Implementation of the European Works Council Directive: Consultative Document URN 99/926

The Government has published its proposals for implementing the European Works Councils Directive. The legislation must be brought into force by 15 December 1999, the deadline imposed by the Extension Directive which applied the original Directive to the UK, following the "signing up to the Social Chapter".

The consultative document includes draft regulations, to be known as The Transnational Information and Consultation of Employees Regulations 1999. This article looks where the draft Regulations depart from or expand upon the wording of the Directive and where the method of implementation may be controversial.

"Article 13 agreements"

The original Directive and the Extension Directive permit voluntary agreements instead of agreements under the provisions of the Directive. To be valid, these agreements must be for transnational information and consultation and cover the entire workforce.

They must be in force by particular dates: for those European undertakings which were covered by the original Directive, by 22 September 1996; for those only now covered because of the extension to the UK, by 15 December 1999.

These agreements are known as "Article 13 agreements" after the provision in the original Directive.

The UK regulations do not spell out much detail on these agreements. They do not stipulate that the signatories on the employee side must be representative or independent, nor do they stipulate that the agreement must be legally enforceable. This creates a problem as the agreement must be legally enforceable in order for the UK to comply with its obligations under the Directive. This abstentionist approach means that it is up to the parties to the agreement to decide whether the agreement is enforceable and the method of enforcement. The parties are not given the option of adopting the enforcement methods through the Central Arbitration Committee (CAC) and Employment Appeal Tribunal (EAT) which apply to agreements under the Regulations.

"Employees"

The regulations are confined to "employees", namely those who work under a contract of employment. This contrasts with the wider definition of "worker" used in the Working Time Regulations and National Minimum Wage Act.

This means that wider categories of worker are deprived of participation and that numbers of employees for calculating whether the thresholds are satisfied are kept artificially low.

Number of employees

The legislation applies where a European-wide undertaking (or group of undertakings) has 1000 or more employees within the Member States of the European Economic Area, with at least 150 employees in each of two or more Member States.

The UK method of calculation is averaged over a two year period and allows employers to count part-time workers as half an employee in the calculation. This is discriminatory and the decision to average the calculation over two years even when a company has been in operation for less than two years may unfairly exclude employees of new companies from the legislation.

Special Negotiating Body

The Regulations say that central management need only initiate negotiations when a request is made by 100 or more employees or their representatives. The Directive requires management to act on their own initiative.

The Special Negotiating Body (SNB) is the group which will negotiate to establish the European Works Council (EWC).

The provisions include some weighting towards Member States with larger workforces, but still would allow the minority of the workforce to outvote the majority if there were a large number of Member States with small workforces. This is important because the SNB acts by a majority and may vote by a two-thirds majority not to continue negotiations.

Selecting SNB members

The government proposes that in every case there must be a ballot of all employees to choose the members of the SNB. This is unnecessary, costly and cuts across existing representational structures.

In other Member States, existing representatives are entitled to choose the members of the Special Negotiating Board. This means the choice can be made by trade unions or existing employee representative bodies (eg existing national works councils or consultative committees).

There are relatively few rules for the conduct of ballots and the employer is allowed to choose constituencies. Paid officials of the union may be members of an SNB. The SNB may have one expert funded by management.

The negotiating process

Negotiations must be conducted in a "spirit of co-operation".

Central management must commence negotiations within six months and the agreement must be concluded within three years, otherwise an application can be made to establish a "statutory EWC" in line with the requirements set out in the schedule to the Regulations (broadly in line with the Annex to the Directive).

The draft Regulations propose that the three year period may be extended by six months by agreement. This provision is not in line with the Directive.

If the parties agree within the three year period, they will have reached a negotiated EWC agreement, also known as an "Article 6 agreement".

Statutory EWCs

The default requirements of the schedule are very similar to the Annex to the Directive. They set out requirements for the composition and conduct of an EWC where no agreement is reached.

The rules for composition are essentially the same as for the SNB (see above), although paid union officials cannot be members Ð only employees of the company. Once again, the members must be elected by all employees; they cannot be appointed.

Confidential information

The Directive allows restrictions on the use of confidential information. The draft Regulations provide that management may withhold information where, according to objective criteria, it would seriously harm the functioning of the undertaking or be prejudicial to them. The CAC may resolve any dispute on this.

The government proposes draconian penalties for disclosure of confidential information.

It is an offence for SNB or EWC members to disclose any information provided in confidence by central management. Only if the representative can show it was not reasonable to impose the confidentiality or that disclosure was not likely to cause serious harm or prejudice will the representative escape a criminal conviction.

This is an absurdly harsh sanction which encourages employers to develop a culture of secrecy and is out of all proportion to the "offence". Civil remedies allowing damages or injunctions would have been sufficient.

Enforcement

The remedies for disclosure of confidential information contrast starkly with the much weaker sanctions on employers for failure to comply with their obligations.

Disputes on whether the Regulations apply, the validity of the request to initiate negotiations and the SNB election process are to be decided by the CAC which may issue declarations. If management refuses to commence negotiations within six months or fails to conclude an EWC agreement within three years, the EAT will order the establishment of a statutory EWC and may impose financial penalties.

Disputes about the operation of an EWC agreement are to be resolved by the EAT which may order the employer to take action and impose financial penalties. However, the EAT is denied the power to make orders which require management to suspend or overturn any action taken by management. This denies the EAT the most effective remedy Ð the power to order that decisions cannot be implemented until there has been consultation with the EWC in accordance with the law. This is the remedy available in other jurisdictions, as for example in the Renault case in the French courts.

The EAT does have power to impose a financial penalty of up to £75,000. This is supposed to equate to the cost of an EWC meeting, but is a paltry sum to the multinational employers who will be covered by these Regulations.