The EU information and consultation Directive is due to be transposed into Irish law by March 2005 but, with the deadline fast approaching, the draft implementing Bill has not yet been finalised as of November 2004, and there is considerable uncertainty as to the implications of this potentially far-reaching piece of legislation for Irish industrial relations. In view of this, a recent conference on the Directive was timely, and this article reports on the key points raised.
A conference held in Dublin on 21 October 2004, organised by the Law Society of Ireland, examined the implications of the 2002 EU information and consultation Directive (2002/14/EC) (EU0204207F) for Irish industrial relations. The conference was timely, given that, although the Directive is due to be transposed by 23 March 2005, considerable uncertainty remains as to the possible impact, especially given that the Member States have considerable autonomy in the transposition process, as long as certain key principles are adhered to
The Directive applies to undertakings with at least 50 employees or establishments with at least 20 employees (the choice is left to the Member States). It provides employees with a number of information and consultation (defined as taking place between the employer and employee representatives) rights (see below). Although the transposition deadline set by the Directive is March 2005, there are transitional arrangements for Member States, such as Ireland, currently without 'general, permanent and statutory' information and consultation systems, allowing these countries to phase in the application of the Directive to smaller undertakings up to March 2008.
Earlier in 2004, in response to a Department of Enterprise and Employment consultation paper on the Directive, interested parties were given the opportunity to voice their opinions as to what the final form of the legislation should be (IE0309203T and IE0309204F).
There are few concrete indications as to the final shape of the transposing legislation in Ireland, but a draft Information and Consultation of Employees Bill is anticipated by the end of 2004. Once drafted, the Bill will then be submitted to the government for authorisation to publish, before it is sent to parliament (the Oireachtas). It may be that, in certain regards, the final legislation will be influenced by the UK implementing provisions - which are more or less finalised (UK0407104F).
Whatever the shape of the final legislation, the Directive will bring Irish industrial relations into uncharted waters, and will mark a further move away from the traditional 'voluntarist' system of industrial relations. For the first time, large numbers of employers will have to introduce mandatory employee 'voice' mechanisms providing workers with a range of information and consultation rights.
Major culture change
The implementation of the information and consultation Directive will undoubtedly constitute a substantial culture change, and there is a great deal of uncertainty over the precise implications of the new provisions. Pending the transposition of the Directive, the main existing statutory obligations on employers in Ireland to inform and consult employees arise in relation to European Works Councils (EWCs) in multinational companies, and in cases of collective redundancies and transfers of undertaking. In many non-union workplaces in particular, the Directive will require radical changes in employment relations, above and beyond existing obligations. Accordingly, these new arrangements will be introduced into something of an institutional vacuum.
As noted above, given that - reflecting their 'voluntarist' traditions - Ireland and the UK are the only two of the 'old' 15 EU Member States with no general, permanent and statutory system of workplace information and consultation, these two countries will be able to apply the Directive in three phases: undertakings with at least 150 employees (or establishments with at least 100 employees) must be covered by March 2005; undertakings with at least 100 employees (or establishments with at least 50 employees) must be covered by March 2007; and full application of the Directive to undertakings with 50 or more employees (or establishments with at least 20 employees) will be required by March 2008.
Here, we look at some of the papers/debates at the Irish Law Society conference, pinpointing some of the main issues of importance.
In his introduction, the conference chair, Terence McCrann of McCann Fitzgerald Solicitors, looked at the context of the Directive, suggesting that it would place more requirements on firms to consult with their workforces over major workplace change decisions. Mr McCrann said the Directive is coming into effect in Ireland at a time of declining trade union density, especially in the private sector. Therefore, as matters stand, in many workplaces there do not yet appear to be any discernible qualified employee representatives to consult with. According to Mr McCrann, from an employer perspective, there is a perception that the Directive may intrude on market forces and management prerogative. On the other hand, from a worker perspective, it is often the case that they first hear through the media that their jobs have been cut, and feel that this situation is unacceptable.
Ongoing consultation
Evelyne Pichot from the European Commission suggested that the Commission views the Directive as requiring a continuous ongoing process of information and consultation, the intention being to create real employee involvement over a range of issues. This, she said, is in accordance with the fundamental right of employees to receive information and consultation - as set out in the Charter of Fundamental Rights of the European Union. Ms Pichot emphasised the importance of providing for dispute resolution, particularly given that information and consultation forums will be an almost completely new phenomenon in Ireland. She said there are some lessons to be learnt, such as the importance of providing adequate representation, avoiding a 'minimalist' interpretation of the Directive, and articulating the different levels and forms of employee involvement.
Maura Connolly of Eugene F Collins Solicitors considered a wide range of issues, including whether the Directive will apply to undertakings or establishments, whether to include a 'trigger' mechanism, rules and elections, and the nature of representative bodies and personnel.
European Court judgments
In drafting the Irish legislation, Ms Connolly suggested, a key issue for the Irish government will be to take account of the directions given by the rulings in two key court cases brought by the European Commission against the UK (Cases C-382/92 and C-383/92, Commission of the European Communities v UK, delivered on June 8 1994). In these two cases, the European Court of Justice (ECJ) held that the existing UK provisions for consultation of employees in relation to collective redundancies and transfer of undertakings were inadequate and did not correctly transpose the EU Directives covering these issues. The ECJ found that, by restricting the legal obligation to consult employee representatives on impending redundancies and transfers to employers that recognise unions, the UK was in breach of the relevant Directives (UK9803109F).
Therefore, although the information and consultation Directive affords Member States significant latitude in framing their national legislation to take account of local industrial relations practice, there are nonetheless some key principles that must be observed. Ms Connolly is of the opinion that a minimalist approach, which does not result in an effective process, will not be regarded as adequate, bearing in mind the decisions of the ECJ in the above cases.
Consultation/negotiation boundaries?
Ms Connolly stated that, although the exact ambit of the Directive in Ireland will not be clear until the Bill is published, the Directive sets out the situations in which an employer is required to engage in an information and consultation process in relation to decisions, as follows: (a) information on the recent and probable development of the undertaking's or the establishment's activities and economic situation; (b) information and consultation on the situation, structure and probable development of employment within the undertaking and on any anticipatory measures envisaged, in particular where there is a threat to employment; and (c) information and consultation, with a view to reaching an agreement, on decisions likely to lead to substantial changes in work organisation or in contractual relations.
In terms of the scope of employer obligations under these three categories, the third category is perhaps the most expansive, given that it covers major changes in work organisation and contractual relations, including changes in terms and conditions of employment that affect the overall employment contract.
The Directive defines consultation as 'the exchange of views and establishment of dialogue between the employees' representatives and the employer'. Although, in theory, this does not mean negotiation or collective bargaining (which requires agreement to be reached), in practical terms there could be a fine line between consultation and negotiation, given that, in relation to decisions falling within category (c) above, employers are obliged to consult with employee representatives 'with a view to reaching an agreement'. The possible result of this is that the dividing lines between information, consultation and negotiation - as well as between individual and collective rights - have the potential to create considerable confusion, and conflicting viewpoints between employers and employees, Ms Connolly argued
It is not necessary that agreement be reached, but that consultations are genuine and conducted with a view to reaching an agreement. It should be noted, Ms Connolly suggests, that Article 4.4(e) of the Directive limits this requirement to decisions 'within the scope of the employer’s power'. Where the employer does not have the power, for example, to prevent its parent company from reorganising a group structure, the obligation to consult with a view to reaching agreement would be limited by this requirement, according to Ms Connolly. The preamble to the Directive states that 'the employer should be allowed not to inform and consult where this would seriously damage the undertaking or the establishment'. It is important, she suggested, that this exception, even if narrowly defined, is reflected in the Irish legislation.
Undertaking or establishment?
A key issue which remains open in Ireland is whether the legislation, when fully implemented by 2008, will apply either to undertakings with 50 or more employees or establishments with 20 or more employees. An undertaking is defined as 'a private or public undertaking carrying out an economic activity, whether or not operating for gain, which is located within the territory of the Member States'. In Irish law this would include a legal entity such as a company. In contrast, an establishment is defined as 'a unit of business defined in accordance with national law and practice, located within the territory of a Member State, where an economic activity is carried out on an ongoing basis with human and material resources'. This could apply to a branch, factory or unit that is part of a larger legal entity.
Type of agreement?
Ms Connolly noted that, as was the case under the Transnational Information and Consultation of Employees Act 1996 (which transposed the EWCs Directive in Ireland), employers will be allowed to enter into their own local agreements under Article 5 of the information and consultation Directive. It is the Irish government’s stated aim in its consultation paper to facilitate customised local-level arrangements tailored to reflect the needs of particular enterprises and employees. These local agreements must adhere to various key principles, including that: where the agreement is for 'direct' employee involvement, employees must be free at any later stage to exercise their rights through elected employee representatives; agreements must apply to the entire workforce and must be negotiated rather than being unilaterally imposed by management; and there must be a clear statement of the subjects and methods of information and consultation. Where local agreement is not possible, the legislation will provide for the implementation of standard 'fall-back' provisions under Article 4 of the Directive.
Trigger mechanism?
The decision whether to adopt an 'opt-in' or 'opt-out' approach to transposition is one of the most critical issues that has to be decided by the Irish government, given that the Directive leaves this decision open. 'Opt-in' means that an employer should only have to set up an information and consultation structure if formally asked to do so by a group of employees. In contrast, an 'opt-out' approach means that the employer is obliged to put a structure in place unless employees make it clear that they are not interested. The opt-in approach places the onus on workers themselves to trigger the process if interested, while 'opt-out' automatically places the onus on the employer. The UK in its latest proposals has chosen the opt-in approach, and to trigger the process, the employee request must be made by at least 10% of the employees in the undertaking, subject to a minimum of 15 employees and a maximum of 2,500.
According to Ms Connolly, the role of trade unions in the process in Ireland will be dependent on the form of the final legislation, but she anticipates that trade union representatives will assume the role of employee representatives for these purposes, even if the employer maintains a formal policy of non-recognition of trade unions. The draft Bill is likely to lay down minimum guidelines for the election of employee representatives. Ms Connolly says that the procedures adopted are likely to be similar to those laid down in the Transnational Information and Consultation of Employees Act 1996, which state that employees employed by the relevant undertaking are entitled to vote, the poll should take place by secret ballot, and the costs are to be borne by the employer.
In terms of the nature of the 'works council'/employee forum, Ms Connolly suggested that it is for individual enterprises to determine whether they establish a joint body through which both the enterprise's and employees' interests will be represented, or, alternatively, a works council-type body representative of the employee side only.
Defining employee representatives
Anthony Kerr, a barrister and University College Dublin law lecturer, raised many similar points. According to Mr Kerr, because the Directive establishes only a general framework, the specifics of the implementing legislation will have a crucial bearing on its eventual impact. Of particular concern will be the definition of the employee representatives who must be informed and consulted.
Various definitions of employee representative are under consideration, and existing definitions under the transfer of undertakings legislation and the Transnational Information and Consultation of Employees Act, 1996, are being considered. Mr Kerr referred to the definition of employee representative contained in the transfer of undertakings legislation:
- a trade union, staff association or excepted body 'with which it has been the practice of the employees’ employer to conduct collective bargaining negotiations'; or
- in the absence of such a trade union, staff association or excepted body, a person or persons chosen by such employees from among their number to represent them in negotiations with the employer.
Mr Kerr suggested that from the perspective of the trade union movement, it would be a retrograde step were the Irish government to allow employers to bypass recognised unions and establish parallel information and consultation mechanisms. For their part, employers would be vehemently opposed to a provision that required a trade union official to be included as an employee representative in non-union operations.
Mr Kerr referred to observations made at the conference by Paul Davies (London School of Economics). In particular, Professor Davies made the point - which Mr Kerr says is not so true of Ireland - that private sector collective bargaining in the UK occurs overwhelmingly at company level, and that the new information and consultation structures will be occupying the same level and space. Mr Kerr remarked that, given that centralised national wage agreements have been a distinctive feature of Irish industrial relations since 1987, this issue, whilst important for Ireland, is not as acute as in the UK.
Active 'lay' participation
Mr Kerr remarked that, because employee representatives will be elected from amongst the workforce, the establishment of information and consultation machinery will benefit more those trade unions that have active 'lay' participation structures, rather than those that are overly reliant on full-time officials. It is here that the implementing legislation will potentially have the greatest impact on Irish industrial relations law, he believes: 'One would expect that, in order to fully comply with the Directive, elected employees’ representatives would be entitled to time off with pay both to attend to their duties under the legislation and to undergo training to perform their functions.'
Other issues that will need to be addressed, Mr Kerr suggested, include the question of experts being retained by representatives to assist them in the process and the extent of any such assistance: 'In particular, will trade union officials in the guise of 'experts' be permitted to attend the discussions between the employees’ representatives and the employer? It remains to be seen whether the presence of elected employees’ representatives will have the effect of encouraging or discouraging trade union presence in workplaces, or parts thereof, where it is presently absent.'
Confidentiality
Ciaran O’Mara of O’Mara Geraghty McCourt Solicitors suggested that the provisions of Article 6 of the Directive on confidential information are particularly important: 'These represent the first substantial statutory intrusion, in Ireland, into the law on breach of confidence which has been developed by the courts.'
Mr O’Mara said that the Directive seems to require considerable disclosure of information to employee representatives on topics of major relevance and sensitivity. The European Commission stated - in the explanatory memorandum to its original proposal for the Directive - 'that these obligations could prove to be in conflict, if they were to lead to premature public disclosure, with other obligations deriving, for example, from the regulations of the Stock Exchange'. Not surprisingly, Mr O’Mara suggests, these core provisions of the Directive create a necessity to protect the interests of the employer. The Commission therefore proposed counterbalancing the access to information afforded to employee representatives with the duty to respect its confidential nature, as asserted by the employer.
Closing the conference, Terence McCrann said that - reflecting the social partnership consensus model - the government's final information and consultation regulations would have to strike a balance between providing sufficient consultation for workers while not endangering employers' freedom to make decisions as they see fit.
Commentary
The Irish Law Society conference was timely given that the legislation transposing the information and consultation Directive is supposed to come into force by March 2005. However, given that the draft Bill is yet to be published, there appears to be understandable uncertainty among the key actors surrounding the precise implications of what will potentially be a radical turning-point in Irish industrial relations. On the one hand, many employers in Ireland will want to preserve direct methods of communicating with their employees, while, on the other, the trade unions will want to promote collective employee consultation structures based on independent indirect union representation. Under Ireland’s social partnership consensus model, the government has to come up with what it sees as an appropriate balance between these competing demands. To a significant extent, much depends on whether or not the government veers towards a minimalist interpretation of the Directive similar to that of the UK. (Tony Dobbins, IRN)