Impact of the Information and Consultation of Employees Regulations

All companies with a work-force of at least 150 employees now have an obligation to keep their employees informed of certain commercial developments. The underlying ethos is that there are long-term economic benefits if employees are at least consulted about major changes as opposed to discovering fundamental changes by media announcements.


The regulations provide some default provisions that will apply if at least 10% of the employees request that a consultation process be put in place. It is expected that, in the majority of cases, these default or standard provisions will apply. This is because few British companies either have existing arrangements for employee consultation or are in the process of negotiating such arrangements.


The standard provisions require information and/or consultation in a wide number of commercial transactions. The work-force must be informed about probable developments of the business or its activities. It must be informed and consulted where the probable developments involve a possible threat to employment or where the decisions are likely to lead to substantial changes in work organisation or contractual relations.


The regulations will take effect when a company is considering a reorganisation, for example, moving locations or rearranging production systems. They will also apply to substantial developments such as takeovers, mergers, acquisition or disposal of companies or assets. Companies are obliged in these circumstances to inform employees, but if there are changes such as harmonisation of terms of employment, manner of work or redundancies, then there is also an obligation to consult.


The Department of Trade and Industry has produced guidance that states that the obligations of the listing rules and the takeover code do not provide an excuse for failing to provide information to employees. However, it suggests that an employer could legitimately restrict the employee representative from disclosing the information to anyone, including the work-force, to maintain confidentiality.


There is also an exception where an employer may withhold information if its disclosure would cause prejudice or serious harm to the business. Employers need to be wary of relying on this exception, as such decisions can be challenged by the Central Arbitration Committee.


The regulations give little assistance on when information and consultation have to start. They refer to an appropriate time. If it is information only that must be given, then clearly the appropriate time within the spirit of the regulations should be before it is disclosed to the public. In cases where consultation is required, the regulations require certain procedures such as meetings, and again a timetable for the procedure may dictate the latest time at which the consultation should start.


However, this is clearly another area where companies will be keen to see how the business world reacts. Complaints about such timing issues may be challenged before the committee and so eventually there will be some additional guidance on what is an appropriate time.


There are already consultation regimes applicable where collective redundancies are taking place or where there is a transfer of a business within the transfer of undertakings regulations. In these cases, it is open to the employer to notify the employee representatives in writing that this consultation is taking place so that it does not need to be repeated under the regime of these more recent regulations.


Complaints by employees concerning the regulations may be made to the committee. It has powers to require an employer to rectify the situation within a specified time period. However, this may be of little use if the transaction is completed, as no order by the committee can suspend or alter an agreement.


It may be that in the future, purchasers will require warranties concerning employee information and consultation, as the committee may also impose fines of up to £75,000.


There will inevitably be teething problems with these regulations. Many employers will simply be completely unaware of the obligations imposed. Even for those with an understanding of the regulations, there are clear issues regarding some of the disclosure arrangements and the timing of information and consultation.


It is not until some challenges have been heard that companies will start to have a better view on how to implement these regulations. However, employers can at least be reassured that the regulations are limited to information and consultation.


The regulations do not require co-decision-making. Ultimately, whatever the commercial transaction, the decision remains with the employer.


By Coral Hill, associate professor, College of Law, London