UK consultation changes

The information and Consultation of Employees Regulations 2004 (‘the Regs’) have brought the UK into line with the rest of the EU in allowing workers to force employers to set up a national works council. Companies that fail to set up such structures, or that fail to consult staff before taking business decisions face fines of up to UK£ 75000 (€ 109250).

This is one effect of the Regs, which came into force on 6 April 2005. It is probably a prospect which many companies view with alarm, particularly those whose industrial relations have not always been smooth.

Up until now every EU Member State except the UK and Ireland had laws or legally binding national agreements, which obliged employers to inform and consult with employee representatives on both economic and employment issues. Employees in the UK had fewer rights to information and consultation than their counterparts elsewhere in the EU. In fact most of the time employers in the UK had no legal obligation to keep their employees informed, or to consult with them.

The idea of having to talk to staff reps before taking business decisions will no doubt go against the grain for many employers, but the consequences of failing to do so could be serious. As well as the financial penalty, non-compliant employers risk conflict with staff and trades unions.

In addition, employers bidding for public sector construction work may find their prospects for success jeopardised if actions have been brought against them for failing to comply with the Regs. Employers may have already completed questionnaires on their track record on race and sex discrimination claims as part of a bid process. It's easy to imagine that, in future, it may also be necessary for employers to disclose details of how they inform and consult with staff.

The implementation of the Regs potentially gives the building unions an opportunity to get a foot in the door with employers where they may have no presence. Unions not officially recognised by an employer may nonetheless be able to gain access to its workforce and compel the employer to deal with the union at least for certain purposes. Unions already recognised by an employer may seize upon the Regs as a way of enhancing their role within the business and increasing their profile with the workforce.

That may worry construction employers, but things may not be as grave as they seem. First, only those employers with 150 or more employees will be required to comply with the Regs. However, employers with 100 employees will have to comply from April 2007, and employers with 50 employees from April 2008, so in some cases the stay of execution may be only temporary.

Another crumb of comfort for reluctant employers is that the obligation to set up a national works council and to inform and consult with its employees is only triggered if formally requested in writing by at least 10% of the employees in the business. This could mean that construction employers may not receive many valid requests because their workforce does not perceive a national works council as conferring any real benefit on them, or because the employees cannot motivate themselves to attain the 10%.

Despite some companies attempts to employ more permanent employees as opposed to relying on self-employed workers, the pattern of ‘here today, gone tomorrow’ workers remains common. Employees who do not anticipate a long-term working relationship with an employer may have little interest in whether they are informed and consulted.

In addition, if an employer has already set up a form of works council that meets the requirements set out in the Regs of a “pre-existing agreement”, the employees will need a majority in a ballot (where over 40% of the workforce votes) in favour of establishing a works council. Such an agreement can be on whatever terms the employer is able to agree with its employees, as long as it meets the conditions in the Regs for pre-existing agreements (i.e. it must be in writing, cover all the workers in the undertaking and set out how the information will be given and views sought and have the approval of the workforce).

As such, an employer may be able to agree far less onerous obligations to consult than those contained in the regulations. Assuming preexisting agreements can be entered into after 6 April (the Regs are rather unclear on this point), employers have a choice to make: consider setting up a pre-existing agreement on terms that they can live with or wait to see if the employees attain the 10% that triggers the obligation to consult.

Even if the provisions of the Regs are ‘triggered’, the obligation to inform and consult does not mean that employers actually have to agree with staff before implementing decisions. All that is required is “to work in a spirit of co-operation and with due regard for... Rights and obligations” and, in certain circumstances, to consult “with a view to reaching agreement”. The Regs recognise that the interests of employers and employees are not always alike, and that all the informing and consulting in the world will not necessarily produce consensus.