UK: European Works Councils - Trojan Horse or Damp Squib?

Last Updated: 1 May 2000
Readers may remember the apocalyptic visions shared by the cabinet of the former Conservative administration regarding the advent of European Works Councils. A hard-earned opt-out was obtained whereby UK employees were excluded from the head-count in assessing whether a business concern was subject to the Directive or not. This only had a limited effect as British multi-nationals were still potentially subject to the Directive regarding their (non UK) EU operations and many voluntarily included their UK employees. The incoming Labour administration quickly reversed the opt-out and negotiated a two-year transition period for the introduction of the Directive.

The Transnational Information and Consultation of Employees Regulations 1999 finally implement the European Works Councils Directive in the UK. The original implementation date was to have been 15 December 1999, however the sheer weight of legislative measures presently passing through the DTI severely delayed the legislative process and publication of the actual Regulations until 15 January 2000. The Regulations are complex but have a number of important features.

They apply to “Community Scale Undertakings” and “Community Scale Groups of Undertakings” which in either case have at least 1,000 employees within Member States and at least 150 employees in each of at least two Member States. UK employees now count in this computation for the first time. Interestingly, a number of the major international UK law firms will now be covered by this legislation.

The provisions of the Regulations do not apply to any undertaking which has already negotiated a Voluntary Works Council Agreement covering the whole of its workforce. However, the last date for negotiating such an agreement was 15 December 1999 (the original implementation date for the Regulations). It is therefore too late for a business to now take advantage of this exemption.

A business covered by these Regulations will not automatically have a Works Council foisted on it. A request must be made on behalf of at least 100 employees working in the business in at least two Member States. (Occasionally the business itself will initiate the negotiations but this will be rare). When in receipt of that request the business has two choices: it may either seek to negotiate with the employees and their representatives or it may effectively ignore the request. In the former case it must then negotiate an agreement with the employees’ representatives as to the composition and terms of reference of what is called a Special Negotiating Body which itself will then negotiate with the business the terms of the Works Council Agreement itself. In the latter case, or where it has not been possible to negotiate the terms of a Works Council Agreement within three years from the date of the request, a default model Works Council Agreement will automatically apply.

There is plenty for the trade unions in the Regulations. They can, for instance, stand for election to the Special Negotiating Body if they regularly represent the employees in collective bargaining even if the relevant official is not actually an employee of the business. They will also, in practice, play a large role in the negotiation of the agreement and where a consultative committee representing all the UK employees exists that committee can actually nominate from its number the UK members of the Special Negotiating Body.

The composition and terms of reference of the Works Council will ultimately be for negotiation but its main role will be to meet on an annual basis to receive information on transnational matters concerning the business ie. matters that significantly affect the interests of employees in the business in at least two Member States. Moreover the Works Council simply receives and discusses information – it has no power to negotiate. In addition, national negotiating procedures will take precedence to it. It therefore remains to be seen how important in practice a European Works Council will be and there is a distinct danger that it could simply become a glorified talking shop.

There are a number of unusual features about this process which will be alien to many employers not least the collection of employees from different nationalities with the consequential necessity for interpreters; the use of “experts” to assist the employees in assessing the information provided to them and proposing subjects for discussion; finally, the length of time it will take to negotiate the agreement, again resulting from the potential multiplicity of interests and backgrounds.

Not all information of a transnational nature need be provided to the Works Council in any event. Both the Directive and the Regulations provide for the possibility of withholding confidential information where the nature of the information is such that its disclosure would seriously harm the functioning of the business or be prejudicial to it. Unfortunately the Government have provided no guidance as to the scope of this exception other than to say that it would have to be assessed on a case by case basis. It would seem that details of proposed major transnational acquisitions or mergers would be covered by this exemption but ultimately businesses and trade unions will have to await the decisions of the arbitrating body before this can be ascertained.

Most of the disputes as to the operation of the Regulations will not go to the courts but to the unfortunately acronymed CAC, the Central Arbitration Committee. Initial concerns from employers that it would be headed by a non-lawyer have proved unfounded with the appointment of Mr Justice Burton as its head (Michael Burton QC having been a leading member of the employment bar). However, it is quite likely that it will take a broad approach to the questions referred to it which may well make it difficult to predict the outcome of any dispute referred to it.

In most cases where a request for a Works Council is made the employer is likely to try to negotiate the relevant agreement. If it does not then the terms of the default agreement will apply. It remains to be seen how much tangible disadvantage this will be or if a business will suffer if it has to apply this model.

However, in general it is likely that it would require the business to provide more detailed information on a wider range of topics and there would be more scope for employee representatives to seek special meetings in addition to the annual meetings with consequential cost consequences for the employer.

Finally, it is the business that will pick up most of the costs of this process. This will no doubt influence, amongst other things, the choice of venue for meetings – an employee representative expecting a luxurious, all-expenses paid trip to an exotic European capital may instead have to make do with an overnight stay at a rather cheap Heathrow hotel!

© Herbert Smith 2002

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

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