangements is familiar from the European Works Councils Directive. However,
in that context, there was only an ability to enter into a voluntary agreement
in the period prior to the directive’s transposition in to the relevant member
state’s national law. If that window of opportunity was taken, the directive,
as implemented in national law, did not apply to the trans-national undertaking
or group concerned.

The National-level Information and Consultation Directive is different.
Voluntary arrangements may be entered in to at any time, either prior to or
after the directive is incorporated in to national law. All the directive says
is that the voluntary arrangements for information and consultation may be
different to those envisaged by the directive so long as they provide for the
effective information and consultation of employees. The directive, therefore,
sets out the minimum requirements.

Confidentiality

Employee representatives will not be allowed to reveal any confidential
information given to them in the course of the information and consultation
procedures if it is expressly provided to them in confidence and if this is in
the legitimate interest of the undertaking concerned. However, member states
may authorise employee representatives and those assisting them to pass on
confidential information to employees and to third parties bound by an
obligation of confidentiality. Whether this means the employees must have
signed some form of confidentiality undertaking or whether their general duty
of confidentiality will suffice is not clear.

Under the directive, an employer will not be obliged to disclose information
or undertake consultation when, according to objective criteria, the
information or consultation might seriously harm the functioning of the
undertaking or the establishment or would be prejudicial to it. This exception
is likely to be construed narrowly.

Member states will be obliged to set-up procedures for dealing with disputes
over confidentiality of information. If the Government adopts a similar approach
to that used in the context of the European Works Councils legislation, it will
make provision for disputes in this area to be referred to the Central
Arbitration Committee.

Protection of Employee Representatives

Employee representatives must have specific protections to enable them to
carry out their functions. In the UK, we can expect this to be the now familiar
package of the right not to be subject to any detriment for exercising their
functions or standing for election, and provisions rendering any dismissal of
an employee representative or candidate for election in connection with such
matters automatically unfair without reference to the usual statutory tests.

Sanctions – no nullification of dismissals

One of the major differences between the text originally proposed by the
Commission and the final text of the directive concerns the provisions relating
to sanctions. The 1998 text stated that, in case of serious breach of the
directive’s provisions by the employer, and where this would have direct and
immediate consequences in terms of substantial change or termination of
employment contracts or employment relations, the decision (dismissal, for
example) would have no legal effect on the employment contracts or employment
relationships of the employees affected. The original text also defined serious
breaches as the total absence of information and consultation, and the
withholding of important information or provision of false information.

These provisions have been omitted from the final text of the directive,
which states merely (as also contained in the original draft) that member
states shall provide for appropriate measures in the event of non-compliance
with the directive, that adequate administrative or judicial procedures shall
be available to ensure compliance and that member states should provide for
"adequate sanctions" in the case of infringement, which must be
"effective, proportionate and dissuasive".

Reactions

The European Trade Union Confederation has stated that the directive
"sends a strong signal to workers and to those who had serious concerns
about the high-handed and frankly intolerable way company management have been
behaving in closures and industrial restructuring". The ETUC maintains it
is the result of concerted trade union action and lobbying.

The Union of Industrial and Employer Confederations of Europe (UNICE) was
not originally in favour of the directive, based on subsidiarity arguments and
believing that a high level of protection of workers is already ensured by the
Collective Redundancies, Transfer of Undertakings and European Works Councils
Directives. UNICE has, however, welcomed elements in the directive including,
in particular, the exclusion of smaller employers from the scope of the
directive and the broad principles on sanctions.

What happens next?

While the directive as a whole must be implemented into UK law within three
years, the UK will have up to six years to implement the provisions in full. By
March 2005, the directive must be applied to employers in the UK with more than
150 employees; by March 2007 to those with 100 or more employees and, only by
March 2008, will it have to be applied to those with 50 or more employees. By
contrast, in those Member States where there is already in existence a
framework for employee information and consultation [all existing EU Member
States except the UK and Ireland], the directive must be applied, in full, to
all employers with more than 50 employees from the standard implementation date
of March 2005.

The DTI has already issued a discussion paper in connection with employee
involvement and has stated its intention to consult on the implementation of
the directive in the UK during 2003. The consultation document will include draft
implementation regulations.

Although UK law will probably not change until March 2005, employers should
not be complacent. They would be well advised to audit their employee
involvement arrangements now, or if no formal arrangements exist, consider introducing
some. This is particularly because voluntary information and consultation
arrangements will be capable of satisfying an employer’s obligations under the
directive and the employee relations advantages of being pro-active are likely
to be quite considerable.

Philip Titchmarsh is a solicitor at Pinsent Curtis Biddle

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