News and Events

Worker Consultation - EC Directive

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Today's papers are flooded with the news that the EC has finally approved the proposed Directive for Informing and Consulting Employees in the European Community.

Assuming the Directive is formally passed and published (which is now fairly automatically - the approval being the controversial stage), the UK will have to implement the Directive within seven years (faster for employers with 150+ employees).

The legislation will require all employers with over 20 workers in a single workplace (or 50 workers throughout different workplaces) to inform and consult their employees on all crucial decisions, including:

• the reasonably foreseeable development of the undertaking's activities and its economic and financial situation (Art 4(1)(a));
• the situation, structure and reasonably foreseeable developments of employment within the undertaking (Art 4(1)(b)); and,
• most importantly - any decisions likely to lead to substantial changes in the work organisation or contractual relations (Art 4(1)(c)).

There are provisions enabling the domestic legislation to contain obligations of confidentiality, and there is an exception to the consultation requirement where "the nature of th[e] information or consultation is such that, according to objective criteria, it would seriously harm the functioning of the undertaking or would be prejudicial to it."

An important point on enforcement: the Directive states that domestic legislation must provide that, in cases of serious breach of consultation requirements relating to Art 4(1)(c) (ie the third bullet-point above), any business decisions taken - or dismissals made - will have no legal effect until the employer has fulfilled his consultation obligations (or, if no longer possible, made adequate redress).

This is an enormously controversial Directive, and the CBI's response has been quite scathing (see link to CBI below).

Prior to the election, the government published the Employee Consultation Rights Bill (see bulletin dated 3rd April 2001). It is insufficient to comply with the Directive, because it provides a penalty of up to four weeks' pay for breach of the obligations (rather than, as the Directive requries, stating that decisions to dismiss or vary contracts will - if the breach of the consultation obligations is serious - be of no effect). If the Bill is not made Directive-compliant, it will generate a significant (and expensive for the government) number of Francovich claims.