Janet Gaymer, Partner, Simmons & Simmons

PREVIOUS SPEAKERS:
Janet Gaymer, Partner, Simmons & Simmons

Title:
The right to know, the duty to consult - information, consultation and collective bargaining for the future.
Information and Consultation - just how far can the individual and corporate manager go?

The Industrial Law Society Spring Conference
8 May 1999

1.INTRODUCTION

Partnership is now the buzzword. In its manifesto document 'Building Prosperity', New Labour described its vision of partnership in society as follows:

'Our ambition is for Britain to be a high quality, high added value economy, supported by sustained long term investment, social cohesion and an ethos of democratic participation in citizenship ... The old approach of trade union immunities as the basis for legislation has gone ... What there will be is a new deal for people at work, which will avoid rigidity but give people a decent minimum threshold of fair treatment recognising that social partnership is at the heart of the successful company of the future.'

Soon after his election, the Prime Minister, Mr Tony Blair, told heads of government that he wanted to champion flexible labour markets. However, the TUC argued at the same time that the 'European labour market is much more flexible than is sometimes painted' while accepting that the European Commission was now 'focusing on achieving a new balance between flexibility for companies and for individual workers and security for workers.'

In the TUC document 'Partners for Progress - Next Steps for the New Unionism' 'social partnership' is defined as meaning 'employers and trade unions working together to achieve common goals, such as fairness and competitiveness; it is a recognition that, although they have different constituencies, and at times different interests, they can serve these best by making common cause wherever possible. At the national level partnership means Government discussing issues with employers and trade unions on a fair and open basis where a common approach can reap dividends, for example, attracting inward investment and promoting training and equal opportunities.'

Towards the end of 1997 the Department of Trade and Industry and the Department for Education and Employment published guidance on 'partnership' at work, noting that this was 'central to the strategy of successful organisations'. The advice set out five sharing 'paths' which, according to those interviewed, both in the public and private sector, produced a balanced environment in which employees thrived and sought success for themselves and their organisations. These five paths to enlightenment are as follows:

shared goals - 'understanding the business we are in';
shared culture - 'agreed values binding us together';
shared learning - 'continuously improving ourselves';
shared effort - 'one business driven by flexible teams'; and
shared information - 'effective communication throughout the enterprise'.

The guidance further noted that there were three levels or stages within each of these five paths at which certain elements of good practice had to be established. These were characterised as:

starting out;
moving forward; and
new horizons.

However, what does all this mean in practice and as a matter of law to the individual and corporate manager?

There may be a number of approaches to the implementation of partnership in practice. According to a recent survey (conducted by Industrial Relations Services (645/December 1997)) employee relations may be approached in the following five ways:

adversarial: the organisation decides what it wants to do and employees are expected to fit in. Employees only exercise power by refusing to cooperate;
traditional: a good day to day working relationship but management proposes and the workforce reacts through its elected representatives;
partnership: the organisation involves employees in the drawing up and execution of company policies but retains the right to manage;
power sharing: employees are involved in day to day and strategic decision making.

In none of these models (which were derived from a survey of fifty organisations, both unionised and non-unionised) does one find any reference to profit or shareholders and some organisations reported problems with partnership or power sharing. Most thought, however, that employee management relations had improved as a result of greater employee involvement and that workers had obtained both material and less tangible benefits from the adoption of a partnership approach.
2.UK APPROACHES TO PARTNERSHIP, INFORMATION AND CONSULTATION

2.1 The Historical Context.

Traditionally, English law has had little to say about the structure of employee relations. The most familiar concepts to an English lawyer are:

the 'collective bargain' - described in the Donovan Report as a term coined by Beatrice Webb to describe an agreement concerning pay and conditions of work settled between trade unions on the one hand and an employer or association of employers on the other; and
consultation - which may involve a statutory obligation to reach or seek agreement and the requirement of an opening or listening mind but which leaves the last word with the employer.

The philosophy which has underlined the approach in English law to employee relations has been employer orientated. However, it must not be forgotten that attempts at more effective employee representation are not necessarily a recent development. The mining deputy, with responsibility for health and safety, a position which has existed for over one hundred years, had powers backed by statute to close production down. A little known Act and regulation of 1936 provided for consultation of women and young workers 'by secret ballot' as the condition for the Minister approving certain shift systems in factories.

There are now four main areas in which the law has come to demand some form of consultation by the employer with representatives, namely:

health and safety;
proposed redundancies as defined;
an impending transfer of an undertaking; and
pension schemes.

Forms of Employee Relations.
Participation between employer and employee or groups of employees may be facilitated in many ways. Broadly speaking, however, they are:

on a community wide scale - for example, through the European Trade Union Confederation ('ETUC') and mandatory works councils and generally through the Social Partners dialogue;
on a national scale - for example, by the TUC, and trade unions;
on an industry wide basis - for example, in joint councils; and
individually - where an employee may nominate a representative, for example, if there is an allegation of misconduct.

However, none of the above mechanisms may necessarily deliver the sort of 'give and take' deal which is typical of 'partnership' agreements which are said to characterise the new social partnership.

2.3 The Current UK Statutory Framework.

2.4 Collective Bargaining
Traditional British collective bargaining has never been hedged around with rigid rules binding the parties to follow contractual principles or to fixed term agreements. Typically, parties have raised issues in an agreed procedure as and when they arrive and collective bargains are typically not legally binding contracts. Books on master and servant before 1969 scarcely mentioned collective agreements at all.
Until implementation of the Fairness at Work proposals there is no statutory framework supporting the recognition of trade unions although it should be noted that Article 11 of the European Convention on Human Rights, soon to be incorporated in our law, assures everyone of the right to 'freedom of association with others, including the right to form and to join trade unions for the protection of its interests'. Article 11(2) prohibits restrictions on the exercise of these rights other than such as are prescribed by law and are necessary in a democratic society in the interests of national security or public safety, for the prevention of disorder or crime, for the protection of health or morals or for the protection of the rights and freedoms of others. As Donovan put it, 'the trade union movement here is sufficiently strong to make legislation on these matters unnecessary'.

Consultation

As noted above, the notion of consultation in the workplace is particularly relevant in relation to the implementation of redundancies, transfers of undertakings and health and safety. The relevant statutory provisions are:

section 188 et seq Trade Union and Labour Relations (Consolidation) Act 1992 ('TULRCA') as amended by the Collective Redundancies and Transfer of Undertakings (Amendment) Regulations 1995;
the Transfer of Undertakings (Protection of Employment) Regulations 1981 (as amended by the same 1995 Regulations); and
the Health and Safety (Consultation with Employees) Regulations 1996.

In due course legislation will be necessary in order to implement the European Works Council Directive (94/45) in the United Kingdom.

Briefly, the requirements are as follows.

In relation to redundancies

There is a statutory obligation on an employer to consult with 'appropriate representatives' when the employer is proposing to dismiss as redundant (as defined) twenty or more employees at one establishment within a period of ninety days or less. As part of the process of consultation the employer is required to provide the appropriate representatives with specified written particulars (set out in section 188(4) of TULRCA). The information must be sufficiently specific so that meaningful consultation may take place.

Consultation must be conducted 'with a view to reaching agreement' in relation to:

ways of avoiding dismissals by reason of redundancy as defined;
ways of reducing the number of employees to be dismissed; and
ways of mitigating the consequences of any dismissal. Consultation must begin 'in good time' - prior to 01 March 1996 the requirement was 'at the earliest opportunity'.

What is 'in good time' is subject to statutory regulation, namely:

where one hundred or more dismissals are proposed at the same establishment within ninety days the consultation must begin 'in any event' at least ninety days before the first dismissal is effective; and
where it is proposed to dismiss between twenty and ninety-nine employees at the same establishment within ninety days then consultation must begin 'in any event' at least thirty days in advance.

Since 30 August 1993 the proposed timetable must enable there to be sufficient time for consultation to take place with 'a view to reaching agreement'.

In relation to transfers of undertakings

Where there is a transfer of an undertaking, the duty to consult arises only where an employer envisages that measures will be taken in relation to employees in connection with the transfer. There is a separate duty to inform (as opposed to consult) wherever a transfer of undertaking is proposed. Both the transferor and the transferee must inform and consult as they will each be employers of affected employees. Specified information must be given to the appropriate representatives of the 'affected employees'. Consultation must be between the employer of the affected employees and the appropriate representatives of those employees. For this purpose an 'affected employee' is any employee of the transferor or the transferee who may be affected by the transfer or may be affected by measures taken in connection with it. An employee may be 'an affected employee' whether or not the employee is employed in the undertaking or the part of it to be transferred.

There is an obligation on the transferee to provide information to the transferor at such a time as will enable the transferor to comply with its duties, that is, long enough before the transfer to enable consultations to take place.

The obligation to consult is not an obligation to reach agreement. However, consultation must be conducted 'with a view to seeking agreement to the measures to be taken'. The employer must in the course of consultation consider any representations made by appropriate representatives and reply to those representations and if he rejects any of those representations give his reasons.

Health and Safety

The United Kingdom has had consultation rights for certain worker representatives in relation to health and safety since the coming into force of the Health and Safety at Work etc Act 1974 (sections 2(4)-(6)).

Sub-section 2(5) specifically originally anticipated the possibility of regulations being introduced by the Secretary of State to provide for the election in prescribed cases by employees of safety representatives from amongst the employees with a view to their conducting consultations with employers. The duty of every employer was expressed to be:

'To consult any such representatives with a view to the making and maintenance of arrangements which will enable him and his employees to cooperate effectively in promoting and developing measures to ensure the health and safety at work of employees, and in checking the effectiveness of such measures.'

Regulations were subsequently brought into force in the form of the Safety Representatives and Safety Committees Regulations 1977. These allowed a recognised trade union to appoint safety representatives from amongst all employees where one or more of them was employed by an employer which recognised that trade union.

With effect from 01 October 1996 a new consultative regime came into force. The new Regulations were entitled the Health and Safety (Consultation with Employees) Regulations 1996. They required employers to consult with all employees and matters concerning their health and safety at work and represented a 'top-up' of the 1977 regulations. The Regulations created a new category of 'representatives of employee safety'. The main requirements of the Regulations are as follows:

employees must be consulted in good time on matters relating to their health and safety at work;
consultation may be either with the employees themselves or with 'representatives of employee safety';
information must be provided (subject to certain exceptions) to enable full and effective participation in consultation;
training of representatives of employee safety must be ensured;

time off with pay for such representatives must be permitted and an action lies to an employment tribunal for breach by the employer;

employers must provide such facilities and assistance as a representative of employee safety may reasonably require;
representatives of employee safety have three statutory functions, namely, to make representations on potential hazards and dangerous occurrences; general matters affecting health and safety at work and on matters about which they are consulted; and to represent employees in consultations with health and safety inspectors.

Pensions

The Pensions Act 1995 includes a statutory consultation procedure. Active and pensioner members are always entitled to be consulted (section 21(8)(a)(i)). However, deferred members do not have a statutory right to be consulted although the trustees have a discretion to consult some or all of them (section 21(8)(a)(ii).

2.4 Proposed Changes to the UK Framework.
The government is currently in the course of reviewing the working of UK legislation which requires provision of information to and consultation with employees representatives on collective redundancies and transfers of undertakings. As noted above, the legislation was amended in 1995 by the Collective Redundancies and Transfers of Undertakings (Protection of Employment) (Amendment) Regulations. These were introduced in response to judgments of the European Court of Justice in June 1994 (cases C-382/92 and C-383/92) in which it was held that the UK was in breach both of the Collective Redundancies Directive (75/129/EEC) and the Acquired Rights Directive (77/187/EEC). The present government considers that the provisions do not provide a clear and satisfactory framework for the necessary information and consultation. Accordingly the government has issued a consultation document seeking views on possible changes. The government notes carefully in the consultation document that the proposals which it makes should be seen in the context of other developments on consultation with employees' representatives. It notes in particular the forthcoming implementation by the government of the European Works Councils Directive (94/45/EC) referred to below and the Fairness at Work proposals.

The proposals for amendment may be summarised briefly as follows:

Instead of the current arrangements, whereby an employer can choose to inform and consult either a recognised union, or elected representatives of the affected workers, when there is the prospect of a transfer of an undertaking or of redundancies, in future the law will provide that the employer must inform and consult:
- representatives of any recognised trade union covering (ie, involved in collective bargaining over terms and conditions for) the affected workforce; or
- in cases where there are affected employees who are not covered by arrangements recognising such a union, but only in such cases, appropriate representatives of those employees.
At present there are no specific requirements about who any non-union representatives should be except that they must be elected. In future it will be specified that:
- Non-union employee representatives must be both capable (ie, suitably mandated) and independent;
- They may be either
  - elected for the purpose on an ad hoc basis, or
  - (if the employer chooses) elected as a standing body. An existing standing body of employee representatives of the affected workforce may be used if suitable for the purpose.
Currently there are no provisions for the conduct of elections. In future it will be provided that where representatives are to be specially elected, certain conditions must be followed, such as provision for early elections to allow for consultation to take place 'in good time'.
At present the only legal provision for resolving disputes is for a complaint to be made to an employment tribunal by employee representatives or a trade union, or in some circumstances by an individual employee, that the required consultation has not taken place. In future it will also be provided that if a relevant case is brought, it shall be for the employer to prove to an employment tribunal that, if existing employee involvement arrangements were used, the employee representatives were both capable and independent, or if the representatives were specially elected, that all the election conditions were met.
In future, an employment tribunal will be able to award up to ninety days' pay (instead of up to four weeks' pay as at present) to each employee in the affected workforce in a case where an employer has failed fully to comply with the information and consultation obligations on the transfer of an undertaking; and a similar sum (with no provision for set-off between the two) in any case where an employer has failed fully to comply with the information and consultation obligations on redundancy. (At present the maximum award is thirty days' pay where there are fewer than one hundred redundancies, ninety days' pay where there are one hundred or more.)
A new provision will be introduced so that where the employer genuinely provides full opportunities for the election of representatives but the employees do not take this up, the employer may discharge his or her obligations by giving directly to the individual employees in the affected workforce the information which would have been provided to their representatives had there been an election.
In order to ensure that all those required by the Directives to be consulted are consulted, the requirement to consult in the case of redundancies will be extended to representatives of all those who may be affected by the dismissals or by measures taken in connection with them, (not just representatives of those who may be dismissed, as at present) and 'affected', in cases of redundancies and transfers, will be defined to mean 'affected either directly or indirectly'.
It will be provided that training in matters relevant to handling information and responding to consultations in the context of transfers of undertakings and redundancies is a type of training for which union officials are entitled to reasonable paid time off, and other employee representatives who are (or may be) involved in handling information and responding to consultations in this context will be given an equivalent entitlement.
Although this is a matter on which the government particularly wishes to have views, it has in mind that the current threshold exempting cases of fewer than twenty redundancies from the consultation requirements will be removed, and the previous position whereby employers were obliged to inform and consult the employees' representatives in all redundancy cases regardless of how many dismissals were in prospect will be reinstated. As things stand, employers can in some cases avoid consultation by adjusting the number and timing of redundancies. There is no similar threshold for consultation on transfers in the Acquired Rights Directive (and the Government does not propose, in consulting on the possible amendment of that Directive, that one should be introduced). Although the Collective Redundancies Directive permits such a threshold, the UK did not apply it until 1995. In consulting on this point the government invites views on whether the requirements should be different where small numbers of redundancies are involved.

3.THE CORPORATE SCENE

3.1 The Reach of Company Law.
Small companies represent by far the greatest proportion numerically of incorporated companies. Of all 3.7 million businesses in the UK, only 32,000 or less than 1% have fifty or more employees. Small companies are important in terms of economic activity. At the start of 1997 they accounted for 45% of non-government employment and 40% of turnover. At least 99% of businesses in all but a handful of industry sectors were small or medium sized companies (Small and Medium Enterprise (SME) Statistics for the United Kingdom, 1997, DTI, URN 98/92, July 1998).

However, in general the statutory regime is structured around the needs of larger publicly-owned companies with a separation between the needs of shareholders/investors and the directors who are in charge of and accountable to shareholders for day to day management. The basic model was probably the start up railway company. Many statutory provisions impose duties on directors and provide protection for shareholders against abuses of directors' powers.

Generally, UK and US companies are narrow focus, shareholder first enterprises.

3.2 Reform of Company Law.
On 04 March 1998 Margaret Beckett, then Secretary of State for Trade and Industry and President of the Board of Trade, announced the launch of a fundamental review of the framework of core company law. A consultation paper ('Modern Company Law for a Competitive Economy') was published on the same day in order to outline the nature of the problems which the review was designed to address, its proposed objectives and the scope and process which was envisaged. In November 1998 the Department published a summary of the responses which had been received. These responses included among other things wide agreement that company law needed to be amended to allow greater use of electronic means of communication and storage of information. There was also an agreement that the 'stakeholder' issue lay at the heart of the review although there was no consensus on the most appropriate approach.

3.3 Terms of Reference.
The Department of Trade and Industry Consultation Paper proposed specific terms of reference for the review process. These were:

to consider how core company law can be modernised in order to provide a simple, efficient and cost effective framework for carrying out business activity which:
1. permits the maximum amount of freedom and flexibility to those organising and directing the enterprise;
2. at the same time protects, through regulation where necessary, the interests of those involved with the enterprise, including shareholders, creditors and employees; and
3. is drafted in clear, concise and unambiguous language which can be readily understood by those involved in business enterprise;
to consider whether company law, partnership law and other legislation which establishes the legal form of business activity together provide an adequate choice of legal vehicle for business at all levels;
to consider the proper relationship between company law and non-statutory standards of corporate behaviour;
to review the extent to which foreign companies operating in Great Britain should be regulated under British company law;
to make recommendations accordingly.

During the life of the review the Principles of Good Governance and Code of Practice ('the combined code') were annexed to the Stock Exchange's listing rules following the work of the three major committees (Cadbury, Greenbury and Hampel) which have studied corporate governance in recent years.

3.4 Relevant Factors for Change.

The need for a review of core company law has been triggered by a number of issues. In particular, the following seem to be particularly relevant:

globalisation - the increasing international mobility of business and capital, the globalisation of brands and the ability of firms to operate internationally has made it necessary to review systems for regulating overseas businesses operating in Great Britain;
Europe - the UK's membership of the European Union has changed the legal backdrop against which company law has to be evaluated. Also, the European Convention on Human Rights, once incorporated, which includes the right to freedom of association and to peaceful enjoyment of possessions, may constrain the way in which traditional corporate regulatory machinery has operated;
changing patterns of regulation - companies are now subject to a considerable number of regulatory controls by, for example, the Stock Exchange, the Financial Services Authority, the Takeover Panel and accountancy bodies;
information technology - much of company law depends upon the accumulation and communication of information. Electronic communication and information management will have an effect on these processes;
changing patterns of ownership - the overwhelming majority of registered companies are small owner-managed businesses. Only 1% of companies on the Companies House register are public companies. In larger companies ownership has become concentrated. Institutional investors hold 80% of shares in UK companies (see the Committee on Corporate Governance, final report, January 1998, section 5.1). The largest institutional investors are consistently companies' largest shareholders (OECD Economic Surveys, United Kingdom, 1998, published by the OECD, Paris). The growth of institutional investor influence has highlighted corporate control. During the last fifteen years there has been a significant growth in personal share ownership;
softer asset structures - the traditional model of a company as envisaged in the reforms of 1844 - 1862 derives from the age of the railway. This is a company which is a high fixed asset enterprise run by managers on behalf of a wide body of investors and dependent on a largely 'commodity' labour force. However, today asset structures are softer. A significant proportion of the value or capacity of a business is in intangible assets - particularly human resource and knowledge based assets. Traditional reporting requirements focus on historic experience and tangible assets and not opportunities and risks and human and intellectual investment.

3.5 Key Corporate Governance Issues.

The right to know, the duty to consult and inform all are reflected in the key issues with which corporate governance is concerned. These include:

effective boardroom communication with shareholders, employees and others;
sensitivity - for example, in relation to salary packages for directors who are themselves employees;
accountability - the importance of internal and external audit and financial controls;
efficiency - having better run boards which include a well informed, independent, non-executive element;
awareness of publicity - the need to be aware of the public way in which corporate objectives may be presented.

3.6 Two Approaches to Corporate Structure.

What are the available options?

During the course of this century, many views have been expressed about how the interests of those involved in a corporate enterprise are to be expressed. Recently it has been suggested that shareholder pressure has inhibited long term investment in companies and the establishment of relationships both internally and externally. A long term relationship founded on mutual trust, it is argued, is more likely to ensure that employees of a company will acquire high levels of skill and knowledge which are specific to the industry sector.
There are two approaches to the issue, one of which is more conducive to the right to know and the duty to be informed and to be consulted. They are:

enlightened shareholder value - this approach views the ultimate objective of a company as the generation of maximum value for shareholders. This is the current statutory approach. Some argue that this is incompatible with the cultivation of a cooperative or sharing relationship;
the pluralist approach - which includes objectives serving a wider range of interests and not subordinated to shareholder value. With this approach directors' duties are owed not simply to the company. Such duties may need to take into account those who make a commitment to the company apart from shareholders such as employees. The danger of the pluralist approach is that interests may conflict - for example, where a plant is closed and where non-closure will affect shareholder return.

So how does the individual operate within this scenario? And is the perception of the corporate manager any different?

4.'THE RIGHTS OF THE INDIVIDUAL NEGOTIATO

4.1 The Rise of the Individual.
There has been a growing trend towards individualisation of contracts of employment. The Autumn 1997 Labour Force Survey reported that 44% of employees were in workplaces with trade union recognition. There are in Great Britain about 0.7 million trade union members in workplaces without recognition - about 2.8% of employees.

The Fairness at Work proposals which include a statutory framework for trade union recognition giving workers the right to be represented in collective bargaining by a trade union where that is wish of the majority of the workforce are intended, according to the government, to help improve industrial relations. The theory is that by providing a procedure through which differences can be resolved with less conflict, cooperation and partnership will be promoted.

4.2 Greater Emphasis on Detriment.
As part of the Fairness at Work proposals it is worth noting that section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 is amended to provide that each worker has the right not to be subjected to any detriment as an individual by any act or any deliberate failure to act by his employer. This replaces the previous notion of 'action short of dismissal' and deals with detriment in the context of union membership.

However a similar approach is taken in relation to the new statutory recognition procedures. Part VII of schedule 1 deals specifically with the notion of detriment to the worker.

A worker has the right not to be subjected to any detriment by any act or any deliberate failure to act by his employer if the act or failure takes place on any of the grounds specified. These grounds include:

the worker acting with a view to obtaining or preventing recognition of a union or unions by the employer under the Schedule;
the worker indicating that he supported or did not support recognition of a union or unions by the employer under the Schedule;
the worker acting with a view to securing or preventing the ending under the Schedule of bargaining arrangements;
the worker indicating that he supported or did not support the ending under the Schedule of bargaining arrangements.

Of the grounds stated in the Schedule those stated above would appear to support the role of the individual negotiator.

The worker may not rely on any of the above grounds if he breaks his contract with his employer by so doing or the ground constitutes an unreasonable act or omission by the worker.

The worker may present a complaint to an employment tribunal on the ground that he has been subjected to a detriment in contravention of the relevant paragraph - although apart from this the worker has no remedy for infringement of the right described above. If the tribunal finds that the complaint is well-founded it may make a declaration to that effect and an award of compensation to be paid by the employer to the worker in respect of the act or failure complained of. The compensation is to be such amount as the tribunal considers 'just and equitable in all the circumstances having regard to the infringement complained of and to any loss sustained by the complainant which is attributable to the act or failure which infringed his right'. Any compensation awarded must not exceed the relevant specified limit that is the basic and compensatory award.

Similar provisions in relation to dismissal apply - although these are carefully stated to refer to 'employee' as opposed to 'worker'.

4.3 Voluntary Choice Remains Important.
In the White Paper on Fairness at Work the government was at pains to note that voluntary choice remains important.

At paragraph 4.10 the Paper notes:

'The Government accepts the importance of voluntary choices, and believes that mutually agreed arrangements for representation, whether involving trade unions or not, are the best ways for employers and employees to move forward. Where agreements are reached voluntarily, they are most likely to be successful and suited to the needs of the enterprise.'

4.4 Increased Emphasis on Training?

It is inevitable that the changes currently occurring both in employment and company law will enhance the need for training. This is reflected in the Fairness at Work proposals in which training is seen as underpinning the move to support partnership at work.

The Fairness at Work proposals generally represent a balance between the creation of minimum standards in the workplace and allowing the individual to assert his or her rights. As Stephen Byers put it in January of this year:

'It is not the job of a Labour government to act as fifth cavalry and come riding over the hill to save the trade unions from declining membership.'
5.'THE ATTITUDE OF THE CORPORATE MANAGER

The corporate manager, when assessing his organisation's obligations in relation to information and consultation, will naturally wish to comply with the law as a matter of good corporate governance. However, other issues will inevitably intrude. Examples of these issues are as follows.

5.1 Which stakeholder is more important?

As noted above, the current corporate structure favours the interests of shareholders. We do not yet have a pluralist model;

5.2 Confidentiality, confidentiality, confidentiality.
In many information and consultation measures, whether European or in the United Kingdom, there is provision for a refusal of information where confidentiality or other special circumstances are issues. This is expressed in various ways but is often the last resort of the management who do not wish to supply information or to consult. Interestingly, the most recent proposals for national information and consultation in Europe contain the ability, in the case of a serious breach of employer's obligation to inform and consult, to ensure that any decisions will have no legal effect on the employment contracts or relationships of the employees affected. This concerns decisions likely to lead to substantial changes in work organisation or in contractual relations and where such decisions would have 'direct and immediate consequences in terms of substantial change or termination of the employment contracts or employment relations.' Legal effect only would take place once employers had fulfilled their obligations or if adequate redress had been established. Serious breach includes a total absence of information and/or consultation of employee representatives prior to a decision being taken or the public announcement of that decision. It also includes the withholding of important information or the provision of false information which renders ineffective the exercise of the right to information and consultation. Amendments by the European parliament in April 1999 provided that the decision would have no legal effect in the event of a serious breach only where the withholding of the information was done with the intention of rendering ineffective the right to information and consultation.

5.3 What is the bottom line?

Any corporate manager will assess the financial burden of compliance against business need. Many commentators have pointed out the excessive financial burdens which may arise as a result of the Fairness at Work proposals.

5.4 Whose contract will be terminated?

This question will inevitably be asked by a corporate manager charged with completing a project. He may put first his own survival as opposed to that of his colleagues or other interested parties. The ability to buy one's way out of a non-compliant legal situation may be viewed to be preferable to losing a job.

6. KEY ISSUES FACING EMPLOYERS

So what do all these developments in relation to information, consultation, participation, flexibility and changing working patterns mean in practice for employers'

Size is an issue

Much of our current UK and forthcoming European based legislation proceeds on the assumption that the employer must be of a particular size before certain legal requirements apply - for example, in the case of works councils. The small employer may therefore wonder what relevance some of these forthcoming proposals have for him. Indeed, it is worth noting that some organisations have complained about their non-inclusion in the European level social dialogue. UEAPME (for small and medium sized firms) commenced proceedings in the European Court of Justice on this very point. It petitioned the European Court of Justice to annul the Directive on parental leave. To some extent, this issue is addressed in the proposals to amend the statutory requirements on consultation by lifting the current twenty redundancies threshold so that all redundancies will be affected.

At the time when the statutory requirement to consult in relation to collective redundancies of twenty or more was introduced, the government said that there would be an estimated saving of up to '85 million per year in employers' costs. The government also estimated that it would affect some 96% of UK businesses.

Does the partnership model really avoid or minimise industrial disputes?

In its document 'Partners for Progress', the TUC notes that 'those employers who inform, consult and listen to employees and their trade union representatives, provide for good and fair conditions, including job security, are less likely to have disputes than those who see unions as an irritant.' While the UK is enjoying at present a period of industrial calm - some may question whether the partnership approach will hold in a difficult economic environment. If not, what then'

When does listening stop and decision making start?

Sooner or later, any organisation must take strategic decisions. One of the difficulties encountered in legal partnerships is how to come to a decision when there are a series of individual decision makers. In a corporate environment the stakeholders include not only the employees but also the shareholders. It is noteworthy that the Bullock Report on Industrial Democracy 1977 (Cmd 6706) did not result in worker directors becoming part of the UK industrial scene. In 1982, the Employment Act required that British companies with more than 250 employees were to be required to insert in their directors' reports a description of 'employee involvement' (without reference to any trade union) including information systematically distributed. The Companies Act 1985 (section 234 and Part V of Schedule 7) requires that directors reports should report on the 'involvement of employees in the affairs, policy and performance of the company'. Section 309 of the same Act requires directors to have regard to the interests of employees in general. However, this regard for employees' interests is inevitably subsidiary to the interests of shareholders in whose interests the directors must act. It is worth noting that despite the emphasis in current UK legislation on seeking or reaching agreement as part of the consultation process, the courts have not been prepared to grant injunctions to restrain acts by employers who have failed to consult properly (see, for example, Newnes -v- British Airways plc [1992] IRLR 575). Indeed, in 1978 we find the Employment Appeal Tribunal expressing the following view:

'This legislation never envisaged a requirement for a trade union to be involved in preliminary policy considerations which are a managerial responsibility.'

(NALGO -v- National Travel (Midlands) Limited [1978] ICR 598)

How flexible is flexible?

As is noted in the European Green Paper, the key issue for workers, management and the Social Partners and policy makers is to strike the right balance between flexibility and security. The paper highlights the need for lifelong learning and a review of the balance to be struck between regulatory powers between public authorities (legislation) and the Social Partners (collective bargaining) and between the Social Partners and individual employees (individual employment contracts). In particular, the paper emphasises that the employer must look at wage systems, working time, taxation, social security, health and safety at work, environmental issues and equal opportunity policies. However, increased regulation of fragmented working patterns may cause employers to shun such patterns and to revert to less flexible full time working models.

Recognition versus representation

In evidence at a House of Commons Select Committee on employment in October 1993 the TUC called for changes in the law to give employees the legal right to representation. The TUC noted that it 'would ideally wish to see [the legal right to representation] take the form of a right to trade union recognition' but that 'there are, of course, other ways of achieving this objective'. A right to employee representation through elections to works or company councils is another model. In practice, unions have a role in these systems too.' Accordingly, the trade union movement itself is mindful of the different patterns of employee representation available and this in itself is a challenge. In July 1994 in its report 'Employee Outlook' the Organisation for Economic Cooperation and Development noted that changes in regulations relating to employee representation rights had moved in different directions across countries.

And who is a 'worker'?

The notion of a 'worker' under European law is an economic one and the precise role of the worker in relation to a social partnership model is not always free from doubt. Some 'workers' are, for example, excluded from redundancy consultation rights - for example, if they are employed outside Great Britain (section 285 TULRCA). Also individuals employed under a contract for a fixed term of three months or less or made in contemplation of performing a specific task not expect to last for three months (and in either case where the employee has not been continuously employed for more than three months) is excluded (section 282 TULRCA). Where transfers of undertakings are concerned the definition of 'employee' is to be interpreted as covering any person who in the Member State concerned is protected as an employee under national employment law (Mikkelson case 105/84 [1985] ECR 2639). In its reexamination of the Acquired Rights Directive the Commission has not proposed the introduction of a community wide definition for the purposes of the Directive since it would create rather than solve problems. However, it is noted that Member States should not be allowed to exclude employees because of the number of hours worked or because they have a fixed duration employment relationship or temporary employment relationship. Those who have already attempted to set up works councils will also know that the definition of 'employee' in a trans-European environment is not an easy exercise.

Neil Millward wrote in 1994 as follows:

'Britain is approaching a position where few employees have any mechanism to which they can contribute to the operation of their workplace in a broader context than that of their own job. The presumption is simply that workers will do what they are told and have no rights of address or even channels through which they can make suggestions of better working practices. They are meant to be impotent and it is assumed that they have nothing to contribute to workplace organisation.'

('The New Industrial Relations', Policy Studies Institute 1994)

The UK workplace in the year 2000 may be very different if the changes currently underway come to fruition.

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PREVIOUS SPEAKERS: Janet Gaymer, Partner, Simmons & Simmons

PREVIOUS SPEAKERS:
Janet Gaymer, Partner, Simmons & Simmons