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Information and Consultation Regulations

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The Information and Consultation of Employees Regulations 2004

The Information and Consultation of Employees Regulations 2004 came into force on 6 April 2005 and, with effect from 6 April 2008, they now apply to undertakings with 50 or more employees.  The regulations implement the EC Information and Consultation Directive. 

The Government has issued detailed Guidance Notes for employers on the regulations.  These are available on the Department for Business, Innovation and Skills (BIS) web site.

The regulations give employees in larger companies rights to be informed and consulted on a wide range of business issues.  The aim of the regulations is to promote dialogue between management and the workers, so that the workers can be more actively involved in the decision-making process.

The previous UK legal position

The UK already had a number of statutory provisions providing for the informing and consulting of employees or employee representatives in specific circumstances.  The most notable of these are those related to collective redundancies, collective bargaining information where there is a recognised trade union, health and safety and transfer of undertakings (TUPE).  However, until the advent of the regulations, there were no general information and consultation laws.  The regulations have changed this.  The regulations place general information and consultation obligations upon employers.

Scope of the regulations

The regulations apply to public and private undertakings carrying out an economic activity, whether or not operating for gain.  This covers sole traders, limited companies and partnerships.   The undertaking must have its registered office, head office or principal place of business in Great Britain and must employ at least 50 employees in the UK.  For these purposes, ‘employees’ are narrowly defined as those working under a contract of employment or contract of apprenticeship. 

To calculate employee numbers for the purposes of the threshold, in broad terms, this involves calculating the average number of employees in the undertaking over the previous 12 months.  The employer has the option to count certain part-time staff as half a person for these purposes only.  The law also obliges the employer to let employees and their representatives have the relevant data so they can carry out the calculation themselves.  If you fail to do this within a month of a request, the employees or their representatives can complain to the Central Arbitration Committee (CAC).  The CAC can then order you to disclose the relevant data.

Where there is a group of associated companies and employees are legally employed by a service company rather than the company for whom they actually work, you should count the employees who actually work in the undertaking, which may not be the same as their legal employer.  In these circumstances, the legal employer in the group is irrelevant.

Triggering the negotiation process

Importantly for employers, the requirement to inform and consult employees does not operate automatically.  It is triggered either by a formal written request served on either the employer or on the CAC from 10% of the employees (subject to a minimum of 15 and a maximum of 2,500 employees) or by employers starting the statutory process themselves.  However, the circumstances where employers trigger the process themselves are likely to be rare.

You can only challenge an employee request in a limited number of situations, for example:

  • You are not within the scope of the regulations.
  • The request was not supported by the relevant number of employees.
  • The request did not meet certain formal requirements set out in the regulations.
  • You already have a valid pre-existing agreement that is supported by a relevant ballot.
  • The request was made within three years of a negotiated agreement or the standard information and consultation provisions applying.

The negotiation process and negotiated agreements

Once you have received a valid request, you are obliged to make arrangements for appointing or electing representatives with whom you will then seek to agree a negotiated information and consultation (I&C) agreement.  All employees must be permitted to take part in the appointment or election and it must be conducted in such a way that all employees are represented by a representative.

Once the appointment or election process is complete, you must then inform the employees in writing of the identity of the negotiating representatives.  Thereafter, you must invite the negotiating representatives to enter into negotiations to reach a negotiated I&C agreement.  This must start as soon as reasonable practicable and, in any event, within three months of the original employee request.  You then have a six-month period to draw up and reach a negotiated agreement.  When negotiating an agreement, both parties are required to work in a spirit of co-operation and with due regard for their reciprocal rights and obligations.  Note that you are free to draw up whatever arrangements and structures you want (including different arrangements in different parts of the business undertaking) – as long as they have been agreed with the negotiating representatives and as long as the agreement satisfies the following conditions: 

  • It sets out the circumstances in which you must inform and consult your employees.
  • It is in writing and dated.
  • It covers all employees in the undertaking.
  • It meets the approval conditions i.e. it is signed by all the negotiating representatives or a majority of the representatives sign and either at least 50% of the employees in the undertaking approve the agreement in writing or at least 50% of the employees who vote in a secret ballot approve the agreement.
  • It is signed by or on behalf of the employer.
  • It provides for either the appointment or election of information and consultation representatives with whom you will inform and consult or that you will supply information directly to the employees and consult them directly.

Note that the subject-matter, method, frequency and timing of information and consultation are left to the parties to agree under a negotiated agreement.

The six-month negotiation period can be extended by mutual agreement.

However, where no agreement is reached, the standard or ‘default’ provisions will then apply.  That said, there is further six-month period during which the parties prepare the structure for the application of the standard model and this provides a further opportunity to negotiate an alternative to the standard model.  If no alternative is negotiated, the standard provisions will then apply automatically, requiring you to inform and consult on specified matters and in a specified way.  During this further six-month period the information and consultation representatives must be elected (see below); the time period is not solely intended for further negotiation.  Indeed, where information and consultation representatives are elected before the end of the six-month period, the standard information and consultation provisions then begin to apply immediately.

The standard information and consultation provisions

Under the standard or default provisions, employees have much greater rights to be involved in, and be consulted on, key business issues, such as changing working conditions or contractual terms, expansion plans, takeovers, outsourcing, business restructurings or proposals for redundancy. 

There are two key elements to the standard provisions:

  • Mandatory election of information and consultation (I&C) representatives within six months.
  • Mandatory information and consultation duties placed upon the employer.

You must arrange a ballot for the election of at least one I&C representative for every 50 employees or part thereof.  There must be a minimum of two and a maximum of 25.  Any employee of the undertaking may stand for election and an independent ballot scrutineer must supervise the ballot.  The costs of the ballot are to be met by the employer.  Other than that, the detailed rules on ballots are complex and are beyond the remit of this fact sheet.

Under the mandatory information and consultation obligations, you are required to provide the elected I&C representatives with information on:

  1. The recent and probable development of the undertaking’s activities and economic situation.  This requires you to produce a ‘state of the company’ report and should not be too onerous.
  2. The situation, structure and probable development of employment within the undertaking or any measures envisaged, in particular whether there is a threat to employment.
  3. Decisions likely to lead to substantial changes in work organisation or in contractual relations including collective redundancies and transfers of undertakings.  This is likely to have the greatest impact on employers.

The information must be given at such time and in such a manner and with such content as enables the I&C representatives to conduct an adequate study and, where necessary, to prepare for consultation.  In the case of 1 above, you need only ‘inform’ the I&C representatives.  However, in relation to 2 and 3 above, you are required to both inform and ‘consult’.  Consultation means exchanging views and establishing a dialogue.

Where you are obliged to consult, this must be conducted:

  • In such a way to ensure that the timing, method and content of the consultation are appropriate and relate to the information supplied by you.
  • In such a way as to enable the I&C representatives to give their opinion on the matters they are being consulted about and to meet with the relevant level of management and to obtain a reasoned response from them.
  • In relation to 3 above, with a view to reaching agreement on decisions within the scope of your powers.

Pre-existing agreements

Where you have a pre-existing agreement, you may be under no obligation to enter into negotiations on receipt of an employee request.  In order to be valid, a pre-existing agreement must:

  • Pre-date the valid employee request.
  • Be in writing.
  • Cover all employees in the undertaking.
  • Have been approved by a majority of the employees.
  • Set out how the employer is to give information to employees or their representatives and seek their views on such information.

A pre-existing agreement could be a collective agreement and it could cover more than one undertaking.

However, even with a valid pre-existing agreement, you will still be obliged to enter into negotiations if:

  • 40% or more of the employees employed in the undertaking are a party to the employee request; or
  • In a secret ballot of employees, which you must organise, at least 40% of the employees in the undertaking endorse the employee request and a majority of votes cast in the ballot endorse the employee request.

Confidential information

The regulations also contain provisions dealing with confidential information.  Firstly, negotiating representatives and I&C representatives are not permitted to disclose information which the employer has entrusted to them on terms requiring it to be kept in confidence.  This only applies if the information is genuinely ‘confidential’.  The CAC can make rulings on this aspect in cases of doubt.  The test is whether the disclosure of the information would be likely to harm legitimate interests of the undertaking.  Secondly, the employer can withhold information completely where, according to objective criteria, the disclosure of the information would seriously harm the functioning of, or would be prejudicial to, the undertaking.  Again, cases of dispute can be referred to the CAC and this provision is likely to be narrowly interpreted.

Protection from unfair treatment and dismissal

Negotiating and I&C representatives are protected against dismissal or other detrimental treatment when acting as representatives.  In addition, the rules provide for reasonable paid time off during working hours for the representatives to perform their functions as representatives.

Enforcement and remedies

The enforcement of, and remedies for infringement of, the regulations are vested in the CAC.  The remedy for infringement of rights under the regulations lies by way of a CAC complaint.  It is possible to appeal to the EAT against a CAC order or declaration.  The CAC has the power to make declarations and orders about the operation of negotiated agreements and the application of the standard or default I&C provisions.  However, no order of the CAC has the effect of suspending or altering the effect of any act done or of any agreement made by the employer or of preventing or delaying any act or agreement which the employer proposes to do or make. 

If the CAC declares that an employer has failed to comply with a negotiated agreement or the standard I&C provisions, an application can also be made to the EAT within three months of the CAC’s decision for a penalty award.  The EAT can apply a fine of up to £75,000 in these circumstances, payable to the Government.  The high level of the potential fine means that the regulations should not be ignored!

Options for employers

As an employer, you now have five options:

  1. Reach a pre-existing agreement now with employees, before a valid employee request is received.
  2. Do nothing but, following a valid employee request, reach a negotiated agreement.
  3. Of your own volition trigger the process leading to a negotiated agreement.
  4. Do nothing and, following a valid employee request, allow the standard I&C provisions to take effect.
  5. Do nothing and hope that you do not receive an employee request!

The advantages in trying to reach a pre-existing agreement now include:

  • The opportunity to negotiate something more favourable than the standard provisions.
  • The ability to tailor the agreement according to the needs and priorities of your business.
  • Increasing the threshold vote for changing the status quo from 10% to 40%.  Under the regulations, the threshold is 10%.  However, where you already have a valid pre-existing consultation mechanism in place but the workforce makes a valid request for a new agreement, you can then arrange a ballot of all employees.  Only if a majority of those who vote in the ballot, and at least 40% of the whole workforce, endorse the request for a new agreement are you obliged to begin negotiations on a new agreement. 
  • Limiting potential trade union involvement in the workplace: many of the unions will use the introduction of the regulations as an opportunity to increase the penetration of trade union membership.

The main disadvantage in taking action now is the management time that will necessarily be required to put in place voluntary arrangements, without any guarantee that the workforce will actually approve the proposed arrangements.  However, if you simply choose to do nothing, you need to be aware that you may be at risk of a valid request, at which point you might find yourself stuck with the standard provisions if you are unable to reach a negotiated agreement.  As an employer, whatever you decide to do, you should raise internal awareness amongst managers in relation to the I&C process and the implications of putting in place an I&C procedure.

This document has been created by, or on behalf of ESP Ltd, as a general document and as a guide in relation to its subject matter and has not been bespoke drafted for you or the specific circumstances in which you are looking to use it. Prior to using this document and undertaking any HR process you must consult your organisation’s own policies and procedures to ensure that you do not do anything in conflict with your own policies and procedures.  If in any doubt as to how to use this document or, if you require any legal advice, please feel free to contact ESP Ltd on 0333 006 2929 and our legal team will be more than happy to assist.  ESP Ltd will not be liable in any way for any actions undertaken by you or your use of this document unless we have been consulted regarding your use of this document as legal advisor to your business or have bespoke drafted any documentation in response to a specific support request.

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