UK: Bosses Forced To Grant New Powers To The Workforce

Last Updated: 10 January 2005

Article by Russell Brown

For many bosses, employees should be seen but not heard. However, from this April employers who believe that staff shouldn’t have a say in the running of the business could be in for a shock.

New employment law Regulations are introduced on 6th April 2005. As a result, businesses employing 150 or more people will be obliged to consult with them on a wide range of work-related issues.

Here, Russell Brown, employment law solicitor at Manchester law firm, Glaisyers, explains why employers should act now to devise an effective internal communications strategy before the legislation comes into force.

Under the Information and Consultation Regulations employers will be required to provide information to employees and seek their views on matters affecting them. Issues such as re-structuring, employment prospects and redundancy will all be on the agenda.

The Voluntary Agreement

For businesses which sit up and take note of their obligations now, this could be as simple as providing information to employees and, in return, collecting employee views.

The aim of this voluntary agreement is to keep all employees informed on an ongoing basis of the state of the company. This comes into play as and when developments occur which could potentially affect business performance or employment. With each development, information should pass from top management to employees and back. Information may take the form of an official meeting, email or newsletter, for example, and employees should be given the opportunity to express their reactions and suggestions via representatives or direct to management.

The voluntary agreement is drawn up by the employer with at least the agreement, if not the active participation, of the workforce, but with little intervention from the official bodies upholding the law. To be valid under the Regulations, it must be set out in writing, cover all employees, and be approved by the employees, or at least by their representatives.

Once a voluntary agreement is in place, it can only be overturned if more than 40% of the employees are dissatisfied with its provisions and wish to set up another agreement. If this happens, the employer is obliged to enter into talks with employees to reach a negotiated agreement.

The Negotiated Agreement

Apart from the democratic election of employee representatives, there are no detailed rules on the content of a negotiated agreement. At this point the aim is still to allow both parties to determine the best regime for themselves without strict intervention from the Regulations. Negotiated agreements must, however, be in writing and agreed by the signatures of both parties.

If, however, an employer and its employees can still not come to an agreement within six months, or agree to extend the period of negotiation, then the default agreement is triggered.

The Default Agreement

This is a more complex and prescriptive procedure which most employers will try to avoid. It calls for the election of a proportional number of employee representatives – one for each 50 employees - and lays out the employer’s responsibilities according to the type of information concerned. Under the default agreement, information is divided into three classes:

Class 1

Class 1 information includes a company’s economic situation and should be disclosed to representatives at set intervals in the form of an annual or quarterly report.

Class 2

A Class 2 situation occurs when there is a threat to employment. An employer who is contemplating individual redundancies or restructuring for example is obliged to inform and consult with employee representatives at the earliest opportunity to allow the representatives to conduct an adequate study and to prepare for consultation.

Class 3

The most sensitive and critical information is contained in Class 3 and is likely to carry serious implications for the business and its employees. This includes decisions which are likely to lead to substantial changes in work organisation, such as collective redundancies. Again, information must be provided in time to allow consultation with a view to reaching agreement.

The Power of the Workforce

Businesses tempted to ignore the Regulations should be aware that members of the workforce will soon be awarded greater powers to appeal the decisions of their employers. The Regulations not only grant employees greater rights to be informed and consulted on business issues, but also enable groups of employees to overturn the actions of their bosses and to force action where there has been none.

An employer who decides not to set up a voluntary agreement to share information with employees from the outset may find themselves forced into a more onerous communications policy by a workforce intent on exercising their employment rights.

It only takes 10% of the workforce to object to an employer’s inactivity and make an official request to the Central Arbitration Committee or the Employment Appeal Tribunal for the law to come into play. It is these bodies which are charged with policing the law and punishing every serious failure to comply with a fine of £75,000.

Smaller Businesses Are No Exception

Smaller businesses won’t be excluded from the Regulations, although they will have more time to plan an approach to their new responsibilities. The rules will be phased in over three years, to include organisations with 100 or more employees from 6th April 2007 and those with just 50 or more employees from 6th April 2008.

Breaking Down Barriers to the Boardroom

Unlike their European counterparts, UK businesses have been slow to recognise the business benefits of sharing news and gathering feedback from their employees. Opening lines of communication between management and employees is proven to promote employee loyalty, improve working practices and boost productivity.

Despite this, formal consultation between employer and employee is too often restricted to larger companies with recognised trade unions. The idea of handing over important business information before final decisions have been made strikes fear in the hearts of employers who have traditionally kept a comfortable distance from their employees.

Many employers simply aren’t used to dealing with their workforce collectively or regularly and it’s likely that some will trail behind when it comes to implementing an official procedure. Satisfying the new rules needn’t be complicated however and businesses which act now to introduce a voluntary agreement can not only avoid the complexities of the default agreement, but also a hefty penalty and the wrath of a discontented workforce.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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