UK: A Little More Conversation

The Government has recently undertaken a consultation process on the draft Regulations (The Information and Consultation of Employees Regulations) which will implement the EU Information & Consultation Directive and will shortly bring domestic works councils, or "workforce committees" as they are now known, to our shores. The UK is currently the only member state in the EU without some form of legislation requiring formal workforce information and consultation and it has done its best to avoid that legislation. There will soon be nowhere left to hide.

The Directive requires employers to provide information to and consult with a workforce committee in relation to its business and will be implemented in the UK in stages. Employers with over 150 employees are to be covered by the legislation by 2005, those with 100 or more employees by 2007 and all employers with 50 or more employees by 2008. The legislation will not apply to employers with less than 50 employees.

Businesses with 50 or more employees account for 75% of the total employees in the UK so these Regulations are set to have an extremely wide-ranging effect and also a costly one: the Government has estimated a likely one-off cost of between £26 million and £68 million (depending on which implementation model the Government ultimately chooses) for medium-sized companies (50-149 employees) from the initial implementation alone.

The draft Regulations state that management must inform and consult with their workforce committee in relation to: (a) the recent and probable development of the business' activities and economic situation; (b) the situation, structure and probable development of employment within the business and any measures envisaged, in particular where there is a threat to employment; and (c) decisions likely to lead to substantial changes in work organisation or in contractual relations, including collective redundancies and business transfers. This is significantly wider than the current duties to consult collectively on large scale redundancies and business transfers.

Discussions must take place with a view to reaching agreement on these matters.

The mere thought of this further level of workplace bureaucracy leaves many employers cold, but there is action that can be taken prior to the implementation of the Regulations which may allow a greater level of flexibility and control and possibly even allow an employer to escape the effects of the Regulations altogether.

• First, the Regulations impose a form for the committee and rules relating to its operation. Employers may be able to escape some of the mandatory requirements by voluntarily establishing a committee in advance of the Regulations coming into force, provided it complies with the applicable criteria, which will be set out in the Regulations.

• Secondly, there is a possibility that even if the employer falls within the thresholds detailed in the Regulations, it may not have to set up a formal committee. Although there are various options discussed in the consultation paper, the Government favours a method whereby the obligation to set up a committee will only be triggered if an employer (of over 50 employees) receives a specific request from at least 10% of the workforce (subject to a minimum of 15 and maximum of 2500 employees). So, if it has a happy, contented and/or fairly apathetic workforce, perhaps by virtue of existing and/or voluntarily introduced arrangements, an employer may yet escape the full wrath of the Regulations.

However, this is a gamble employers might not be willing to take and rightly so, bearing in mind that an early proactive gesture could avoid some or all of the mandatory provisions as referred to above.

Details of what will be required of a voluntary committee in order to escape the mandatory provisions will not be clear until the Government publishes guidance on the Regulations, although this is not now expected until later this year. Practical guidance is also being prepared by ACAS and the DTI are likely to wait for that before publishing their own guidance (perhaps to get some ideas!). The final Regulations will not be issued until after the Employment Relations Bill (under which they are to be issued) has received Royal assent, currently expected in around the summer or autumn of this year. At present the only firm information available is that any agreement would have to:-

• cover all the employer's employees;

• be in writing so that everyone is clear what is involved; and

• could not be unilaterally imposed upon the employees.

The employer would have to be able to exhibit how agreement was reached and how the employees gave their approval to the committee structure. Other applicable criteria for such agreements and the relevant employee representatives should be contained in the DTI guidance.

What is clear from what we have seen of the similar pan-European Works Councils legislation, however, is that as long as the employees are comfortable with the voluntary committee arrangements the employer has put in place (or with their existing arrangements generally), they are far less likely to seek to introduce the mandatory provisions. Furthermore, under the voluntary arrangements the employer will generally have much more flexibility than it would have under a statutory procedure imposed upon it as a result of the Regulations. If a committee is established now it may be relatively easy to tweak it to comply with the voluntary requirements as and when the final Regulations are introduced, thus avoiding the usual rush to start from scratch with unfamiliar legislation.

Specifically, for employers who have heard employee mutterings about union recognition and want to avoid this, it makes very good sense to take the initiative and address the workforce committee issue straightaway, as a compromise position. The threshold of 10% for requesting a workforce committee is much lower than the majority support* that must be evidenced for union recognition; so, in workforces where there is not sufficient union support for statutory recognition, the resident union supporters would still be able to request a workforce committee with only 10% general support across the workforce and could potentially then dominate that committee, so introducing union representation "by the back door". In addition the members of the committee potentially have the right to be informed on far wider areas under these draft Regulations than they currently do under the statutory union recognition legislation.

The proposed sanctions for failing to comply with the Regulations are actually relatively small as compared to what the TUC lobbied for and comparative European sanctions, but they will still entail a good degree of inconvenience and cost. Employees would be able to apply to the Central Arbitration Committee ("CAC") if an employer had failed to comply with the Regulations or if the employees wanted to challenge the validity of a voluntary agreement. If the CAC ordered the company to take steps to remedy the position, and the employer failed to comply with that order, the employees would then be able to apply to the Employment Appeal Tribunal which could in turn impose a fine of up to £75,000.

• If employers introduce a voluntary committee before the implementation of the Regulations, there is a good chance that the employees will be satisfied with that system so that the employer will then avoid the formal procedures that have to be followed to set up a committee via the legislation at a later date.

• Taking steps before being forced to by the legislation means that managers and employees alike will benefit from learning how such a workforce committee operates in practice without the fear of complaints being made to the CAC if they get it wrong.

• Finally, the employer can also reap real benefits from having a standing consultative committee in place to deal with any collective workforce issues that arise. Whilst these benefits may not be as optimistic as the Government hopes (" a better informed, more motivated and committed workforce" leading to "lower turnover of staff and higher productivity and…a more skilled workforce"), at the very least they could remove the need for separate elections for employee representatives in redundancy and business transfer situations and make it easier to disseminate to staff difficult messages or controversial subjects which require consultation or consent. Our experience of clients that operate staff councils or similar standing consultative bodies is that they add little administrative burden and are generally beneficial to good industrial relations. They are also less scary than might be imagined.