What does the Information and Consultation Directive mean for Europe, and what can the UK learn from the experiences of its European neighbours, ask Nick Thorpe and Richard Kenyon
The Information and Consultation Directive (Directive 2002/14/EC) being introduced in the UK and in other EU member states will introduce significant new rights for employees in some EU member states, for example, in the UK and in Ireland, where there is no established system of information and consultation of employees.
The directive is drafted in fairly broad terms and allows member states considerable flexibility in implementing its terms.
Individual member states have discretion over the scope of the consultation directive, which apples to:
- undertakings employing at least 50 employees in any one member state
- establishments employing at least 20 employees in any one member state.
An ‘undertaking’ is defined by the directive as “a public or private undertaking carrying out an economic activity, whether or not operating for gain”. An ‘establishment’ is more narrowly defined as “a unit of business… where an economic activity is carried out on an ongoing basis with human and material resources”.
The DTI has taken the view that in the case of companies, the term ‘undertaking’ means a separate legal entity as distinct from for example an organisation entity such as a division or business unit of the company. The term ‘establishment’ could, however, cover individual divisions or business units.
The UK government did not want to implement the directive in a way that meant it could apply to employers with less than 50 employees, or to different groups of employees employed by the same employer, and that is why it opted for to go with ‘undertakings’ with 50 or more employees.
It does not specify what information and consultation arrangements should be established. However, the establishment of a standing body of employee representatives is implicit.
Individual member states are allowed to entrust employers and employee representatives to negotiate their own information and consultation arrangements. However, the arrangements which the employer and the employee representatives negotiate must comply with the general principles of the directive.
The right to information and consultation covers:
- information on the recent and probable development of the undertaking’s or the establishment’s activities and economic situation
- information and consultation on the situation, structure and probable development of employment within the undertaking or establishment and on any anticipatory measures envisaged, in particular where there is a threat to employment
- information and consultation on decisions likely to lead to substantial changes in work organisation or in contractual relations.
The scope of the directive is therefore very wide and could include information relating to mergers and acquisitions and business reorganisations, as well as changes in terms and conditions of employment.
The directive states that information must be given in a timely manner and in such a fashion that its content would be appropriate to enable employee representatives to conduct an adequate study to prepare for consultation, if necessary. As for consultation, the directive requires that the timing, method and content of the consultation are appropriate and that it takes place:
- at the relevant level of management and representation
- in such a way as to enable employee representatives to meet the employer and obtain a response, and the reasons for that response, to any opinion they might formulate
- with a view to reaching an agreement on decisions, within the scope of the employer’s power, which are likely to lead to substantial changes in work organisation or in contractual relations.
The directive includes specific provisions regarding confidential information. Employers are not obliged under the directive to communicate confidential information, or undertake consultation, where the nature of that information would seriously harm the functioning of the undertaking or establishment. Also, the directive prohibits employee representatives from disclosing to employees, or third parties, any information which, in the legitimate interests of the undertaking or the establishment, has expressly been provided to them in confidence.
The directive is due to be transposed into Irish Law by 23 March 2005. Notwithstanding this deadline, the draft bill has yet to be placed before the Houses of the Oireachtas. Although it is not possible at this stage say exactly how the directive will be implemented in Ireland, it is likely to have a significant impact on employment practices and, as a result, Ireland is permitted to stagger the introduction of the directive on a phased basis, the timetable being as follows:
- undertakings with at least 150 employees or establishments with at least 100 employees from 23 March 2005
- undertakings with at least 100 employees or establishments with at least 50 employees from 23 March 2007
- undertakings with at least 50 employees or establishments with at least 20 employees from 23 March 2008.
The directive will have less impact, as French law already provides a comprehensive set of rules in relation to information and consultation of work councils (comite d’entreprise).
Under existing French law, works councils must receive information and be consulted prior to any decision relating to the organisation, the management and the overall functioning of the business and, in particular, on the measures affecting the size and structure of the workforce, working time and, more generally, conditions of employment.
However, although information and consultation rights are already well established, the directive may have some impact regarding the issue of confidentiality, as the directive provides employers with the right not to communicate information or undertake consultation if, according to objective criteria, such processes may cause harm to the organisation. At present, no such rights exist under French law, and the issue of confidential information is considered, on a case-by-case basis, by the courts.
Germany also has comprehensive information, consultation and co-determination requirements in place. For example, there is a detailed system of corporate co-determination (Unternehmensmitbestimmung) which requires employers to co-determine issues with employee representatives in board meetings. Works councils also have various information, consultation and co-determination rights under the German Works Constitution Act (Betriebsverfassungsgesetz).
German employers must inform and consult works councils in respect of any planned changes in relation to the structure of their business. They must also inform works councils about the intended employment of managerial staff. German employers have to consider works council’s co-determination rights in respect of the transfer of employees, the termination of contracts of employment, social issues such as working time, disciplinary proceedings, performance review, the change of business structure and staff reductions. As a consequence, the directive is unlikely to have any real impact in Germany.
The directive has yet to be implemented in Italy. Currently, the Bill of law (Legge Comunitaria 2004), which is still to be approved by the Italian Parliament, delegates the Italian government to implement a set of EU directives which includes the directive within 18 months from the coming into force of the bill. At this stage, therefore, it is not possible to foresee the date in which the directive will be implemented in Italy, or the terms and conditions under which the employee information and consultation framework will be realised.
However, most national collective agreements (such as those applied by industrial, energy/petrol and commercial companies) already require specific employee information and consultation procedures concerning wide issues (including mergers and acquisitions, business reorganisations and changes in terms and conditions of employment) similar to those set out by the directive. As a consequence, for many Italian organisations the implementation of the directive should not imply a considerable impact on their work practices.
The Spanish government has not taken any steps so far to implement the directive. This is because Spanish law already provides employees with information and consultation rights (Ley 1/95, Estatuto de los Trabajadores, clause 64). However, these rights only apply to undertakings employing at least 50 workers.
In Spain, employees’ rights to information and consultation are exercised by employee representatives. Employers have to inform and consult the representatives of business changes, and then the representatives inform the employees of such changes when they are consulted.
Spanish law contains specific information rights that employers must observe. The basic rights of information are:
- the employee representatives should receive economic information every three months, and information about the undertaking’s or establishment’s activities
- the employee representatives must be informed about changes in staff structure, including recruitment and staff reduction
- employee representatives must be informed of all changes in the work organisation and changes in business structure.
These rights are very similar to those contained in the directive. As a consequence, like many EU member states in continental Europe, the directive is unlikely to have a significant impact on employment practices in Spain.
The directive’s purpose is to establish a general framework for informing and consulting employees in Europe. However, while a new pan-European emphasis will be placed on the importance of employee involvement in business decisions, the directive will not harmonise the mechanics of that involvement across Europe. The reality is that there will be a patchwork of different information and consultation requirements in Europe. Multinational employers must, therefore, be careful to meet the specific requirements in each individual member state when informing and consulting employees.
However, although the information and consultation requirements may be different in each member state, UK employers would be well advised to look to Europe and see what lessons can be learnt from the experiences of employers in Europe.
(Our French and German colleagues have joked that the directive will at least make the UK economy as inefficient as those of France and Germany so that we can all compete on a relatively level playing field!)
The challenge is to harness employee involvement to the benefit rather than to the burden of UK business.
Nick Thorpe is senior solicitor and Richard Kenyon deputy head of employment for Field Fisher Waterhouse, with contributions from other members of The European Legal Alliance (www.thealliancelaw.com):
- Beauchamps (Ireland)
- Buse Heberer Fromm (Germany)
- Dubarry Le Douarin Veil (France)
- Jimenez de Parga (Spain)
- La Scala (Italy)