Solicitor Ann Bevitt of the law firm Morrison & Foerster explains the ins and outs of the Information and Consultation of Employees Regulations 2004.
Before April of this year, employers were required to inform and consult with their staff in certain circumstances, for example, if they were proposing to make redundancies or if there was to be a transfer covered by the Transfer of Undertakings (Protection of Employment) Regulations 1981.
In addition, if employers recognised trade unions they were obliged to inform and consult union representatives in accordance with their collective agreements with those unions. Those employers who had European Works Councils were also required to inform and consult those bodies.
The Information and Consultation of Employees Regulations 2004, which came into force on 6 April 2005, greatly extend employers’ duties to inform and consult.
The Regulations require employers to inform employees, and in some cases consult with them with a view to reaching agreement, on a wide range of business issues if at least 10% of employees make a request under the Regulations.
Initially, the Regulations will only apply to firms with 150 or more employees. Firms with 100-150 employees will have to comply from 6 April 2007 and firms with 50 or more employees from 6 April 2008.
Employee consultation may not be part of the culture of some accounting firms. In particular, the partnership structure often does not lend itself to employee consultation. In some partnerships even junior partners may be left out of the loop and non-partners may have little or no idea of what the firm’s management is planning.
Such firms may need to undergo some cultural changes in order to comply fully with the extensive duties to inform and consult under the Regulations. For example, providing information about their economic situation is a process to which many firms will not be accustomed but with which they will now have to come to terms.
Under the Regulations, the extent of an employer’s duty to inform and consult depends on the nature of the information to be made available to employees and upon which employees are to be consulted.
Employers must inform employees about the recent and probable development of the business’ activities and economic situation, such as takeovers and mergers (by and of the business), the acquisition and disposal of subsidiaries or businesses, the opening and closing of offices and restructurings.
Employers must both inform and consult with employees regarding the situation, structure and probable development of employment within the business and on any anticipatory measures envisaged, in particular where there is a threat to employment.
Finally, employers must inform and consult with employees with a view to reaching agreement on decisions likely to lead to substantial changes in work organisations or in contractual relations, such as the introduction of new technology, the change of employer as a result of business transfer and changes in terms of employment, for example, hours of work.
However, employers are not required to consult on changes regarding pay and benefits of monetary value. Information must be provided at such a time and in such detail as to allow adequate study and preparation for consultation.
Consultation does not require actual agreement but there is a general duty on both sides to co-operate. Employers must therefore ensure that they approach any discussions in good faith and that there is a proper dialogue and an exchange of views. The Central Arbitration Committee will enforce the Regulations and may impose fines of up to £75,000 per breach.
Firms should not see the regulations as an unwelcome chore. Effective employee dialogue can help staff feel more valued and increase productivity. Further, making staff more aware of the business climate in which the business is operating is a positive move and will hopefully avoid employees hearing for the first time on the radio at breakfast that their employer is to close, a process which the DTI is very keen to eradicate.
Employers still have time to make voluntary arrangements more suited to their needs and wishes, rather than being forced to negotiate and, if unsuccessful, to adopt the default provisions in the Regulations. This sort of pro-active behaviour can pay huge dividends for both sides by creating an amicably negotiated, appropriate and flexible consultation body going forward.