EU consultation law to spark culture change

Employers need to gear up for the huge Information and Consultation Directive
as it is set to have a huge impact on employee relations

This month, the European Parliament ratifies the Information and
Consultation Directive, which requires EU member states to consult their staff
prior to important business decisions through enacting domestic consultation
law.

This is one of the most significant pieces of European legislation to affect
UK employers in recent years and the change to UK employee relations could be
the greatest in over a generation.

In all forms of business activity, from day-to-day business decisions to
situations such as redundancy and closure, employers will be increasingly
obliged to inform and consult with employee representatives with a view to
reaching agreement.

Requirements

There are three major issues of concern to UK businesses:

– Early information and consultation

– Commercial confidentiality

– Remedies

The commission has stated that the aim of the directive is to oblige
employers to consult with employee representatives at an early stage. This will
be a significant change for UK employers, even for those who already have
consultation processes.

There are three possible stages to the requirement to inform and consult.
First, ‘information’ must cover recent and probable developments of the
business activities and the economic situation. Second, there must be
information and consultation on any measures envisaged, particularly where
there is a threat to employment, and on decisions likely to lead to substantial
changes in work organisation or in contractual relations. Third, where the
business decision seriously affects employees’ rights – such as sale or
redundancy – consultation is required ‘with a view to reaching an agreement’.
This could imply there must be some form of negotiation to reach a common
position, even if that position is not actually reached.

Employee representatives must be provided with information in a form that
enables them to give it adequate consideration. The employer must allow the
representatives to put forward a response to its proposals in sufficient time
to allow for dialogue in relation to the proposals.

Confidentiality

Turning to commercial confidentiality, the directive provides for an
‘objective test’ of whether the disclosure of information would damage a
business, in which case it need not be disclosed. It is ambiguous, however,
about whether regulatory prohibitions prevent disclosure, providing that non-disclosure
is permitted only if there is an ‘order’ by the regulatory body.

Another key issue is sanctions. Here the directive provides that EU member
states must put in place ‘administrative or judicial procedures as well as
penalties that are effective, dissuasive and proportionate…’ This is still to
be interpreted by the UK, but it leaves open the possibility of a trades union
using an injunction as a possible remedy for a serious breach of the directive.

The UK has until January 2005 to implement the directive for firms with more
than 150 employees; until 2007 for those with more than 100; and until 2008 for
those with 50 or more. Employers may be allowed to keep in place arrangements
that broadly comply with the directive’s principles.

Businesses should now consider setting up information and consultation
procedures on terms acceptable to them and their employees, rather thanwait to
have a statutory model imposed upon them by legislation.

Key Points

– Informing and consulting the workforce before taking major business
decisions will be a significant cultural change.

– Businesses should consider setting up their own information and
consultation procedures.

By Luke Menzies, a barrister and Paul White a senior associate in the
Employment and Pensions Group at Stephenson Harwood.

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