Information and consultation: Junk food for thought

Employers are being told to brace themselves for the introduction of new rules on information and consultation on 6 April but a recent European case, Junk v Wolfgang Khnel (C-188/03), has had a much more significant impact on current practice in this area.

When the new Information and Consultation Regulations 2005 come into force, employers who ignore a valid request to establish an information and consultation body could face fines of up to 75,000. In addition, they may have to comply with a restrictive default information and consultation model, as set out in the regulations.

Sounds harsh, but is it really that bad? Employers are only affected by the new rules if 10% of the workforce put together a valid request.
Even if a valid request does land in the employer’s in-tray, it may be defeated if there is an existing information and consultation forum in operation which complies with the regulations.

The restrictive default model in the regulations, which is currently striking terror in the hearts of many employers, will also only apply if negotiations with the workforce fail and the parties are unable to agree their own more flexible version of an information and consultation forum.

In the worst case scenario, employers will be required to inform and consult employee representatives with a view to reaching agreement on decisions likely to lead to substantial changes in work organisation or in employees’ contractual relations, such as collective redundancies.

However, there are still no precise time limits attached to the information and consultation requirements other than what is ‘appropriate’.

By contrast, earlier this year the European Court of Justice (ECJ) handed down its ruling in Junk, which, effectively, guarantees a period of 30 or 90 days (depending on numbers) consultation for employees affected by a collective redundancy exercise before they can be given notice of termination of employment.

Junk considered an employer’s information and consultation duties under the EU Collective Redundancies Directive. This requires an employer to comply with consultation procedures before redundancies are effected. However, the Directive is unclear as to when exactly redundancies are ‘effected’.

Two possible interpretations were considered by the ECJ. One option was that redundancies were effected when the employer gives notice of dismissal. Alternatively, they could be effected on expiry of the notice period. In the latter case, this would mean an employer could give notice of termination during a redundancy consultation period, provided that the consultation was complete before the notice period had expired.

According to the ECJ the correct interpretation was that a redundancy dismissal was effected “on the declaration by an employer of its intention to terminate the contract of employment”. This was found to be compatible with the Directive’s aim of protecting employees in redundancy situations, and with the requirement to consult workers’ representatives when collective redundancies are ‘contemplated’.

How does Junk change collective redundancy practices in the UK? The UK rules on collective redundancies (s188 Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA)) require employers to begin consultation in good time and in any event, at least 30/90 days before the first of the redundancy dismissals takes effect.

Nowhere in the UK rules is it specified that consultation must be completed before notice of termination for redundancy is given. It would not be unusual for employers to give notice during the consultation period, particularly in circumstances where the entire operation is being shut down and redundancies are inevitable.

However, applying the ECJ interpretation of a redundancy dismissal to TULRCA, employers must now consult for the full 30/90 days before serving notice of dismissal to employees – even in circumstances where it is clear redundancies are inevitable.

Employees and their representatives cannot bring claims under the Directive, but UK tribunals must interpret the provisions of the relevant UK legislation consistently with the Directive and ECJ rulings. The effects of Junk are clear. Employers will now have to pay employees for the 30/90 day consultation period on top of their notice period, rather than being able to ‘roll-up’ notice within the consultation period. This could mean paying a maximum of another 90 days’ pay per employee, as well as any promised redundancy package.

The DTI has promised to issue guidance on how to deal with Junk and has hinted that there may even be an eventual change in the law. For example, the 30/90 day consultation periods could be replaced with a requirement to consult simply in good time, as required by the Directive, or long enough in advance to consult appropriately, similar to UK rules on transfers of undertakings.

In the meantime, ignoring Junk could be very expensive for employers, with the possibility of protective awards of up to 90 days’ pay per affected employee in addition to a risk of unfair dismissal liability.

Stefan Martin is employment partner at the international legal practice Allen & Overy LLP

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