The new information and consultation regulations have been viewed by many with scepticism. Whilst the new regulations aim at improving dialogue between management and employees to help create “high performance work places”, many employers see the new law as heralding a new “ice age” in terms of impeding business decisions in an already tough market place.

The ICE Regulations were approved in January 2005 and come into effect (for organisations with more than 150 employees) on 6 April 2005.

Does this mean that if you have over 150 employees, on 6 April 2005 you will automatically be obliged to inform and consult?

Contrary to popular belief when the Directive first came into force, there is no automatic obligation to inform and consult. There is only an obligation to establish information and consultation procedures where a valid request is made by at least 10 per cent. of employees in the undertaking, subject to minimum (15 employees) and maximum (2,500 employees) thresholds.

There are various criteria which the employee request must meet and if employees wish, the request can be anonymous, submitted to the Central Arbitration Committee or to a qualified independent person. Alternatively you as employer can take the initiative and notify your workforce that you want to start the process.

If you already have an agreement governing consultation with employees – why should you care?

If this is the case the key question for you will be whether the agreement you have in place constitutes a pre-existing agreement under the regulations. In order to be a pre-existing agreement it needs to:

1) be in writing

2) cover all the employees of the undertaking

3) be approved by the employees

4) set out how you intend to give information to employees or their representatives and to seek their views on such information.

The crucial point is that the legislation does not impose any requirements/restrictions on the method, frequency, timing or subject matter of the information and consultation in the pre-existing agreement. So the great advantage of a pre-existing agreement is that you have an absolute free rein regarding what you inform employees about, how and when, and how you seek their views on the information.

However, don’t get too complacent. Pre-existing agreements are not set in stone, employees can still overturn them. If 40% or more of the workforce make an employee request, you must negotiate a new agreement in line with the new regulations. If less than 40% make the request, instead of negotiating a new agreement, you have the option of balloting the workforce to ascertain whether it endorses the request. Further if you take the initiative by setting up a pre-existing agreement, you will be able to capitalise on the employee goodwill you have generated by doing so and will be able to drive the process. You will have more chance of getting in place the structure you want and taking employees by surprise and unprepared.

But what if you don’t have a pre-existing agreement? Are you too late to put one in place now?

The good news is that you are not too late. According to the regulations a pre-existing agreement is an agreement between an employer and his employees made prior to the making of an employee request. Therefore you can put a pre-existing in place at any time prior to a formal employee request having been made. However, if the regulations apply to you, you need to be careful that you do not invoke a formal employer notification under the regulations by mistake.

So what do you do if you receive an employee request?

Firstly, check if it is a valid request. If so, you need to initiate negotiations with representatives of the employees within three months at the latest. During this time you must make arrangements for employees to elect or appoint negotiating representatives. You then have six months to negotiate an agreement providing for information and consultation. This period can be extended without limit by agreement. Importantly the regulations only give limited requirements as to the contents of negotiated agreements.

Agreements must set out the circumstances in which the employees will be informed and consulted, however the legislation does not specify the method, frequency, timing or subject matter of information and consultation. It allows for information and consultation to take place either through representatives or with the workforce directly, or both. If through representatives, it allows the employer and employees to decide how they are elected and who they are. Therefore in the same way as for a pre-existing agreement, there is a lot of flexibility to get in place the arrangement you want. However, although in theory there is total freedom for you to put in place the structure you want, in practice you need to be careful because by this stage you will be negotiating against the backdrop of the standard procedure.

What is the standard procedure?

The standard information and consultation procedure applies if you are unable to reach agreement with the negotiating representatives. There are obligations to inform with regard to three categories of information:

Category A information – information on the reasonable development of the undertaking’s activities and economic situation. An employer is obliged to inform only with regard to this type of information. DTI guidance suggests that the scope of information potentially falling under this category would be extremely wide, and could include the launch or discontinuation of new products/services, developments in production processes or ways of working and even changes to senior management! Whilst it can be seen that these may have an impact on employment, only time will tell if the courts really do expect organisations to consult with its employees over the firing of its CEO…

Category B information – information on the situation, structure and probable development of employment within the undertaking, in particular where there is a threat to employment within the undertaking. The obligation in terms of category B information is to inform and consult.

Category C information – information on decisions likely to lead to substantial changes in work organisation or in contractual relations. It is an obligation to inform and consult with a view to reaching agreement. This is not a new concept. It mirrors the drafting of the consultation obligation in TUPE and collective redundancy legislation. Some commentators believe that the requirement will be akin to negotiation, however it is clear that an employer will not be obliged to agree with views or proposals put forward by the representatives.

What about if you face different consultation obligations?

If, for example, you are required to inform and consult in line with the standard procedure, and wish to purchase a business, you may also be required to inform and consult under the TUPE regulations. In addition, if you are considering a substantial downscale in operations this could invoke a third consultation obligation under the collective redundancy legislation – so how do you juggle these different obligations?

This point was specifically raised in response to the Government’s consultation on the new regulations. When a TUPE/collective redundancy situation arises you can elect to inform and consult under the TUPE/collective redundancy legislation and not under the Information and Consultation regime. You do this by notifying the information and consultation representatives in writing that you will be consulting under the legislation on collective redundancies or business transfers. However you need to be careful. This is because the obligation to inform and consult under the information and consultation standard procedure arises earlier than it does under the collective redundancy legislation. Under the new regulations information needs to be provided in advance of developments occurring – the regulations anticipate consultation on “measures envisaged”, that is seeking views at a formative stage before a final decision has been taken. This is different to the wording of the collective redundancy legislation which talks about consultation on proposed redundancies. Therefore in practice employers may have to start consulting under the information and consultation regime and then switch to collective redundancy consultation when those envisaged matters become clear proposals.

What if the transaction is highly confidential or market sensitive?

An employer can entrust information in confidence or withhold information altogether if information is likely to prejudice or cause serious harm to the undertaking. If an employer entrusts information in confidence, information and consultation representatives or an expert assisting the representatives may not disclose that information to third parties (e.g. to other employees).

The DTI guidance specifically states that neither the UK listing rules nor the city code and takeovers and mergers nor US rules prevent a company sharing price sensitive information with representatives of employees before it is disclosed to the market so long as those representatives are subject to an obligation of confidentiality. An employer may bring an action for damages in a civil court if there is a breach of confidentiality.

What if you don’t comply – what’s the worst that can happen?

Firstly, even if you have not followed your obligations under the regulations, none of your decisions will be altered. There is no criminal penalty unlike, for example, in France, where as the Marks & Spencer case showed, criminal penalties are a real concern. In the UK, breach of the regulations only gives rise to a financial penalty. The maximum award is £75,000. This may not be a big price to pay where a crucial business decision is at stake.

In addition who actually brings the complaint? The fine is on the employer, but there is no award to the employee, the award goes to the Secretary of State. Therefore it is not necessarily in the employee representatives’ interest to complain, unlike failure to consult under TUPE or TULRCA where employees can get protective awards.

Whilst the lack of real teeth to the legislation may mean there is no real impetus for organisations to change current practice, the longer term effect on employee relations may however ultimately prove to be an important incentive.

So what should you do now?

So is this really the beginning of a new Ice Age? Whilst the regulations are not as onerous as many feared, only time will tell their impact and, in particular, the scope of the standard procedure.

What is clear is that there are important mechanisms in place to help employers from falling into the worst case scenario (where the standard procedure applies). These are the scope for pre-existing agreements and, even where an employee request has been made, the scope to reach a negotiated agreement. In both cases there is total freedom over the method, timing and subject matter of information and consultation. Notwithstanding these mechanisms, undoubtedly the regulations do herald a cultural change in terms of the rights this society gives to employees – a culture change which employers should ignore at their peril.

You may come to the view that because of the nature of your organisation, it is highly unlikely that employees will ever make a request – which is a valid strategy provided that you are prepared to deal with its potential consequences. Alternatively you may consider the best thing for you to do is to be proactive and to reach a pre-existing agreement (or even make an employer notification) and try to drive the process to get in place a structure you want. Whatever route you take don’t ignore the new regulations – at the dawning of a new ICE age, you don’t want to be left out in the cold.

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