Private Equity (Transfer of Undertakings and Protection of Employment) Bill

Conservative Members' comments that they were satisfied with the current regulations were reflected in the speech made by the hon. Member for Huntingdon (Mr. Djanogly). Our review of the procedure concluded that it was working in a reasonable manner, and that it had avoided the pitfalls and problems that beset attempts to devise statutory procedures in the past. The existence of the statutory recognition procedure has the effect of making someone think twice before derecognising a union that has been voluntarily recognised. Why should an employer derecognise, if the union could then restore recognition via the statutory procedure, if the majority of the work force wanted that to happen? At the very least, the decision to derecognise could draw the employer into the statutory procedure. I would argue that the existence of the statutory procedure already provides an adequate safeguard against decisions taken by an employer to derecognise a union that enjoys the support of a work force in a company. I fear that the Bill's treatment of union recognition goes beyond the provisions in the TUPE regulations. It does not merely provide the same protections as those that apply in TUPE. Let me explain that point. Under regulation 6 of the TUPE provisions, the new employer, the transferee, is tied to the recognition arrangement in just the same way as the old employer, the transferor—no more, and no less. That logic applies to a number of the provisions in TUPE. In other words, the new employer stands in the shoes of the old one and is tied to the recognition arrangement in exactly the same way. So the freedom of the old employer to derecognise the union, albeit in the context of the statutory procedures that I have outlined, applies equally to the new employer in a TUPE situation. Most recognitions are voluntary and can be terminated by either side within notice periods if they so wish. Under TUPE, the new employer can choose to derecognise the union within such a time scale; in practice, very few do, but TUPE would, in theory, allow them to do so. However, there is no cross-reference to regulation 6 of TUPE in the Bill; nor is there a cross-reference to regulation 5, which explicitly deals with the status of collective agreements. Instead, clause 3 refers to the issue of union recognition and other collective agreements by stating that they are subject to parts of regulation 4 of TUPE. Yet that regulation deals with individual contracts of employment between the employee and the employer, and does not cover collective agreements between the trade union and employer. The net effect is significantly to change the treatment of union recognition agreements and other collective agreements. For example, under clause 3, after an equity transfer, the employer could not derecognise the union for a reason unconnected with the transfer, unless he has an economic or technical reason to do so. That would provide a new legal underpinning to voluntary recognition deals that is different from TUPE and other statutory procedures—a limitation not found within the TUPE regulations. My hon. Friend the Member for Nottingham, East said several times that his intention was to treat equity transfers as if they were TUPE transfers, but on that point and one or two others, I fear that that principle is not quite reflected in the Bill. Clauses 4 and 5 deal with information and consultation rights in the event of an equity transfer. That is an important issue, so I quite understand why my hon. Friend emphasises it. Clause 4 defines the information and consultation rights, including their timing, the identity of the participants and the content of that dialogue; whereas clause 5 deals with the available remedies. These provisions are based on regulations 13, 14 and 15 of TUPE. Again, however, there are important provisions in those clauses that are not found in the regulations, which would have the effect of conferring a different set of rights under the Bill from those under TUPE. I appreciate the importance of proper consultation and a number of important consultation rights already exist. As I have already mentioned, perhaps the most important are in the Information and Consultation of Employees Regulations 2004. Where those rights are exercised, they would ensure that the business implications of new ownership are thoroughly discussed with the work force and their representatives. The 2004 regulations cover many of the circumstances with which clauses 4 and 5 are concerned. The 2004 regulations were seen generally as a very important step in our system of industrial relations. Indeed, John Monks, the former general secretary of the TUC, described them as"““potentially the most significant piece of employment legislation ever to be introduced in the UK””." They were based on an agreement reached between the TUC and the CBI. Those rights apply to employers with 100 or more employees and next month they will be extended to cover those with 50 or more. That means that they will cover a significant proportion of UK employees and a comfortable majority of those in organisations that are likely be subject to equity transfers of the kind that the Bill is concerned with. The 2004 regulations are flexible, allowing employers and employees to devise the consultative arrangements that best suit them. In our view, it is preferable for businesses and employees to decide their own arrangements voluntarily. The 2004 regulations provide scope, however, for employees to require the employer to introduce information and consultation arrangements where none exists. They also provide scope for employees to seek new systems where they consider that voluntary systems are insufficient. The object of the discussions is to reach an information and consultation agreement. Under the 2004 regulations, employers and employees are free to include in their agreement any aspect of the business's operation as a subject for consultation, including issues around business ownership. When parties fail to reach an information agreement, the employer is required to institute a fall-back set of standard consultative provisions. Under the 2004 regulations, that includes consultation on the recent and probable development of the economic situation; the current and anticipated employment levels, particularly if there is a threat to employment in the undertaking; and decisions likely to lead to substantial changes in work organisation or contractual relations. There is therefore an important opportunity in the 2004 regulations for employees, supported by their trade unions, to require an employer to discuss issues consequent upon equity transfers. Moreover, the regulations enable employees to create long-term information and consultation arrangements to help them influence decisions on a continuing basis. The Government recognise the importance of the regulations, which can be extremely valuable. We have kept a commitment to publicise them. We have alerted affected employers, arranged mailshots, sent e-mails, put information on the web to raise awareness and recently written to an estimated 40,000 organisations employing 50 to 99 employees, which will be brought within the scope of the regulations in April. ACAS has put together a programme of training events to help parties consider the effect of the regulations on them. Clauses 4 and 5, on consultation, go further than either the 2004 regulations or the TUPE arrangements. They would require a five-year forward look, with recourse to the High Court should that not happen. Again, that would not simply translate TUPE but go beyond it. The consultation rights available to employees do not stop at information and consultation regulations. Other important rights are available. We have heard in the debate about redundancies. When an employer proposes redundancies, other existing consultation rights come into play. If more than 20 redundancies are proposed in a 90-day period, the employer is required to consult for a minimum of 90 days with employees' representatives. They must discuss the reason for the redundancies as well as ways of minimising or avoiding them. If that discussion does not happen, each employee concerned may be entitled to a protective award, which constitutes a significant incentive for the employer to consult properly in accordance with the law. We have also heard that private equity companies can be large undertakings, operating across borders in several EU member states. That could bring them within the scope of the European works council directive, which is another information requirement. The UK is subject to it, and it led to our implementing the Transnational Information and Consultation of Employees Regulations 1999. Those regulations provide employees of European-level undertakings with ongoing access to information and consultation rights. They give employees of undertakings or groups of undertakings with at least 1,000 employees in total, and at least 150 employees in each of at least two member states, the right to be represented on a European works council. As has been said, a new owner might wish to change the terms of an occupational or stakeholder pension arrangement, in which case another consultation right comes into play—the 2006 occupational pension schemes regulations. My hon. Friend is right to stress the importance of information to employees. The purpose of my going through the rights available to employees in some detail is to show that we share his concern and have introduced a number of regulations to ensure that employees have recourse to information.