Our
continuing series of quick guides to major employment legislation, which puts
key information at your fingertips and brings you up to date with the latest
developments. This week Roger Steel, partner at Eversheds, looks at the
newly-introduced National Works Councils Directive and why there is so much
opposition to what is essentially a mechanism for information and consultation
The
institution of works councils in the UK has met consistent opposition from
employers and Governments.
However,
we have no choice about accepting European legislation introduced by majority
voting, as is the case with the National Works Councils Directive.
Until this
summer, the UK had relied on a "blocking minority". That coalition of states fell apart in the
winter of 2000 as previous objections from Denmark and Germany were satisfied
through textual change.
Thus, the
final vote that took place on 11 June was a foregone conclusion. The
implementation of the directive in member states is inevitable.
Not that
the detail is finalised, as we shall see.
Under the
June "common position", the NWC directive is to be applied by member
states either to "undertakings" employing 50 or more employees, or
"establishments" employing 20 or more. Undertakings are economic
entities, public or private and not necessarily working for profit.
Establishments are business units defined according to local law and practice.
I would
think the UK will opt for undertakings of 50 or more, rather than the lower
threshold of establishments of 20 or more.
In either
case we see a much greater impact than with European Works Councils, the
trans-national fora existing only in undertakings employing 1,000 plus and
where requested by 100 plus workers. In contrast, NWCs will be compulsory.
As with
EWCs, the function of an NWC is to be a mechanism for information and
consultation. So why the opposition?Â
Most
employers accept that workers have an interest in "the probable
development" of the employer and its "economic situation". We
already have rules on consultation "where there is a threat to
employment".
Also, an
employment contract cannot generally be varied unilaterally, so talking about
"decisions likely to lead to substantial changes in work organisation or
in contractual relations" should not cause alarm.
What
caused controversy was the point at which this had to happen and the
consequences if it didn’t.
From an
employee’s perspective, the sooner and the more he or she knows what is going
on, the better.
Events
involving multinationals such as Renault, Rover/BMW (as was) and more recently
Marks & Spencer have convinced unions and most EU governments that the law
on information and consultation was not in balance and needed tipping more in
favour of employees.
The
directive seeks to achieve this balance as follows. First, information has to
be given on any "anticipatory measures envisaged". Second,
information has to be timed so as to enable the NWC to "conduct an
adequate study" and "prepare for consultation". Third, once
informed, the NWC is to reach opinion on its content. The employer has to
accede to any request for a meeting in order to provide its response.
So, the
information obligation is triggered at a point when the employer is merely
anticipating change and before decisions are taken. The representatives are to
be given time to form an opinion, followed by the meeting to discuss the
employer’s response – all with a view to reaching subsequent agreement through
consultation.
The
changes in UK practice will be momentous, requiring a totally different mindset
among business people, corporate lawyers, investment bankers and, yes, HR
practitioners.
True, the
directive provides for member states to allow both sides to negotiate
information and consultation mechanisms different from those in the directive,
but no doubt these will still need to comply with the spirit of the directive.
Why should employees settle for anything less?
Employer
refusal to divulge confidential information that would "seriously
harm" the business is allowed, subject, however, to member states
providing for administrative or judicial procedures to prevent abuse, possibly
through review.
On
enforcement, the common position was that "effective, proportionate and
dissuasive" measures had to be introduced. In other words, and to CBI
relief, flexibility was given to member states.
When would
all of this become law? A three-year implementation period was set for larger
undertakings (150 plus employees), five years for those with 100 plus and seven
years for those with 50 plus employees.
However,
the ETUC and the European Parliament had long made clear their desire to give
the proposal more teeth. Since 11 June, these calls have intensified.
We are now
at the second reading stage before the European Parliament and on 23 October
the Parliament confirmed its support for sanctions in the event of employers’
non-compliance, but did not accept the more radical proposals put forward by
its relevant committee.Â
Even the
watered-down proposals would mean the right of employee representatives to
secure the suspension of a commercial transaction until compliance was assured.
Full
implementation should also be achieved within two years not seven, argues the
Parliament and the issues on which workers should be consulted ought to be
widened.
While the
Council of Ministers does not have to agree and the DTI believes the changes
are "unnecessary and unhelpful", it is clear that any textual changes
are going to be more employee-friendly.
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HR
practitioners should be planning now as to how their current information and
consultation systems can best be adapted to the new environment. The final text
should be known within three months.
