Employees (Provision of Information and Consultation) Act, 2006

The long overdue Employees (Provision of Information and Consultation) Act, 2006 (“the Act”) was signed into law on 9 April this year. It is important that employers familiarise themselves with the meaning and significance of the Act, as it brings with it new obligations on certain employers to consult employees in connection with

changes in the workplace. Failure to comply with the Act by an employer can give rise  to criminal consequences.

To date, there have been only specific, identified circumstances in which an employer has a specific obligation to consult with, and inform, employees. Such situations include when an employer is making “collective redundancies” or when employees are affected by a “transfer of undertaking” situation (where the assets of a business are being sold, and the employees have a right to transfer with the business and have their reckonable service and terms and conditions recognised).

By introducing new and general requirements to consult with, and inform, employees the Act is significant. Its stated aim is to promote mutual trust and co-operation between employees and undertakings. The Act sets out the framework for an employer

to consult with the employees in relation to the situation and likely development of employment within a business. The employer must inform and consult on decisions likely to lead to substantial changes in work organisation or in contractual relations with the employees.

Initially, the Act will apply to those businesses with in excess of 150 employees. From March 2007, it will apply to businesses with at least 100 employees and in March 2008 it will apply to undertakings with at least 50 employees. There is a relief for smaller

employers, in that it will not apply to businesses with less than 50 employees. Nonetheless, smaller employees should pay heed to the fundamental proposition of the Act, that good practice requires an employer to consult with employees on important matters.

The process by which a particular employer will consult with and inform its employees is to be set out in an “Information and Consultation Arrangement” (“an Arrangement”). An employer may at its own initiative, or at the request of 10% or more of the employees or at the direction of the Labour Court, enter into negotiations to establish such an Arrangement.

The agreement between the employer and the employees to establish an Arrangement can be recorded in writing by what is referred to in the Act as a negotiated agreement. The negotiated agreement should be recorded in writing and outline the details of the Arrangement. It should deal with matters such as the subjects which will be for information and consultation between the employer and employees, the method and timeframe by which information is to be provided by the employer, the method and timeframe by which consultation is to be conducted by the employer,

the procedure for dealing with confidential information and the duration of the agreement. Essentially, it records the basis upon which the employer will inform and consult with the employees.

Once negotiations have commenced between the employer and employees on the form and structure of an Arrangement, the Act imposes a time limit of 6 months for the agreement and establishment of that Arrangement (although that time may be extended). If no agreement is reached between the employer and the employees on the form of the Arrangement, then the standard rules (which are set out in a Schedule to the Act) will apply. The rules in the Schedule provide a template for an Arrangement.

The Act recognises situations in which employers can deal directly with employees, or with elected employee representatives and sets out rules as to which an employer must abide by in particular cases. In circumstances where an employer has a practice of negotiating with a trade union, the Act provides that such a trade union (once it represents at least 10% of the businesses’ employees) will be entitled to elect at least

one or more employee representatives from its members.

When the draft forms of the Act were being drawn up, a major concern raised by employers and employers representatives was confidentiality. It was argued that having to disclose information on possible changes in the workplace to employees might  well jeopardise the possibility or success of the very changes themselves. The 2006 Act recognises this concern, by providing that employees may not disclose to a third party any information which has been provided in confidence to the employees by the employer. It is an offence for a person to disclose such confidential information and a person guilty of such an offence may be liable to a fine of up to €3,000 or 6 months imprisonment. Of course, it often can be difficult to prove who has been the source of a “leak” of confidential information, but it is hoped that the possible penalties should act as a deterrent.

There is further relief for employers, in that under the Act employers can refuse to provide information to the employees (which otherwise under the 2006 Act would have to be disclosed) where disclosure of the information would seriously harm the functioning of, or be prejudicial, to the business. One can imagine how particularly sensitive trading information of a business would be relevant in this regard. In the event that an employer refuses to disclose information on these grounds, the employees (or their representatives) can refer the matter to the Labour Court for adjudication. The Labour Court will assess whether the employer was justified in refusing to disclose the information.

The penalties for an employer in failing to comply with the Act are serious and should focus minds. A breach of the Act can be a criminal matter and lead on summary conviction to a fine not exceeding €3,000 and/or up to 6 months imprisonment. On conviction on indictment, the penalties can be far heavier – a fine of up to €30,000 and/or imprisonment up to 3 years.

Previously, the main motivation for an employer in disclosing information to employees was to keep good industrial relations intact. Now, for some employers, the law requires it!

David Phelan
June 2006