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Baroness Seear: My Lords, it would be extremely valuable if the noble Lord would explain how he sees the distinction between "negotiation", as we have understood it over the generations, and "consult with a view to agreement". I find that change very difficult to understand.

Lord Wedderburn of Charlton: My Lords, I am grateful to the noble Baroness for that interruption. I too was not brought up on that concept and it is a foreign concept for at any rate our legal categories. The noble Baroness will know as well as I do the difference between consultation and bargaining. With consultation, normally management takes the decision willy-nilly. But surely "to consult with a view to agreement" requires a little more from management. It may perhaps not be as much as bargaining where the decision is a joint decision and the directives do not require a joint decision. I appreciate that our drafting of these matters will have to be improved and we shall have to learn new tricks. This evening I am asking that the workers' representatives, as a principle, must not be put in a position in which they come on to the field too late in the game to be effective players in what the directive requires them to do. The idea that workers might designate representatives ad hoc, to which Advocate General Van Gerven alluded in his opinion of March 1994, which must be taken into account when interpreting European law, cannot mean that the representatives are allowed by the employer to appear only at the point at which they cannot carry out that extremely difficult process, as the noble Baroness said, of consulting to achieve agreement, if that is possible.

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Indeed, under such a scheme, by choosing his moment the employer could—I do not say that he would do it intentionally—as a matter of fact render ineffective, in practice, the designation of representatives at a date that he chooses for the redundancies and for which the representatives are either not there or under the implementation scheme cannot do anything effective. That would offend the ratio of the court's judgment; namely, that it must not be open to the employer to:

    "frustrate the protection provided for the workers".

Refusing to recognise trade unions is not the only way in which an employer might frustrate the venture. Therefore, perhaps rather uncharacteristically, with one minute to spare, I conclude by asking the Minister whether he will give us those assurances and delay no longer in accepting those basic rights with regard to workers' representation at work.

7.37 p.m.

Lord Rochester: My Lords, I welcome the opportunity which the noble Lord, Lord McCarthy, has given us to discuss the whole question of the application in the United Kingdom of the acquired rights and collective redundancies directives. My interest in those matters goes back, as does that of other noble Lords who have spoken, to the debates on the Trade Union Reform and Employment Rights Bill in 1993. At that time, like the noble Lord, Lord Wedderburn, I tabled amendments which questioned and sought to overturn the Government's contention that the relevant clauses of the Bill brought the detailed provisions of UK legislation fully into line with the requirements concerning consultation contained in the two directives. In reality, the Government's so-called TUPE regulations of 1981 obliged employers to consult only the representatives of recognised trade unions about the prospective transfer of undertakings, whereas the acquired rights directive required consultation with the representatives of employees generally. The European Commission had long argued that restricting the right to consultation and information to recognised trade unions was insufficient; and I agree. Similarly, the directive on collective redundancies required employers contemplating large-scale redundancies to inform and consult workers' representatives well in advance. The European Commission considered that conducting negotiations only with representatives of trade unions recognised by the employer, as now provided in the Trade Union and Labour Relations (Consolidation) Act 1992, made it possible for the consultation procedure to be completely inapplicable when no trade union was recognised by the employer. The Commission found that also to be unacceptable. In the 1993 Bill the Government made no concessions on those points. My amendments to the Bill sought to persuade them to extend the right to information and consultation to employee representatives generally. The difficulty for me at that time was that it would have been incredibly complex and indeed wrong to do that

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by way of substantive drafting. That would have required prior consultation with representatives of employers and trade unions and was thus a task not for Opposition parties but for the Government. I therefore said that it was up to the Government to be proactive in the matter and positively to promote employee representation outside the trade union structure, not so as to do down trade unions but simply for the benefit of employees who did not choose to be represented by a union. Accordingly, my amendments invited the Government to lay before Parliament orders which would amend both the TUPE regulations and the relevant sections of the 1992 Act and would have the effect of extending the application of the duty to inform and consult trade union representatives so that UK law applied to employee representatives generally. The amendments proposed that the 1993 Bill should not be enacted until that had been done. I suggested then that the thinking behind the amendments was very much in line with the Government's often-expressed support for the extension of employee involvement and I expressed the hope that they would make a positive response. I further said that, since the Government accepted the principle that recognised trade unions should be consulted about prospective transfers and collective redundancies, they could not very well fail to treat in the same way employees who did not choose to be represented by a union. The Government's response was that the main problem with my proposal was that it provided no clue as to how an employer would be able to judge who should or should not be an employee representative and that would cause considerable confusion. The Government's clear view was said at that time to be that employee representatives should be trade unions which the employer had freely chosen to recognise for collective bargaining purposes. But now, following the judgments of the European Court of Justice last June which effectively upheld the view of the Commission to which I have referred, the noble Lord, Lord McCarthy, has again challenged the Government themselves to devise machinery which would designate who should be workers' representatives for the purposes we are discussing. In doing so he has followed closely the words used by the European Court in its judgment of June 1994 on collective redundancies when the Commission succeeded in its claim that the UK failed to fulfil its obligations under Articles 2 and 3 of the directive in not providing a mechanism for the designation of workers' representatives in an undertaking when the employer refused to recognise such representatives. In the same judgment the Court ruled against the UK for laying down in 1993 statutory provisions which were narrower in scope than those in the directive, for not requiring employers to consult workers' representatives with a view to reaching agreement and for failing to provide for effective sanctions against employers who did not so consult. I think it is a great pity, as do the two noble Lords who have spoken, that the legislative proposal concerning consultation on both collective redundancies

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and the transfer of undertakings, which it was said the Government were going to issue at the end of last week, has not become available in time for this discussion. I shall be interested to hear from the Minister when he replies as much as he can tell us about the form that this proposal will take. I trust that in his reply the noble Lord will give us as much information about what the Government have in mind as he can and particularly that he will confirm that there will be consultation on their proposals with representatives of employers, trade unions and other interested parties before legislation is brought forward. What we do have is a consultation document that the Department of Employment issued last year in which it asked for comments on the Commission's proposal as to how the directive relating to employees' rights in the event of transfers of undertakings should be amended. In that document the Government recognised that the present requirements of UK law would need to be extended beyond trade unions; and that I very much welcome. There are other encouraging signs—for although in the document the Government reiterated their general view that regulation on these matters at Community level is unnecessary and inappropriate, they do at least acknowledge that the proposed revision of the acquired rights directive gives them the opportunity to fulfil their cherished hopes for greater flexibility in this area. For example, they welcome particularly the Commission's recognition that a distinction needs to be drawn between the contracting out of an activity or a service and the transfer of an undertaking as an economic entity which retains its identity. On the question of the application of the directive to the transfer of insolvent companies, the Government again recognised that the Commission's proposal seeks to provide some of the flexibility that they wish the revised directive to have. Finally in this document the Government express the view that, subject to further clarification by the Commission and certain drafting points, most other elements of the proposal do not appear to give rise to significant difficulties for the UK. I very much hope that this apparent relaxation in the Government's attitude to the directive is an indication that they are genuinely seeking a consensus, since both the existing directive and the proposed revision are based on Article 100 of the treaty requiring unanimity within the Council. I should be grateful if when he replies the noble Lord, Lord Inglewood, would confirm that that really is the Government's aim. As I understand the two judgments of the European Court, it will be, as has been said, for employees themselves to determine who for the purposes of consultation their representatives should be. But, as I said two years ago, and as the noble Lord, Lord McCarthy, has again suggested in the way in which he has framed his Question this evening, it is for the Government to devise the machinery needed for this purpose. The noble Lord, Lord McCarthy, has not specified any time limit within which this should be done; and that being so, it is to be hoped that the noble

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Lord, Lord Inglewood, speaking for the Government, will find no difficulty in accepting the proposition put forward by the noble Lord, Lord McCarthy. More than that, I hope that the Minister will give us some indication as to the timescale within which the Government hope both to consult and to introduce legislation on these important matters.

7.48 p.m.

Baroness Turner of Camden: My Lords, I am sure that we are all grateful to my noble friend Lord McCarthy for introducing a debate on this important and relevant subject. The newspapers are full of stories about the so-called "feel-good factor" which, unaccountably it seems, is eluding the Government despite allegedly phenomenal economic success. It is alleged that we shall not be feeling good for some time. Personally, I do not expect to feel good until after the next general election, and then I am fairly certain that I shall be feeling very good indeed. However, it is fairly widely acknowledged that the lack of this factor arises from a feeling of insecurity among people generally because, despite falls in the figures of unemployment—some of us have doubts about those figures and the way in which they are calculated—people do not feel secure either in their own employment, if they have jobs, or in the future job prospects for their children. The Government have promoted the whole idea of job flexibility, which for most people actually means less security. Employers have been encouraged to treat employees as disposable items—a commodity like any other commodity. Job security has been very significantly weakened as a result of conscious government policy and the forms of collective protection built up by employees over many decades have also been weakened through a series of anti-trade union Acts somewhat ludicrously described as trade union reforms. The idea has been propagated that there is something not quite right, even not quite decent, in expecting a job for life. But without such expectations it is hardly surprising that people feel terribly insecure, more so perhaps than at any time since the war. This is entirely relevant to the Question introduced by my noble friend this evening, for one of the purposes of the acquired rights directive surely was to ensure that in takeovers and mergers employees would have the assurance of some security and some continuation of employment on terms and conditions no less good than they had before. It seems to me that this objective is highly worthy. Similarly, who can possibly object to the notion that there should be consultation in advance of collective redundancies? Employees are not, as I have said before, just another kind of commodity. They are human beings with families, responsibilities and commitments. Without their efforts, the companies concerned would not have existed, and in general they are not to blame when an enterprise is sold over their heads, perhaps to a market predator interested only in asset stripping. They are, moreover, the guarantee, if one is needed, that the new owner will have the expertise readily available to enable the business to continue.

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It is a sad fact that modernising and streamlining too often means getting rid of staff. That is why the protection—it is not all that adequate, as has already been indicated by my noble friend Lord Wedderburn—afforded by the acquired rights directive is important. The Government in the first instance—as we have heard this evening—sought to give effect to the directive through TUPE, the Transfer of Undertakings (Protection of Employment) Regulations. As is so typical of this Government, they sought to do it in the most minimal way. The directive required that there should be consultation with employees. That was not provided for adequately the first time round, so we had amending legislation. However, that legislation only required consultation to take place with recognised trade unions. As we know, the Government do not like trade unions and have done their best to persuade employers not to recognise trade unions, or to derecognise them where such agreements exist. It was decided by the ECJ in June last year that that simply will not do. Employers cannot evade their responsibility to consult employees simply by derecognising unions. The court has ruled that the directives on collective redundancies and transfers of undertakings provide guaranteed universal rights to consultation and that it is not acceptable for UK law to restrict consultation to those workplaces where employers recognise unions. The Government, as we know, must amend UK law to comply with that judgment. In the meantime it seems to me that the Government have been doing their best behind the scenes to water down the acquired rights directive. This was the subject of a Question in this House on 2nd March at col. 1583 of Hansard. I must say that on that occasion I was not particularly impressed by the response of the Minister. The Government's whole philosophy has been based on constant erosion of employees' rights. They seem to be under the impression that only by driving down standards through, for example, the abolition of wages councils, will it be possible to create jobs. Therefore I am not surprised that the Government have been dragging their feet over implementation of the latest decision of the ECJ. In case it is argued that trade unions might not be in favour of the wider consultation argued for by the directive and the ECJ, I must point out that the TUC has made it abundantly clear that it is in favour of the whole ECJ decision and the directives, and wants to see them implemented fully as soon as possible. It has suggested that there are two ways in which this might be done and I would welcome the Minister's response to that this evening. It says that legislation could require that for the purposes of consultation, under the law the employer is obliged to consult either representatives of an independent trade union recognised for the purposes of collective bargaining to any extent; or, where no such union is recognised, representatives elected by all the employees in elections held under the rules set out in a code or regulations under statute. It seems to me that this is a simple solution to the issues posed by the ECJ. Certainly it is quite clear that although we may not be facing the merger mania of several years ago, substantial mergers and takeovers are a continuing feature of economic life. In recent days we

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have learnt of the Glaxo/Wellcome proposed merger (with an indication, incidentally, that this could well mean job losses eventually) and of course there has been the Barings collapse. This is not a time for any government to give the impression that they are intent upon watering down protection afforded by the acquired rights directive, or that they are dragging their feet as regards full implementation. We have heard this evening from my two noble friends a detailed exposition of what the directives mean, and ways in which they could be implemented. I await with interest the Minister's response.

7.55 p.m.

Lord Inglewood: My Lords, this evening we have had an interesting debate on the subject of informing and consulting employees' representatives about collective redundancies and business transfers. I should like to thank the noble Lord, Lord McCarthy, for raising this important issue and the other participants for their helpful and notably expert contributions, and for asking some extremely pertinent questions which I shall endeavour to answer as far as I can before concluding. As I have previously made clear to the House, the Government are giving full and proper consideration to this issue, following the decisions by the European Court of Justice last year. I also stated in this House on 9th February that it is not a question of whether this matter is dealt with by legislation, but how. The Government are now developing a proposal to give effect to the judgments. While I am not in a position to give details of the proposal to the House this evening—as noble Lords know, I had been hoping to be able to do that—the Government expect to make their ideas public shortly, and I anticipate that these proposals will contain clear ideas of what the Government propose for legislation. However, I suppose I should enter a caveat. I was not accurate as regards the timing of the consultation document. Therefore I suppose it is always possible that I may be wrong about what it may contain. It may be helpful to remind your Lordships of the history of this issue. In 1975, the then Labour Government agreed the Collective Redundancies Directive and transposed it into UK law. The UK legislation required employers to consult only a recognised trade union. That legislation remained substantially unchanged until 1993 and it was some of those arrangements which a Labour Government put in place, which were criticised last year by the European Court of Justice and found to be unlawful. It was in 1977, that the same Labour Administration also agreed the so called "Acquired Rights" or "Business Transfers" Directive, which also contained information and consultation provisions. Although that directive was transposed into UK law by a Conservative Government by the 1981 TUPE Regulations, the UK regulations' information and consultation provisions followed the pattern of the earlier redundancy legislation, again only requiring the employer to consult a recognised trade union.

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That view of the directives' requirements was not seriously questioned or challenged in the UK or on the Continent at the time, and indeed it was only in 1989—some 14 years after the redundancies directive had been implemented—that it was challenged by the European Commission. As the House knows, in June last year the European Court of Justice ruled inter alia that these arrangements for consultation did not meet the requirements of the directives. The noble Lord, Lord Rochester, and the noble Baroness, Lady Turner, referred to the possible changes to the Acquired Rights Directive. I do not have any more to add to what I told the House on 2nd March. I have mentioned the history of this issue simply to highlight that arrangements which were thought, by common accord at the time, to meet the terms of the European legislation, have many years later been found not to do so. It is against that background that the Government are developing their proposals for changes in this area. Although, as I stated earlier, I am not in a position to discuss a detailed proposal this evening, it may be helpful to your Lordships to summarise some of the core issues at the heart of our employment policy, and which will provide the raison d'etre for our approach to this matter. First, we believe that a flexible labour market is in the long-term best interests of employers, employees, and the country at large, because growth and job creation occur best in these conditions, and that is in the best interests of both those in and out of work. Secondly, we are equally concerned to ensure that unjustified burdens are not placed on businesses for precisely the same reasons. Our aim is to create an environment in which employers have every incentive to offer employment to others. Hemming in our businesses, and in particular our small businesses, with over-detailed and nit-picking regulations one after another will not, in our view, do that. These are not circumstances which are conducive to employers being able to pay good wages and provide good conditions of employment. They are not the conditions for creating jobs. They become the recipe for increasing national uncompetitiveness in the face of competition from all round the globe in the post-GATT world. They will push our country in the direction of economic decline and it is not this Government's policy that we should or shall move in that direction. Thirdly, the Government are sometimes quite wrongly said to be opposed to workplace consultation and to employee involvement. That has been said today. That is simply not the case. The Government believe strongly that, irrespective of any statutory requirements, it is good practice for employers to inform and, where appropriate, consult their employees about matters which affect them. That is in the best interests of employers and employees, which is why it makes good business sense. But the Government also believe that companies should be free to develop arrangements appropriate to their own circumstances and the needs of their employees. That, rather than inflexible statutory

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requirements, is the best basis for establishing working relationships which suit best both employer and employee. That freedom includes the decision whether or not to recognise a trade union, which has always been a feature of British labour law. The Government recognise that trade unions can be a valuable and legitimate source of help for employees in their relations with their employers. Contrary to what is sometimes said in this House and elsewhere, the Government are not opposed to trade unions. Rather, the aim of our step-by-step reform of industrial relations and trade union law has been to ensure a proper balance in the relationship between employers, employees, trade unions and society at large. I am sure that I do not need to remind your Lordships that, at just over a quarter of a million, the number of working days lost through stoppages in 1994 represented the lowest level of industrial action in over 100 years. That compares very favourably with the average for the 1970s of some 12 million and has benefited everyone in the country. I mention that to remind the House of the industrial relations background to the changes we must make. It must be right, therefore, that the Government consider very carefully exactly what steps to take next to make the necessary statutory changes in this country and at the same time improve labour law. These are important matters and, turning to a point raised by the noble Lord, Lord Rochester, we look forward in due course to considering responses to our consultation exercise when we shall have the views of those representative bodies whose members are affected by our proposal. I was interested to read the recently published TUC report on representation at work, which I understand owes something to both the noble Lords, Lord McCarthy and Lord Wedderburn, which considers in some detail the implications of the European Court of Justice judgments. It is open enough about its real objective, which is to reverse the steady decline in union influence and power from its zenith in the 1970s, which from the TUC's perspective is an understandable aspiration. I remind the House that union membership fell from over 13 million in 1979 to under 9 million in 1993. It is clear that in many cases employees have been far from persuaded that union membership will help them, while many employers are equally unpersuaded of the benefits of union recognition. While obviously promoting union participation whenever possible, the TUC report accepts that an exclusive role for unions is not consistent with current European law. The TUC is arguing for a new, strong and well resourced public agency to police these matters, including determining claims for recognition, echoing perhaps the statutory recognition mechanism of the 1970s to which the noble Lord, Lord Wedderburn, alluded, which was widely regarded as unworkable. Of course legal rights must be underpinned by legal redress if they are denied. But is another public agency really the kind of legislative environment people in this country really want? Will it really contribute to Britain's competitiveness, creating jobs and generating wealth for

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individuals and their families and to fund public services? Is it really the kind of proposal which noble Lords opposite actually wish to endorse? While, as the noble Lord, Lord McCarthy, accurately surmised, I am not in a position this evening to say what will be in the Government's proposal when it is published, I am sure that I shall not be giving away any secrets if I say what it will not contain. It will not contain a requirement on employers compulsorily to recognise a trade union for these or any other purposes. Nor will it contain any provision which would require an employer to establish a works council or similar body. The Government have considered the judgments carefully and they require none of those things. To answer a point which was raised in one form or another by all speakers, there must be a mechanism for designating employees' representatives, who must clearly have appropriate guarantees of independence and resources for the job for which they have been selected. They must be consulted by employers proposing redundancies or a business transfer. Both parties must engage in a constructive dialogue. That is evident from the judgment. There are a number of ways in which that obligation might be met. Our aim, consistent with the points I have made tonight, will be to bring forward proposals which, while fully implementing the requirements of the two directives, which have been clarified by the ECJ judgment, provide the maximum flexibility for employers to make arrangements consistent with their business circumstances and the particular needs of their employees. They must recognise the need to minimise the burden on business; they must not interfere with the delicate balance of industrial relations generally and must ensure proper consultation with employees' representatives. In conclusion, I thank all noble Lords who have taken part for their contributions to tonight's debate because important issues have been canvassed. In particular, I thank the noble Lord, Lord McCarthy, for raising the issue in such a spirited manner. I can assure the House that the views put forward by noble Lords this evening will be considered carefully by those responsible for legislation in this area. As I mentioned earlier, I very much hope that the proposals I have described will come forward soon. They will contain constructive ideas so that legislation will flow as soon as possible thereafter.

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