Employee rights to be informed and consulted

When the I&C rules apply

If you:

• are an ‘undertaking;
• with 50 or more employees; and
• you carry out an economic activity, whether or not operating for gain

you can be required by your employees to enter into negotiations for a ‘negotiated’ I&C agreement. 

The negotiated agreement will require you to inform employees’ representatives about plans and developments in your business that will affect them, and consult with them about the implications, to a significant degree. 

If you refuse to enter into negotiations, or can’t reach a negotiated agreement, a ‘default’ set of rules will apply automatically – see the summary of the default rules in the Appendix. There may be good reasons why you do not want the default rules to apply - see ‘Beware the default provisions’ below. 

Once a negotiated agreement is entered into (or the default provisions apply), there is a three year moratorium against any changes. Negotiations can only be re-opened if both parties agree. 

An ‘undertaking’

In the case of a limited company or a limited liability partnership, the Department for Business Enterprise and Regulatory Reform (formerly the DTI) takes the view that the ‘undertaking’ is the entity itself, rather than any division or business unit within it. In a group of companies, the parent and each subsidiary are treated as different undertakings. Commercial undertakings will, by definition, be carrying out an economic activity. 

Co-operatives, associations, charities, sole traders or partnerships, schools, colleges, universities, NHS trusts and central and local government bodies are all undertakings. The rules will apply if they are carrying out an economic activity. 

If you are uncertain whether you are carrying on an economic activity, take advice. This can be a complex legal issue for non-commercial organisations. 

Calculating number of employees

In calculating how many employees you have for the purpose of deciding if the I&C rules apply, use the average number employed per month over the past 12 months. Part time workers working under a contract for 75 hours or less per month count as half an employee.

How employees require you to start negotiations

Employees require you to enter into negotiations for a ‘negotiated agreement’ by serving a written, signed ‘employee’s request’ on you. Usually, the request must be made by 10% or more of your employees (subject to a minimum of 15 and a maximum of 2,500) before you have to act on it. 

Pre-existing agreements can improve your position

But if you and your employees have voluntarily entered into a valid ‘pre-existing agreement’ - ie an agreement that: 

• meets the criteria in the rules (see below); and
• is in place before employees serve an employees’ request under the rules

the percentage of your workforce required to sign the employees’ request leaps to 40%. 

If you receive a request signed by less than 40% of your employees, you can ballot the workforce. If 40% of your employees (and a majority of those who vote in the ballot) support the request, you must initiate negotiations for a new agreement. But if not, you not only keep your existing agreement, but there is also a moratorium against a further request being served within three years. 

Employers with a valid ‘pre-existing agreement’ are clearly in a better position than those without. 

Requirements of a ‘pre-existing agreement’

A valid ‘pre-existing agreement’ must: 

• be in writing;
• be approved by employees;
• cover all the undertaking’s employees; and
• Set out how the employer is to provide information and how employees are to give their views.

An agreement negotiated with a trade union may qualify as a valid pre-existing agreement. 

How you can force employees to negotiate

You can pre-empt an employees’ request by serving your own employer’s notification. Like an employees’ request: 

• the notification will mean you must start negotiating a negotiated agreement;
• if you can’t reach agreement, the default rules apply; and
• the three year moratorium applies to any agreement reached (or the default rules, if they apply).

If you believe that an employees’ request is inevitable, serving an employer’s notification may give you an advantage in negotiations – your employees’ representatives may well be less combative if you have initiated negotiations yourself, rather than being forced into it. 

Time limits

You have one month to establish whether an employees’ request is valid.

You have three months within which to start negotiations if it is. 

You have six months to reach agreement (unless you agree otherwise with your workforce). 

There are a number of reasons why the default provisions may not be appropriate for your business, so that there is a greater incentive to reach a negotiated agreement if you can: 

1. The default rules are in general terms. If they apply, and you are uncertain whether and when to consult under them, you could find your employees complain to the Central Arbitration Committee (‘CAC’), alleging you have breached the agreement. This can damage employee relations, and lead to a penalty of £75,000. In 2007, the Employment Appeals Tribunal upheld a tribunal decision under which Macmillan Publishers, which had failed to hold a ballot to elect information and consultation representatives as required by the CAC, was fined £55,000 and sharply criticised for its ‘wholly cavalier attitude’. 

If you can conclude your own negotiated agreement with employees, you can be much more precise about events or plans that will or will not lead to an obligation to inform and consult, and when the obligation arises. 

2. The default rules give employees scope to complain about decisions you make to withhold information on the basis it is confidential. If an agreement is negotiated, you can specifically agree which information you can withhold, and the consequences if you fail to give relevant information. 

3. The default rules operate by reference to ‘undertakings’, and assume a separate I&C agreement for each undertaking. If your business in fact comprises several undertakings (as it will within a group of companies) you may want one overarching process that includes all undertakings in the group. 

Alternatively, you might want to inform and consult on some issues at a group-wide level, and on others at the level of individual undertakings. 

In either event, the default provisions will not allow you this flexibility.

Take legal advice if you believe that your employees may serve an employees’ request under the rules, or if you wish to serve an employer’s notification.