The ICE Regulations: part 1
The first part of our two-part guidance note on information and consultation provides a detailed guide to the Information and Consultation of Employees Regulations 2004.
Part two, which will appear in IRS Employment Review 822, will seek to put the Regulations in context by examining how they fit in with the other forms of information and consultation that may be required of an employer, and by assessing the Regulations' potential impact.
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Main points to note The ICE Regulations came into force on 6 April 2005 for employers with at least 150 employees; will come into force on 6 April 2007 for those with at least 100 employees; and on 6 April 2008 for those with at least 50 employees. Businesses with fewer than 50 employees are not affected.
To calculate the number of employees in a business for the purposes of the Regulations, the average number of employees in the previous 12 months is used. Temporary agency workers do not count. Part-time employees (working fewer than 75 hours a month) may be counted as half an employee.
Even where the specified number of employees is present, neither the employees nor the employer are required to do anything. However, either side may wish to initiate information and consultation arrangements.
The process may be triggered by at least 10% of the workforce in an undertaking making a request for information and consultation, or the employer may suggest commencing the process of its own volition.
If the employer has a pre-existing agreement, the workforce may be ballotted on whether it endorses the employee request. If it is not endorsed, the pre-existing agreement continues, and no further requests can be made for three years.
If the employer has a pre-existing agreement but decides not to ballot the workforce, or has no pre-existing agreement, a new information and consultation agreement must be negotiated with employee representatives. This also applies where it is the employer that initiates the process.
If the workforce (40% of all employees and a majority of all those who vote) endorses the employee request, either a negotiated information agreement will be reached or the default standard agreement will apply. In either case, the agreement will not be open to challenge for three years.
Failure by an employer to fulfil its obligations under the ICE Regulations may be challenged before the Central Arbitration Committee (CAC). Appeals can be taken to the EAT, which can award penalties against employers of up to £75,000, payable to the Secretary of State for Trade and Industry. |
The Information and Consultation of Employees Regulations 2004 (SI 2004/3426) ("ICE Regulations") are intended to implement the EU Information and Consultation Directive (2002/14/EC). They will be phased in gradually: having come into force on 6 April 2005 for large employers (with at least 150 employees), they will be effective from 6 April 2007 for employers with at least 100 employees, and on 6 April 2008 for workplaces with at least 50 employees. Organisations with fewer than 50 employees will not be affected. The preamble to the Directive states that it was motivated by "a need to strengthen dialogue and promote mutual trust within undertakings in order to improve risk anticipation…" and "a need, in particular, to promote and enhance information and consultation on the situation and likely development of employment within the undertaking and, where the employer's evaluation of the situation is that employment within the undertaking may be under threat, the possible anticipatory measures envisaged, in particular in terms of employee training and skill development, with a view to offsetting the negative developments or their consequences and increasing the employability and adaptability of the employees likely to be affected".
The Directive (and implementing Regulations) may represent more of a culture change in the UK than in other member states. This is because the UK has a particular history of worker representation, mostly by voluntary recognition of trade unions as the single channel for representation, operating generally at workplace or site level. This is different from the situation in, for example, France and Germany, where trade unions have generally operated at national or sectoral level, leaving local- or site-level representation to works councils. Even in comparison with the approach that UK law has taken to information and consultation in matters such as mass redundancies and business transfers, the ICE Regulations represent a significant change: in those other contexts, provision has been made for the representatives of any recognised union to be the consulted parties, leaving elected representatives as a default position in the absence of a recognised union. Indeed, since the ECJ's decision in Commission v UK, the UK has been prevented from restricting information and consultation rights to union representatives, as this would deprive non-union members in the workplace of their right to information and consultation. This might be regarded as something of a boon for the 81% of UK private sector workers who are not union members, and the 78% who are not covered by a collective agreement1. With the ICE Regulations, however, it is possible to side-step union representatives altogether, by ballotting the workforce on an agreement for information and consultation, which may even involve no representatives at all: email communication to the workforce, if agreed to by a majority, could be sufficient.
Opposing views
In light of this, it remains to be seen how willing employers will be to facilitate genuine information and consultation procedures. Trade unions, too, may see the new legislation as detracting from their usual areas of influence as they can claim no guaranteed formal part in information and consultation structures under the ICE Regulations.
A strong message that came out of the consultation process was that legislation should not do away with pre-existing arrangements that involved formal representative structures and direct communication with staff. The facility for those to remain is provided, but for some organisations a considerable culture change will be necessary. They may have little history of employee involvement and, in many cases, consultation will take place late in the decision-making process. Some organisations queried whether non-management staff should be participating in decision-making at all.
The trade unions question how far information and consultation structures, which are dependent on the employer for facilities, time off, any training for representatives and for expenses, can possibly provide independent representation.
Further, the Regulations allow employers, in some circumstances where there are pre-existing agreements under reg. 8(1)(d), to block requests for a new agreement. However, during the consultation period some employers did recognise the importance of a two-way communication process, especially if bad news about job cuts was on the way.
A guide to the regulations
The DTI has published a guidance document, available from its website2, which gives a summary of the legislation and detailed explanations of terminology and the mechanisms to be set up to give effect to the Regulations. For the employer or HR department, this is probably a more useful guide than the Regulations themselves. The text of the Regulations is available from the HMSO website3. Guidance on the working of the Regulations is also available from the Advisory, Conciliation and Arbitration Service (Acas)4.
We begin our guide by addressing the question as to when the Regulations apply.
Definitions of "undertaking"
In order to determine whether the Regulations apply, the number of employees in the undertaking needs to be ascertained. This, in turn, requires the "undertaking" to be defined. Regulation 2 defines an "undertaking" as a "public or private undertaking carrying out an economic activity, whether or not operating for gain". According to the draft guidance to the Regulations, this definition was adopted from the Business Transfers Directive (2001/23/EC). Article 2 of the framework information and consultation Directive (2002/14/EC) defines "undertaking" as "a public or private undertaking carrying out an economic activity, whether or not operating for gain, which is located within the territory of the member states".
The DTI guidance states that, in terms of companies, "undertaking" means a separately incorporated legal entity and, in the case of British companies, this means a unique registration number at Companies House. This is not the same as what the DTI calls an "organisational entity", such as an establishment, division or business unit within a company, but it does include partnerships, cooperatives, mutuals, building societies, friendly societies, associations, trade unions, charities and even individuals if they are employers carrying out an economic activity. In some cases it can apply to public sector bodies (such as providers of healthcare services and some educational establishments).
"Undertaking" does not include a group of companies. Each company is regarded as a separate undertaking. The application of the Regulations to certain numbers of employees could mean that some employers might split up business units to avoid the application of the ICE Regulations.
It is likely that guidance on what constitutes an "undertaking" and what constitutes an "economic activity" will be borrowed from TUPE case law in UK courts and ECJ case law on the Business Transfers Directive.
The public sector
The Directive applies to any private or public undertaking that carries out an "economic activity", whether or not for gain. Under reg. 42 the Regulations apply to those in Crown employment provided they are carrying out an economic activity.
The ECJ has held that "economic activity" can apply to the provision of healthcare services as in Porter v Queens Medical Centre (Nottingham University Hospital) and Dr Sophie Redmond Stichting v Bartol. Central and local government employees carrying out purely administrative functions will not be covered by the new Regulations. ECJ case law indicates that the Henke exception for economic activities merely ancillary to the main administrative purpose is to be construed narrowly.
Clarification from the courts may be needed, for the purpose of these Regulations, on exactly what is an "undertaking carrying out an economic activity" in cases where there is a dispute over a particular situation. There may be difficulty where a public body carries out a mixture of administrative tasks and economic activities. These would have to be examined on a case-by-case basis.
The government is keen, however, to support the principle of information and consultation for public sector employees, and is drawing up a code of practice for central government employees. Local authorities will be encouraged to adopt similar arrangements.
Employee numbers
Article 3 of the Directive requires member states to choose whether to apply the legislation to "undertakings" with more than 50 employees or "establishments" with more than 20. "Undertaking" is intended to refer to the legal entity, and "establishment" to the physical entity. The UK government chose "undertaking" as the term to be used in the Regulations, meaning that an undertaking could carry on business at more than one establishment and that, therefore, the number of employees to be counted is that employed by the whole undertaking, not on a branch-by-branch basis. This could be important, for example, in undertakings that operate chains of small shops or other retail outlets.
A corporate structure could consist of several individual undertakings, such as subsidiary companies carrying out different functions, and some businesses may choose to organise their information and consultation for the individual business units, provided there are sufficient numbers.
It is also possible to have different types of information and consultation in different units of a company or group of companies for varying purposes. Some issues may be of company-wide application while others may affect only local issues, such as the prospective closure of one factory or site.
Under reg. 3, the Regulations apply only to undertakings employing the required number of employees whose registered office, head office or principal place of business is situated in Great Britain. If a company is based in Northern Ireland the Regulations will only apply where a majority of employees work in Great Britain. Northern Ireland will have its own Regulations. Multinationals with their registered office or their head offices in Great Britain would be covered by the Regulations. Disputes on geographical coverage may be referred to the Central Arbitration Committee (CAC).
Calculating the number of employees
Regulation 4 sets out the method for calculating the number of employees for the application of the Regulations. The number of employees is determined by "ascertaining the average number of employees employed in the previous 12 months" (reg. 4(1)). The monthly figures are then added together and divided by 12 (reg. 4(2)). An employee who works part time - that is for 75 hours or fewer in a month - may be counted by the employer as representing only half a full-time employee if the employer chooses (reg. 4(3)). This could exclude an undertaking altogether from the Regulations if the trigger number could be reduced in this way. For example, an undertaking might have 60 employees but, if 30 were part time, the total number for triggering the application of the Regulations would only be 45, if the employer chose, and the Regulations would not apply.
Regulation 5 gives employees a right to ask, in writing, for data from the employer to determine the number of people employed in the undertaking. Regulation 6(3) stipulates that the data should be provided within a month. If the employer fails to provide the data or it proves to be false or incomplete, a complaint may be referred to the CAC.
Who is an employee?
Regulation 2 defines an "employee" as "an individual who has entered into or works under a contract of employment". A contract of employment includes a contract of service or apprenticeship, whether express or implied and whether oral or in writing. This excludes temporary agency staff or self-employed contractors, although it is arguable that long-term agency staff might fall within this definition on the basis of Brook Street Bureau (UK) Ltd v Dacas. The DTI's guidance suggests the usual tests for an employee:
whether the person has to undertake the work personally;
the degree of control the employer has over the employee; and
any other relevant factors, such as the provision of tools and equipment by the employer.
A director of a company would count as an employee if he or she worked under a contract of employment, as would a salaried partner in a law firm. Those who work offshore or on fixed-term contracts are employees for the purpose of the Regulations.
Starting the process
The process of setting up consultation arrangements, given the required number of employees, can be triggered in two ways. The first is by a valid employee request, and the second is by the employer initiating it. There is a flow diagram of the process in the DTI guidance, which makes the stages and options clear. It is, however, worth noting that the Directive itself provides for no trigger. It is only in UK legislation that the requirement for 10% of employees and a minimum of 15 are required to make a valid request for a negotiated agreement (regs. 7(2) and (3)).
If an employee request is made, there are two options. If there is a pre-existing agreement (such as a trade union collective bargaining agreement) already in place, a ballot may be held to determine whether the workforce endorses the request.
Where there is no pre-existing agreement, or there is but the employer decides not to ballot, the employer must negotiate an information and consultation agreement with the employee representatives. If the employer initiates the process, again an agreement must be negotiated.
Should the workforce, after a ballot, not endorse the employee request, where there is a suitable pre-existing agreement, that pre-existing agreement continues in force for at least three years. No new request can be made until three years have passed.
Where there is no pre-existing agreement, if 40% of the employees and a majority of those who vote endorse the request there are two possible outcomes. One is a negotiated agreement and the second, if no negotiated agreement can be reached, is that the standard information and consultation provisions contained in the Regulations apply by default. In both cases, the three year ban on further employee requests applies.
Negotiated agreements
Regulation 7 provides that an employee request will not be valid unless it is either a single request made by at least 10% of the employees in the undertaking or a number of separate requests made on the same or different days by employees which, when taken together, add up to at least 10%. If multiple requests are made, they must be made within a six-month period (reg. 7(2)(b)). The 10% must be from a particular undertaking, not 10% from a larger group of companies. By contrast, if the undertaking consists of several business units, the 10% applies to the whole undertaking, not the individual business units.
Regulation 7(3) states that if a 10% figure would result in fewer than 15 or more than 2,500 employees being required for a valid request, those numerical thresholds replace the percentage figure. The minimum figure means that a small number of employees in smaller firms would not be able to start the process as it requires at least 15. Similarly, the maximum means that, in large companies, a large number would not be required as 2,500, even if only 5% of the workforce, would suffice.
According to reg. 7(4), to be valid, the request has to be in writing, dated, and sent to the registered office, head office or principal place of business of the employer or to the CAC, and must specify the names of the employees. A request sent via the CAC requires that body to ask the employer for verification of the number and names of the employees making that request. This type of request means that the employees may remain anonymous.
The DTI guidelines advise an employer that has received a request to acknowledge receipt, inform the workforce of the request and explain how it intends to respond. If the employer erroneously believes the request to be invalid (and it turns out to be valid), the standard provisions will apply automatically after six months. Employers should be aware that once a valid request has been made, it is inevitable that some form of information and consultation arrangement will result.
If no employee request is forthcoming, the employer does not have to do anything in respect of the ICE Regulations. However, an employer that does not wish to wait for the employees to start the process may, under reg. 11, do so itself. This will lead to a negotiated agreement under reg. 14 or a "default" standard agreement under reg. 18 if negotiations are abortive.
The employer must issue a dated, written notification that it intends to start the negotiating process and, according to reg. 11(2), cause it to "be published in such a manner as to bring it to the attention of, so far as reasonably practicable, all the employees of the undertaking". Employers may notify employees in more than one undertaking where they wish to negotiate a single information and consultation agreement covering them all.
An employer cannot make a notification, under reg. 12(1), (a) where a negotiated agreement already applies, in which case the three year ban operates; (b) where the default provisions apply; or (c) where there has been a ballot but the employees voted against the employee request.
Any disputes as to whether the request or notification has been made by the employees or the employer are to be referred to the CAC (reg. 13) within one month of the date of the disputed request or notification.
Three-year moratorium
The purpose of the three year "moratorium" is to stop an employer or employees unilaterally overturning an agreement, however it has come into being. The exception is that the two parties can agree within the three-year period to terminate a negotiated or pre-existing agreement or to adopt a new negotiated agreement in place of the standard default provisions.
The moratorium will cease to apply if there are changes to the undertaking, such as mergers, takeovers or other changes, so that the agreement no longer covers all the employees, or is no longer approved by all the employees.
Negotiations and representatives
Regulation 14(1) provides that the employer must, as soon as reasonably practicable, make arrangements for the employees to elect or appoint negotiating representatives, inform the employees in writing who they are, and invite the representatives to enter into negotiations.
The negotiating representatives do not have to be the same people who will go on to become the information and consultation representatives in the longer term (indeed, there is no specific requirement for long-term representatives. The employer may communicate directly with the workforce). They may be elected in a ballot or appointed by the employees from willing volunteers. In some organisations, different parts of the workforce may require their own representative. The representatives must not all be management appointees. Any ballot must be fair and all employees have the right to vote. The Regulations do not stipulate any requirement as to the number of negotiating representatives.
There is no requirement for the negotiating representatives to be trade union officials or members, although such employees might be more experienced than others in conducting negotiations. Some trade union officials might feel they ought to be the representatives, but some managers might wish to keep them out of the process. Recognised unions may not represent all the employees in an undertaking, and such universal representation is a requirement of the Regulations.
Regulation 14(3) provides for the negotiations to last for no longer than six months, commencing at the end of three months from the date of the employee request or employer notification. During that three-month period, negotiating representatives could be chosen or elected. Any period taken up with holding a ballot concerning a pre-existing agreement does not count towards the three months, nor does any period in which a referral is made to the CAC. Any complaints about the election or appointment of negotiating representatives may also be referred to the CAC under reg. 15.
Regulation 16 provides that a negotiated agreement must cover all the employees of the undertaking. It may be a single dated, written agreement or several agreements which, taken together, cover the whole undertaking. The agreement must be signed by or on behalf of the employer. It must provide for the appointment or election of information and consultation representatives to whom the employer must provide the information and consult with, or alternatively, the agreement must state that the employer must provide information directly to the employees and consult those employees directly. Apart from this, the contents of the negotiated agreement are the parties' concern.
Davies and Kilpatrick note in Industrial Law Journal that the Regulations place a heavy burden on what are likely to be inexperienced representatives, whether they are negotiating representatives or longer-term information and consultation representatives. "It is difficult," they say, "to place much confidence in the quality of the consultation - or therefore in its potential for transforming workplace cultures - where either the representatives are inexperienced or there is no representation structure at all"5. The last phrase is a reference to the fact that (what is now) reg. 8(1)(d) allows for information to be given direct to "the employees or their representatives", which could involve direct communication with the workforce only, and therefore no real opportunity for their views to be represented.
Contents of an agreement
Annex 1 to the DTI guidance gives suggestions for the contents of a negotiated or pre-existing agreement comprising the following:
coverage, including defining the undertaking, which employees are included, the scope of any agreements with trade unions, and coverage of multiple agreements;
methods of information and consultation, including via representatives or direct, any hierarchies of national, regional or local structures; choice or appointment of representatives; facilities and time off for representatives; or direct forms of information and consultation with the workforce;
frequency and timing of information and consultation, including how often and when;
subject matter, such as subjects to be covered, and who draws up and chooses the subjects on the agenda;
information and consultation, including the type and nature of information to be provided, how views and opinions of employees can be given, the employer's response and who will represent the employer at meetings;
confidential information, including price-sensitive share information, obligations on recipients and legal penalties or likely disciplinary sanctions for breach;
disputes, including methods of resolution and legal enforceability of pre-existing agreements;
restructuring and its implications for information and consultation structures, including revising existing agreements; and
duration of agreement and circumstances for review, revision or termination.
An agreement has to be approved either by the signatures of all the negotiating representatives or by a majority of the representatives plus approval in writing by at least 50% of the employees, or in a ballot by at least 50% of the employees (reg. 16(3)). Complaints about the conduct of the ballot may be referred to the CAC within 21 days of the date of the ballot (reg. 17).
Pre-existing agreements
A pre-existing agreement, for example a collective agreement with a recognised trade union, or a previous information and consultation agreement, must cover all the employees in the undertaking for it to be valid under the ICE Regulations. It must be stressed that information and consultation is not collective bargaining and that collective bargaining arrangements may remain in place alongside information and consultation arrangements, particularly where unions represent different sections of a workforce. A European Works Council agreement, which focuses on transnational issues, is not a valid agreement for the purposes of reg. 8 (for a detailed discussion of the differences, see part two of this guidance note in IRS Employment Review 822).
The pre-existing agreement must be in writing, cover all the employees, have been approved by them, and set out how the employer is to give information to the employees or their representatives and seek their views on it (reg. 8(1)). A pre-existing agreement may cover more than one undertaking, different parts of the undertaking or there may be multiple agreements. Some collective bargaining agreements, if they are by custom and practice only and not written down, will not qualify. Few existing agreements, especially if long-standing, will meet all the criteria.
Existing arrangements might be extended to take in previously unrepresented sections of the workforce but this would have to be approved by a majority of the employees. A pre-existing agreement must have been agreed before any employee request for a new one is made under reg. 7. Approval by the employees can take the form of a simple majority vote, signatures, or the approval of trade union or other representatives. A pre-existing agreement can of course be modified so that it meets the requirements of an information and consultation agreement.
If all these conditions apply, the employer, instead of negotiating in accordance with reg. 7 may hold a ballot to check whether the employees endorse the agreement. Under reg. 8(3) the employer must inform the employees, in writing, within a month of the employee request that a ballot will be held. The employer must then arrange for the ballot as soon as reasonably practicable, but not before 21 days have elapsed. The ballot must be secret, fairly conducted, accurately counted and all employees must be entitled to vote in it, even if on more than one day. The employer must inform the employees of the result as soon as reasonably practicable.
After the ballot
If the employees endorse the request for a new agreement under reg. 7(1), the employer is under an obligation to begin negotiations for a new information and consultation agreement (reg. 8(5)), but if they do not, the employer is under no such obligation. A three-year moratorium on further requests would then begin.
Endorsement of the request for a new agreement by the employees requires at least 40% of the employees employed in the undertaking, and a majority of employees who voted in the ballot, to have voted in favour of the request (reg. 8(6)). The pre-existing agreement does not disappear. For example, if a trade union collective bargaining agreement exists that covers more than one undertaking, employers may hold a simple ballot of the employees in all the undertakings covered by the agreement. An employer that chooses not to hold a ballot still has to engage in negotiations for a new information and consultation agreement.
Any difficulties with the validity of a pre-existing agreement or the timing or other requirements of the ballot may be referred to the CAC. The CAC may make orders requiring the employer to remedy the defect or hold the ballot again (reg. 10).
Regulation 9 provides for a pre-existing agreement covering a group of undertakings. In such cases, the proportion required for a request is aggregated from the undertakings in the group and a combined ballot may be held.
The DTI's guidance document contains detailed information on the subject of negotiated and pre-existing agreements, which could be extremely complex in some types of undertakings or groups. Unlike an agreement under the standard provisions, a pre-existing agreement could give an employer scope to evade the intention of the legislation. For example, as there is no requirement in the Regulations for a pre-existing agreement to provide for the dissemination of any particular information, important information could be omitted.
As far as employers are concerned, a pre-existing agreement has considerable advantages over the standard provisions. It avoids the default model, which may provide for more than the employer wants to give. It allows for greater flexibility in content and setting up arrangements. It gives a greater chance, from the employer's point of view, of achieving an acceptable information and consultation structure in that the statutory confidentiality rules will not apply, nor will referrals of disputes or enforcement to the CAC or EAT, and it will be possible to shut out statutory processes for up to three years.
The disadvantages from an employer's viewpoint are that there is uncertainty over how the mandatory provisions will operate. If a company fails to provide good information and consultation, employees may opt to request the default model. Worst of all for employers hostile to trade unions, information and consultation arrangements could provide trade unions with a ready-made infrastructure from which to organise and recruit.
The standard provisions
The "standard" information and consultation provisions contained in reg. 20 apply in two situations:
where the employer, despite a valid employee request, fails to initiate negotiations within six months; or
where there are negotiations, but the parties fail to reach agreement within six months.
Regulation 18(2) provides that where the standard provisions have come to apply, the employer and employee representatives are free to reach agreement on alternative, negotiated provisions. This may happen at any time, and if such an agreement is reached, the three-year moratorium will subsequently apply. After the first six months, employers have a further six months in which to set up information and consultation arrangements. After this, penalties may be imposed on the employer for failure to set up the required arrangements. The standard provisions apply as soon as the representatives are elected or appointed.
Election of representatives
Regulation 19 provides for the election of information and consultation representatives under the standard provisions. Schedule 2 to the regulations gives requirements on the holding of ballots:
a ballot must comprise a single ballot or separate ballots in different constituencies if these would better reflect the interests of the employees (rule 2(a));
if there are only sufficient candidates to provide one representative per 50 employees, those candidates will be declared as elected without a ballot (rule 2(b));
the ballot must be independently supervised (rule 2(e));
any complaints about the ballot may be referred to the CAC (rules 3-5);
all employees entitled to vote must be given the opportunity to do so. The ballot must be secret and the votes must be fairly and accurately counted (rule 9);
the ballot supervisor must publish the results of the vote as soon as reasonably practicable (rules 10-14);
all the costs of the ballot must be borne by the employer (rule 15).
The people elected as the information and consultation representatives need not be the same as the negotiating representatives. Regulation 19(3) provides for one representative for every 50 employees, or "part thereof", provided that that number is at least two and no more than 25. Thus, an undertaking with 230 employees will require five representatives, but one with 2,300 employees will only be entitled to 25.
The most convenient way of analysing the information to be provided by the employer to the employees under the standard provisions is by looking at the categories (a), (b) and (c) contained in reg. 20 (see legislation box). The standard provisions apply as soon as the information and consultation representatives are elected or appointed. These requirements closely follow art. 4 of the Directive. Neither the Directive nor the Regulations specify the timing or frequency of consultation, which will obviously vary with circumstances. Activity such as major restructuring would seem to require more frequent information and consultation than stable periods. The DTI guidance says: "Ultimately it will be for the courts to interpret what these requirements might mean in practice in the particular circumstances of any specific complaint."
The Regulations apply to matters for collective consultation and are not intended to deal with negotiations over individual posts or employees. Nor do they require information and consultation to take place regarding the recruitment, redundancy, dismissal, retirement or any other matter relating to an individual. Where there are trade unions, those are still matters that a union can properly take up on a member's behalf.
Although the Regulations are collective, no lower numerical limit of employees likely to be affected by any changes is specified in the Directive. However, once there are likely to be "20 or more redundancies at one establishment within 90 days or less", s.188 of TULR(C)A will be triggered. Where the employer chooses in that situation, or is obliged, to consult with recognised trade unions, it should write and inform the information and consultation representatives that it will be consulting the alternative bodies. This has to be done on each occasion that the situation arises.
Category (a) information
This category is probably best considered as a "scene-setter", which will enable the representatives to understand the wider picture. Category (a) information will not necessarily be matters on which consultation is required, merely information. In other words, it is a one-way process only.
It includes the past history of the undertaking, as well as predictions for its future. "Probable", according to the DTI guidance, "implies something more than the mere possibility of a development … such as where discussions or negotiations with a third party were at a very preliminary or early stage." Regulation 20(3) stipulates that the employer must consult on matters in categories (b) and (c), but not on (a). Many large companies already disseminate general information to employees about the company, orders or profits, by various means such as email or staff bulletins.
Category (a) information is likely to include the following:
changes to lines of products or services;
increases or decreases in demand, sales or markets;
takeovers, mergers, closure of plants, branches or offices;
new developments in technology or ways of working;
internal reorganisation;
changes to the organisation's aims or objectives or senior management;
trading conditions and competition; and
the organisation's financial situation.
There is no requirement in the Regulations for the employer and representatives actually to meet for the information to be imparted. Information can be sent to them, but there may be a need to meet if further explanation is required.
There is no requirement to provide information about any other undertaking, such as a parent company or subsidiary. However, a parent company failing to provide information to a subsidiary does not give the subsidiary an excuse for failing to consult (reg. 20(6)).
Category (b) information
This is intended to be specific to the employees being consulted and to concern employment as a whole. Consultation is required on these areas under reg. 20(3). The elements will vary from organisation to organisation, depending on size, the sector they operate in, their financial health, and other factors. The DTI recommends (although this is not in the legislation) that a prudent employer should seek the views of the representatives on the type of information to be provided. Typical examples incoude:
recruitment and redundancies, voluntary and compulsory;
reduced hours working;
overtime needs;
changes in retirement policy;
restructuring, including reorganisation, redeployment or transfer of locations or posts; and
whether any threats to jobs can be offset by retraining or redeployment.
Category (c) information
This category concerns consultation on "substantial changes" to employment, is mandatory under reg. 20(3) and includes areas covered by other legislation on collective redundancies (s.188 of the TULR(C)A) and transfers of undertakings (TUPE). The detail of the overlap between these and the
ICE Regulations will be discussed in part two of this guidance note in IRS Employment Review 822. However, where TUPE or redundancy consultation applies, the employer can choose to consult the representatives or can notify them that it will instead be consulting other bodies (such as recognised trade unions) under those other provisions. Similar provisions for alternative consultation could be added to negotiated agreements. Or, TUPE and redundancy could, by agreement, be excluded from such agreements.
Outside the scope of the other legislation, which in any event takes precedence once the conditions for it to operate are present, the likely information in category (c) is:
changes to levels or distribution of jobs, redundancies, redeployment;
changes to policies on flexible working or part-time working;
changes to hours, overtime, shifts or other work patterns;
introduction of new technology or equipment;
introduction of outsourcing of production or services;
changes of employer due to TUPE transfers;
substantial changes to terms and conditions, such as hours, leave and rest breaks (these must also be agreed with the employees to be effective);
changes to compulsory retirement age or occupational pension schemes; and
changes to disciplinary or grievance procedures.
Many of these are areas where a trade union would normally represent workers, but one of the most significant omissions from the ICE Regulations is that pay is not covered. "Changes in contractual relations" does not include pay or any benefits with a monetary value. A source of potential difficulty, and therefore likely test cases, is that the Directive (art. 4(2)(c)) does not define what "work organisation" or "contractual relations" actually are. They are wide terms that could cover many possible aspects of the employment relationship.
The Regulations and the Directive do not, however, deal with individual posts, nor is there any requirement to consult on what might be happening in parent companies. The DTI has insisted that the category (c) matters are not "negotiations", for example, on redundancies, but the "view to reaching agreement" looks like negotiation. The overall idea is that consultation should be built into management decision-making.
These categories are not intended to be limiting. Employers subject to the standard provisions may, if they wish, go beyond them. Acas can provide further guidance on appropriate issues for information and consultation.
"Consultation" …
In reg. 2, "consultation" is defined as "the exchange of views and establishment of a dialogue" between the employer and the information and consultation representatives. There is also useful case law on what constitutes genuine and timely consultation in other contexts, particularly redundancy (see R v British Coal Corporation and Secretary of State for Trade & Industry ex parte Price and Middlesbrough Borough Council v TGWU), which will provide guidance. In R v Gwent County Council ex p Bryant, fair consultation was said to mean: "(a) consultation when the proposals are still at a formative stage; (b) adequate information on which to respond; (c) adequate time in which to respond; (d) conscientious consideration by an authority of the response to consultation."
In other words, the representatives must be given a fair and proper opportunity, in terms of information and time, to understand fully the matters about which they are being consulted and to express their views on those subjects. The consultation must be genuine on the employer's part. This implies seeking the employees' views before final decisions are taken. However, consultation at too early a stage may panic the employees about job security, and too late may risk an accusation of "going through the motions".
Consultation on matters in categories (b) and (c), that is, developments, threats, and changes, is to allow the employee representatives to express their views on the impact these may make on employees. They may disagree with the employer's plans or the reasons expressed for them. They may have alternative suggestions or proposals or views as to how these matters are best announced to other employees.
… not shared decision-making
Consultation is not collective bargaining, and employers are not obliged to negotiate with the employee representatives, nor follow their opinions. Decision-making remains clearly the prerogative of the employer. Similarly, the requirement to consult with "a view to reaching agreement" in para. (4)(d) for matters in category (c) (substantial changes and contractual relations) only applies to decisions that are within the employer's power. Decisions made by a parent company or affected by legal or regulatory authorities cannot be changed. It is to be noted that the "agreement" principle does not apply to category (b) matters. The DTI guidance explains this by saying that category (c) matters require decisions and are those on which agreement may "in principle be possible", whereas category (b) matters are of a "more factual nature and less appropriate for agreement".
"The relevant level of management" to be involved (para. (4)(c)) will vary according to the subject up for consultation. In some cases local managers at a plant or branch may suffice, for others national or even international managers may participate. According to the DTI, it should imply "a level of management with the authority to change the decision," theoretically after genuine consultation and an exchange of views.
Oddly, there is no provision in the Regulations for the information and consultation representatives to report back to the other employees on the consultation. Both the DTI and Acas offer advice on good practice that includes the desirability of doing so.
Frequency and timing
Regulation 20(4) does not stipulate any particular requirements as to the timing, method and content of consultation. It merely says that these must be "appropriate". In this context, this means that the employer must give the representatives sufficient time to study the information and prepare themselves for any consultation meetings. The Directive envisages an ongoing dialogue, at best, between employer and employees, with regular consultation rather than a one-off event to deal with a crisis.
It would be difficult to lay down hard and fast rules as to how often consultation should take place because it will vary according to circumstances. Changes such as restructuring, redundancies and closures will require more consultation. The DTI guidance suggests one meeting a year would be a minimum requirement for providing an overview of the undertaking's economic situation and activities.
Where there is a recognised trade union, it must be consulted under TUPE or TULR(C)A where transfer or redundancy situations arise. If there is no recognised trade union, the information and consultation representatives may be appropriate for consultation or the employees may choose other representatives. In Middlesbrough Borough Council v TGWU the EAT held that it was not open to the employer faced with making redundancies to argue that because consultation would be futile it would not conduct any.
With regard to the timing of consultation, the implication is that it should be in advance of any developments affecting jobs. It is suggested by the DTI that this should be at the point where there is a possibility of the development occurring. It should certainly be at a stage before any irrevocable decisions have been taken. There is otherwise a risk of the court finding that the consultation is not genuine. This would be consistent with the recent ECJ judgment in Junk, concerning collective redundancies. Until there are any cases specifically on the ICE Regulations, case law on redundancies and TUPE may provide guidance. In addition to Middlesbrough BC v TGWU, see MSF v GEC Ferranti (Defence Systems) Ltd (No.2) and R v British Coal Corporation and Secretary of State for Trade & Industry ex parte Vardy.
Compliance and enforcement
The provisions on enforcement in reg. 22 cover only negotiated or standard information and consultation agreements. They do not apply to pre-existing agreements. Where the Regulations do apply, a complaint can be presented to the CAC within three months, on the grounds that the employer has failed to comply with the terms of the relevant agreement.
A dispute over the operation of a pre-existing agreement could only be resolved in the way provided for by that agreement. This might be through the courts if the agreement created legal relations or provided for such a contingency.
The DTI guidance gives the common sense advice that, before going to the CAC, the representatives should first see whether the employer's failure could be remedied by discussion or negotiation.
According to reg. 22(3), complaints may be brought by the information and consultation representatives or, if there are none, by individual employees or an employees' representative. It should be noted that the mechanism cannot be used to bring complaints against information and consultation representatives or employees.
The DTI guidance gives examples of the categories of breach of both types of agreement that might lead to a complaint to the CAC. In the case of a negotiated agreement these could include:
failure to establish the agreed consultation arrangements;
failure to provide for the election of information and consultation representatives;
failure to provide adequate or timely information; and
failure to consult.
Clearly, a negotiated agreement may contain much fuller provisions specific to the undertaking than a standard agreement. A complaint could be made about any of the provisions contained in the agreement. Complaints about the standard provisions are necessarily confined to the matters contained in those provisions.
In the case of a breach of the standard reg. 20 provisions, a complaint might be brought for the following failures:
to arrange for election of representatives under reg. 19(4);
to provide adequate information;
to provide the information at the right time;
to meet the representatives;
to send the appropriate level of management to such a meeting;
to allow the representatives to express their opinions;
to give a reasoned response to the representatives' views; or
to consult in a genuine way with a view to reaching agreement.
The last item may be especially difficult to prove, particularly if the employer has gone through the motions of the other stages in the process. Case law on redundancy consultation, such as Middlesbrough BC v TGWU, may provide guidance.
Under reg. 22(4), where the CAC finds the complaint well-founded, it "shall make a declaration to that effect" and "may make an order requiring the employer to take such steps as are necessary" to comply with the agreement, whether negotiated or standard (our emphasis). The CAC can also specify the time to be allowed to remedy the failure.
However, no order made by the CAC can suspend or alter an act done or agreement entered into by the employer. In other words, if an employer closes a factory without any consultation, it may suffer the penalty but the CAC cannot stop the closure or consequent loss of jobs.
Penalty notice
If the CAC makes a declaration, the applicant can, within three months from the date the declaration is made, apply to the EAT for a penalty notice to be issued. The present maximum penalty under reg. 23 is £75,000, payable to the Secretary of State for Trade and Industry.
In setting the penalty, the EAT will take into account the gravity of the employer's failure, the period of time over which it occurred, the reasons for it and the number of employees affected by the failure in the undertaking or undertakings if more than one.
The employer may appeal against the imposition of the penalty by making representations that the failure resulted from a factor beyond its control or some other reasonable excuse. Exactly what constitutes a "reasonable excuse" will, no doubt, be tested in the courts.
Some employers apparently see the CAC as likely to be biased towards employees, for example, in matters such as disclosure of confidential information. They would prefer non-standard negotiated agreements, which could exclude the CAC.
Confidential information
Regulation 25 makes it a breach of statutory duty for an employee to divulge to third parties information or documents given in confidence by the employer. If the employees do disclose confidential information or documents they could be restrained by an injunction and/or sued for damages.
The exception to this, under reg. 25(5), is for "protected disclosures" under s.43A of the Employment Rights Act 1996. This operates to protect a worker who makes a disclosure involving the committing of a criminal offence, a legal obligation, a miscarriage of justice or environmental damage, in the public interest.
Regulation 25 applies to any negotiated agreement or standard agreement. It does not apply to pre-existing agreements where the parties are free to agree whatever confidentiality provisions they wish. An employer could make disclosure of confidential information a disciplinary offence in a pre-existing or negotiated (but not a standard) agreement.
A person to whom the employer has entrusted confidential information or documents could, if there was good reason, apply to the CAC for a declaration as to whether this was reasonable. The CAC would then have to consider whether disclosure of that information would be likely to harm the "legitimate interests of the undertaking" (reg. 25(7)) and, if not, can make a declaration that it was not reasonable for the employer to require the information to be kept in confidence.
An employer may restrict information or withhold it altogether. The DTI guidance advises that it is up to employers to make clear when providing information "on a confidential basis what restrictions there are on it being passed to others". For example, the guidance says the employer may, with express consent, allow the recipient to share the information with someone advising the information and consultation representatives or other named employees of the undertaking. The employer should make it clear also that the obligation of confidentiality extends to those who see or hear the information. The employer may also place a time limit on the period during which information is to be kept confidential.
Price-sensitive information
One important area that employers might wish to keep confidential is information on share prices where a company is listed on a stock market. The UK has the Stock Exchange Listing Rules, which impose a general obligation on listed companies in respect of matters that are not public knowledge and that may affect share prices. These Rules, and their US equivalents, do not prevent a company sharing price-sensitive information with employee representatives before it is disclosed to the stock market, provided those representatives are subject to an obligation of confidentiality.
No inconsistency with Listing Rules or Takeover Code
The DTI guidance says that it does not believe that there is any inconsistency between the obligations in the ICE Regulations and the Listing Rules or the Takeover Code, "so there is no issue of one taking precedence over the other". However, it does point out that the Listing Rules and the Takeover Code limit the number of people who can be made privy to price-sensitive information.
Under the Listing Rules, a company does not have to make public any restructuring proposals during the planning stage. Nor does it need to notify a Regulatory Information Service concerning impending developments or negotiations. It may, however, give such information in confidence to listed categories of recipients, including employee or trade union representatives. The recipients must be made aware that they must not deal in the company's shares until the relevant information has been made public. The recipients must not disclose the information to the wider workforce.
Market abuse
The Listing Rules are due to be revised through the implementation of the EC's Market Abuse Directive 2003/6/EC during 2005. This Directive will permit companies and their advisers to disclose inside information on a selective basis where there is a legitimate reason for doing so and the recipient owes a duty of confidentiality. This could, of course, include information and consultation representatives.
Regulation 26 allows an employer to withhold any information or document where, "according to objective criteria", the disclosure of such information would "seriously harm the functioning of, or would be prejudicial to, the undertaking". This might apply where the consequences of information leaking out to third parties could be extremely detrimental or where there had previously been damaging leaks. Any disputes over the confidentiality or withholding of information as between the information and consultation representatives or employees' representatives may be referred to the CAC for a declaration or order. Under reg. 26(4) an order may specify that the information or document be disclosed, to whom it is to be disclosed, any terms applying to disclosure, and any date for compliance with the order.
Further information on this subject is to be found in annex 2 of the DTI guidance.
Protection for representatives
The statutory protection from detriment and dismissal for information and consultation representatives is similar to that provided by the Employment Rights Act 1996 for pension scheme trustees (s.58) and employee representatives (s.61) and the Trade Union and Labour Relations (Consolidation) Act 1992 for trade union duties and activities (s.168 and s.170). Regulation 27 allows an employee who is either a negotiating representative or information and consultation representative to have reasonable paid time off during working hours for these duties. Under reg. 28 the employee is to be paid his usual hourly rate of remuneration when undertaking these duties. There are also provisions in the regulation for the calculation of the hourly rate, especially when normal working hours vary from week to week.
Regulation 29 allows an employee who has been denied time off or pay to make a complaint to an employment tribunal. The complaint has to be presented before the end of three months, beginning with the day on which the time off was, or should have been, taken. As with s.111 of the Employment Rights Act 1996, the time for making a claim can be extended if the tribunal considers that it was "not reasonably practicable" for the complaint to have been presented sooner (reg. 29(2)(b)). The remedies are a declaration and an award of remuneration for the time off, and/or for the wages that the employer failed to pay.
As with the other statutory provisions, employees are protected by regs. 30 and 32 from unfair dismissal or detriment for the following reasons:
acting as or proposing to act as an employee representative;
acting as or proposing to act as a negotiating representative;
acting as or proposing to act as an information and consultation representative;
standing as candidate for election as a representative;
requesting time off for any of the above;
taking or proposing to take employment tribunal proceedings to enforce any of these rights;
complaining or proposing to complain to the CAC; and
requesting data on employee numbers (reg. 5).
There are other grounds that are protected, including indicating support or lack of it for an information and consultation agreement (reg. 30(6)(e)) or trying to lawfully influence or cast doubt on the conduct of the ballot (reg. 30(6)(g) and (i).
The DTI guidance points out that the Employment Act 2002 (Dispute Resolution) Regulations 2004 will apply to unfair dismissal cases relating to these Regulations, although they will not apply to referrals made to the CAC.
Thus an employee would not be able to bring a complaint of detriment to the employment tribunal unless they had put their grievance in writing to the employer at least 28 days before lodging their claim. An employee who has not gone through the statutory dispute resolution procedure may suffer a loss of compensation.
Regulation 38 allows the CAC to refer any application or complaint where conciliation might be appropriate to Acas.
Restrictions on contracting out
If an employer attempts to exclude the application of the Regulations, whether in an employee's contract or in any other agreement, such a term or agreement would be void under reg. 39. So would any attempt to prevent an employee taking a complaint to the CAC or employment tribunal. However, reg. 40 allows an agreement to refrain from starting or continuing tribunal proceedings where Acas is involved or there has been a compromise agreement on which the employee has taken proper professional advice.
The restriction extends beyond the individual contracts of employees. For example, a contract for the sale of a business could not purport to prevent the employer selling its business from informing and consulting employees or their representatives about the sale if the standard information and consultation provisions or a negotiated agreement required it. A pre-existing agreement does not operate as a contracting-out arrangement to prevent employees from requesting an information and consultation agreement (unless the three-year moratorium applies) under reg. 7(1).
Regulation 39 is not intended to prevent negotiated or pre-existing agreements that differ from the reg. 20 standard provisions if they provide for different terms on timing, means or subjects for information and consultation. This is provided for by the Regulations, although negotiated agreements that purport to exclude the confidentiality provisions - or exclude the right to complain to the employment tribunal or CAC, or to paid time off for representatives - would be void.
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Legislation: Standard information and consultation provisions 20 (2) The information referred to in paragraph [20] (1) must be given at such time, in such fashion and with such content as are appropriate to enable, in particular, the information and consultation representatives to conduct an adequate study and, where necessary, to prepare for consultation. (3) The employer must consult the information and consultation representatives on the matters referred to in paragraph [20] (1) (b) and (c). (4) The employer must ensure that the consultation referred to in paragraph (3) is conducted - (a) in such a way as to ensure that the timing, method and content of the consultation are appropriate; (b) on the basis of the information supplied by the employer to the information and consultation representatives and of any opinion which those representatives express to the employer; (c) in such a way as to enable the information and consultation representatives to meet the employer at the relevant level of management depending on the subject under discussion and to obtain a reasoned response from the employer to any such opinion; and (d) in relation to matters falling within paragraph [20] (1) (c ), with a view to reaching agreement on decisions within the scope of the employer's powers. |
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Legislation: Cooperation 21 The parties are under a duty, when negotiating or implementing a negotiated agreement or when implementing the standard information and consultation provisions, to work in a spirit of cooperation and with due regard for their reciprocal rights and obligations, taking into account the interests of both the undertaking and the employees. |
Case list
Brook Street Bureau (UK) Ltd v Dacas [2004] IRLR 358
Dr Sophie Redmond Stichting v Bartol [1992] IRLR 366 ECJ
EC Commission v UK [1994] IRLR 392
Henke v Gemeinde Schierke [1996] IRLR 701 ECJ
Junk v Kühnel [2005] IRLR 310
Middlesbrough Borough Council v TGWU [2002] IRLR 332
MSF v GEC Ferranti (Defence Systems) Ltd (No.2) [1994] IRLR 113
Porter v Queens Medical Centre (Nottingham University Hospital) [1993] IRLR 486 HL
R v British Coal Corporation & Secretary of State for Trade & Industry ex parte Price [1994] IRLR 72 HC
R v British Coal Corporation & Secretary of State for Trade & Industry ex parte Vardy [1993] IRLR 104
R v Gwent County Council ex parte Bryant [1988] Crown Office Digest 19
R (on the application of the NUJ) v Central Arbitration Committee and MGN Ltd [2005] IRLR 28
1Brook, K, "Trade Union Membership: An Analysis of Data from the Autumn LFS" (July 2002, Labour Market Trends).
3www.legislation.hmso.gov.uk/si/si2004/20043426.htm.
5Davis, P and Kilpatrick, C, "UK worker representation after single channel" [2004] ILJ 121, p.151.
