Don't legislate on consultation

Don't legislate on consultation

Bulletin article
James Wilson
02 April 2001

No-one who runs a business needs to be told that staff are a company's best ambassadors. There is ample evidence that a well-informed and motivated workforce can add value to the bottom line. Proper consultation is vital to ensuring long-term success. But if a firm wanted to improve its workforce consultation practices, or encourage a supplier or client firm to follow best practice in employee communications, would it start with the EU's proposed directive to establish a "General framework for informing and consulting employees in the European Community"? It is hard to see how any well-managed business would ever seriously consider such an approach.

The Commission's proposal would require every business with more than 50 staff to establish formal procedures for informing and consulting employees in the workplace. If the directive is passed by the Council of Ministers (in a qualified majority vote) and the European Parliament - as seems quite possible, later in the year - every member-state would have to implement national laws to this effect. In the UK alone this legislation would affect more than 37,000 companies. The Department of Trade and Industry estimates that British businesses would have to spend £300 million on implementing the directive. Astonishingly, the Commission has - so far - failed to carry out an assessment of the economic impact of the proposal.
As currently drafted, the directive is fundamentally incompatible with the essential principles of good company management. The Commission's approach is predicated on three mistaken assumptions: first, that "communication" can be delivered by top-down regulation; second, that communication is about process rather than content; and finally, that a cumbersome and inefficient system of employee representation can deliver real consultation.

The first assumption is flawed because only a relationship based on trust between employer and employee is viable in the long term. Mutual respect is vital to ensure that all the stakeholders in a business are motivated to achieve results. Any attempt to regulate internal company relations is doomed to failure, for it assumes an inherent lack of trust between employer and employee. Prescriptive regulation cannot generate the climate of partnership that is essential for good industrial relations.

The directive's focus on process rather than content is also mistaken, for it assumes that a single inflexible and impractical structure for employee relations can fit every country. Good practice varies enormously across the EU, because of the very different legal histories and cultures. A single set of rules would be impracticable for the whole Union, and even more so once the Central and East Europeans have joined the club. It may be appropriate to have national legislation on guidelines for good practice, but there is no case for European law on this matter.

Finally, the EU's attempt to impose a cumbersome system of employee representation fails to take account of the rapidly evolving realities of the modern workplace. The directive's approach ignores the desire of many employees to communicate directly with their employer, rather than via representatives. The availability of electronic information and communications systems allows employees to collaborate, whether at home, travelling or in the office. The intelligent use of IT systems has the potential to provide new ways of improving workforce consultation. Such systems can provide the kind of employer-employee communications that are essential to building relationships of trust.

There is certainly scope for EU countries to exchange "best practice" on internal communications. Such an approach would fit with the spirit of the Lisbon summit of March 2000, reaffirmed at the Stockholm summit this year - namely that the EU needs to focus on improving the competitiveness of European businesses. But a "one size fits all" regulation would only add to the regulatory burden on small and medium-sized companies.

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