Legislation Time to choose

The waiting is almost over. After two DTI consultation documents, the final text of the Information and Consultation of Employees Regulations 2004 is with us – and it offers a jigsaw of options 

The three years between the EU agreeing a new legal framework for informing and consulting employees (11 March 2002) and the day it finally becomes law in the UK (6 April 2005) may have felt like an eternity, but it is almost over. Two points determine whether an employer is subject to the law:

  • it must be an ‘undertaking’ whose registered office, head office or principal place of business is in Great Britain
  • it must have the relevant number of employees in the UK.

From 6 April 2005 this will be at least 150. In two years’ time the threshold is reduced to 100 and from 6 April 2008 the law will apply to an undertaking with at least 50 employees.

However, there is nothing for an employer to do unless it receives a written request from at least 10% of the employees (although a maximum of 2,500 applies). Then it must appoint – or have elected – negotiating representatives.

The employer and negotiating representatives try to reach what is called “a negotiated agreement”, which will provide for informing and consulting either through employee representatives or directly with employees. If this process is not completed within the prescribed period (essentially, within nine months of the employee request), the so-called ‘standard’ or, more accurately, fall-back provisions apply. It is these standard provisions that have attracted all the headlines. They are complex but, in essence, provide for mandatory informing and/or consulting depending on the topic (see box).

There is another piece to this complicated jigsaw. An employer can have a pre-existing agreement. If it does, even though it receives a qualifying employee request, it need not seek a negotiated agreement. However, it must organise a ballot of the employees. If a majority of voters comprising at least 40% of the workforce support the employee request, the employer must reach a negotiated agreement.

One major exception is that if the employee request comes from at least 40% of the employees then there is no need for a ballot, and the employer must reach a negotiated agreement.

An employer essentially has three choices:

  • wait and see
  • pre-arrange an agreement
  • be prepared.

Wait and see

This strategy for the risk-averse also suits those who would rather not think about informing and consulting. However, the evidence is growing that informing and consulting is a key element of a high-performance workplace. Further, it is clear that those who do nothing will be on the back foot when an employee request comes in.

On the other hand, this rightly prompts a major question: will 10% of the employees be bothered to submit an employee request? Perhaps they will, if they have not been informed and consulted on a significant topic, for example a change in their pension scheme.

Pre-existing agreement

If an employer has a pre-existing agreement it can avoid having to go through the negotiated agreement process. More significantly, it outflanks the standard provisions and once you have one it is difficult to overturn. In essence, 40% of the employees must have lost faith in the agreement and express this either through an employee request or a ballot to throw it out.

Perhaps what most appeals about a pre-existing agreement is that it could preserve current information and consultation arrangements. But the government may have fatally placed the qualifying requirements too high: the agreement must be in writing, and many companies’ information and consultation procedures are not written down. A pre-existing agreement must “cover all the employees of the undertaking”, a clause which has to be literally construed. This means all employees including managers, directors etc.

The requirement that the agreement must ‘have been approved by the employees’ is even more vague. The legislation does not set out what qualifies as approval. The DTI’s guidance suggests a simple majority in a ballot of the workforce; a majority of employees signing the agreement; or the signature of employee representatives who represent a majority of the workforce. While there is no reason to doubt the DTI’s sincerity, the risk is that a court could well conclude that this is insufficient.

This leaves employers in the incongruous situation of not always knowing whether an agreement qualifies as a pre-existing agreement, as well as needing to meet a set of difficult requirements. Has this put employers off? Probably not. Possibly only those who have become comfortable with writing down their information and consultation mechanisms have been willing to run the gauntlet of reaching a successful pre-existing agreement.

Be prepared

Why prepare? The timetable to reach a negotiated agreement is very short. While there is scope for extending that timetable, by agreement with the negotiating representatives, any such extension is likely to come at a price. Inherent in the ‘wait and see’ approach is the risk of being left on the back foot.

The advantage of being prepared is that employers can hit the ground running. Because there is no ‘one size fits all’ there are many variations on what constitutes a suitable information and consultation process. For example, would the employer prefer to inform and consult at national, regional or site level? Would the employer want a mixture of staff forums and direct communication? Think these possibilities through in advance. What is best will vary from time to time. As a bare minimum employers will want to have a taskforce in place to respond rapidly to any employee request and to have given some thought to where employee representatives will be found.

How to decide

To some, the third option is the classic half-way house, but it is a gamble. The biggest risk is that an employer would be negotiating against the backdrop of the standard provisions. The employee representatives can then simply reject anything that does not reflect these.

By contrast, a pre-existing agreement allows the employee representatives to negotiate an agreement without the necessity of garnering the signatures of 10% of the employees. Equally, the employer does not have to accept provisions it does not want.

In the final analysis, there is no single solution for all employers. An employer’s choice will be dictated by a number of factors including its history of, and philosophical approach towards, informing and consulting. But the ostrich approach is not recommended. Prudent employers will want to ensure that they have consciously selected what is the right option for them.

Raymond Jeffers is chairman of the Employment Lawyers Association and head of employment, Linklaters

Inform and/or consult

Recent and probable developments of the undertaking’s activities and economic situation

Situation, structure and probable development, in particular threats to employment

Inform and consult
Decisions likely to lead to substantial changes in work organisation or in contractual relations
Inform and consult with a view to reaching agreement on decisions

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