Appeal No. UKEAT/0185/07/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 24 July 2007

Before
THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)
MR D J JENKINS OBE
MR A E R MANNERS

AMICUS	APPLICANT

MACMILLAN PUBLISHERS LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Applicant	MR PETER EDWARDS
(of Counsel)
Instructed by:
Messrs Rowley Ashworth
247 The Broadway
Wimbledon
LONDON
SW19 1SE	
For the Respondent	No attendance or representation on behalf of the Respondent.	

SUMMARY

CENTRAL ARBITRATION COMMITTEE (CAC)

Application by Amicus for a penalty to be imposed on the employer following a breach of regulation 19(1) of the Information and Consultation of Employee Regulations 2004.  The breach was admitted. The EAT found that it was a serious breach and fixed the penalty at £55,000.

  

THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

1.	This is the first case which has come before this Tribunal pursuant to an application made under s22 of the Information and Consultation of Employee Regulations 2004. The Central Arbitration Committee (‘the CAC’) made a declaration in favour of the appellants on 19 February 2007 to the effect that the complaint that the employer had not arranged a ballot of its employees to elect the relevant number of information and consultation representatives was well founded.  It also ordered that the employer shall arrange for the holding of the relevant ballot. The complaint had been made under regulation 19(4) of the Regulations.  The appellants, Amicus, who were the complainants before the CAC, now request that the Employment Appeal Tribunal issue a penalty notice in accordance with regulation 22.

The background 
The context
2.	The CAC set out in an admirably brief thumbnail sketch  the nature and purpose of these regulations as follows (paras 23-25):
“The Regulations are intended to give effect to European Directive 2002/13/EC, which established a general framework for informing and consulting employees. They impose obligations on larger employers to put in place arrangements to ensure that employees are informed and consulted on a wide range of issues. The Regulations currently apply to undertakings with at least 150 employees: Regulation 3 and Schedule 1. If there is a valid request by at least 10% of the employees, an employer covered by the Regulations is obliged to initiate a negotiating process to establish information and consultation arrangements: Regulation 7. Once the request is made the employer must undertake negotiations to seek to reach an agreement on information and consultation arrangements: Regulation 14. The Regulations provide for how the employer is to conduct the negotiations to establish such an agreement and the conditions such an agreement must meet: Regulations 14-16. If agreement is not reached within a prescribed period following a valid employee request, the standard information and consultations provisions apply; they require the employer to inform and consult within a statutory regime: Regulation 18-20.
Once faced with a valid employee request, Regulation 8 provides the employer with the only way envisaged by the Regulations of avoiding the obligations in respect of reaching an information and consultation agreement and, failing that, being subjected to the standard information and consultation provisions. Regulation 8 may apply if at the date of the valid employee request one or more “pre-existing agreement(s)” are in place and the employee request has been made by fewer than 40% of employees in the undertaking. In such circumstances the employer may, subject to certain conditions, hold a ballot in which the employees vote on whether they support the request for a negotiated agreement. Unless the ballot shows that a majority of those voting and 40$ of the employees in the undertaking endorse the employee request, the employer need not take the prescribed steps to secure a negotiated agreement but may continue to operate the pre-existing agreement(s) by way of compliance with the Regulations.
The final point in this overview concerns enforcement. The CAC may issue declarations and make orders. A declaration or order made by the CAC may be relied on as if it is a declaration or order made by the High Court: Regulation 35(4). In respect of the main consultation duties – failures to consult in accordance with a negotiated agreement or the standard provisions – a CAC declaration may be followed by a separate application to the EAT for a penalty notice: Regulation 22. The EAT can impose a penalty of up to £75,000: Regulation 23.”

3.	This case concerned the situation where a negotiated agreement has not been entered into and the standard information and consultation provisions are to apply.  The procedures for setting up those arrangements are set out in Part 4 of the Regulations. They require a ballot to be held of the relevant employees to elect the relevant number of information and consultation representatives (regulation 19(1)); the ballot is to be held pursuant to Schedule 2 to the Regulations; and there is a time limit fixed by regulation 18 by which the standard information and consultation provisions have to be implemented.  In this case it was six months from the date of the original complaint.

The hearing before the Central Arbitration Committee
4.	Amicus complained that MacMillan Publishers Limited had failed to hold the ballot required by regulation 19(1).  They did so pursuant to regulation 19(4) which provides:
“An employee or an employee’s representative may complain to the CAC that the employer has not arranged the holding of a ballot in accordance with paragraph 1.”

5.	The CAC noted that this was not the first time that a complaint had been made about the failure of the employers to comply with their obligations under the regulations. The CAC referred to an earlier complaint concerning the failure to give full information about the number of employees employed at different sites.  That complaint was upheld and not appealed. Subsequently the information was provided on 3 March 2006. In fact we were told by Mr Edwards, counsel for the union, that there had been an even earlier complaint that no information about the number of employees had been provided at all.  That complaint also had been upheld by the CAC.

6.	The background to the current complaint was as follows.  On 15 March 2006 the union sent to the CAC a petition signed by individual employees. It contained a request to negotiate an information and consultation agreement. A request of this nature may be either to an employer direct or to the CAC: see regulation 7(4). If it is to the CAC, then it obtains further information to verify the number and names of those who have made the request. In this case that was provided to the CAC, who confirmed that there was a proper application on foot covering in excess of 10% of the relevant work force.

7.	Given that there was no negotiation over the setting up of the relevant information and consultation arrangements, the standard provisions applied. They should have been in place by 15 September 2006 by virtue of regulation 18(1)(a)(i). The union complained that not only had they not been set up, but the employer had failed to take any steps even to conduct the relevant ballot.  As we have said, it was the latter breach which was the subject of the formal complaint.

8.	The employers replied in a response set out on a standard form which the CAC has adopted for these purposes. The employers agreed they were under an obligation to conduct negotiations to reach agreement on information and consultation, and that the standard information and consultation provisions applied to them. They said they had a long standing consultative committee system in the various sites where they operated and that they either had existing elected committees in place or there had been recent elections to elect relevant representatives.

9.	The panel, chaired by Professor Roy Lewis, posed further questions in the light of these responses. The company remained vague in its answers. It continued to maintain that it had consultative committees of elected representatives but did not identify when the relevant ballots had occurred. Also, it was apparently seeking to contend that there were pre-existing agreements in place. These, it submitted, had enjoyed the support of a significant majority of the work force and by implication they were suggesting that this was a compliance with the legislation.

10.	The CAC observed that this was a confusing response.  The employers were accepting that the standard procedures applied and yet at the same time were contending that there were pre-existing arrangements in place.

11.	The CAC, in a most careful and lucid analysis, considered whether there were pre-existing agreements in place.  This requires that they should have been in place prior to the request being made and should have covered the whole of the workforce in the undertaking. In addition, as we have noted, there should be a ballot of the workforce complying with certain requirements endorsing the arrangements. None of those criteria were met here.  Nor had there been any attempt to initiate negotiations under regulation 14.  So the standard provisions applied.  These had not been implemented and no ballot to elect representatives had been held. The latter was a clear breach of regulation19(1).  Hence the relevant declaration and order were made. There has been no appeal against them.

The complaint to the EAT
12.	The jurisdiction which we exercise is laid down in regulation 22.  Regulation 22(6) states:
“If the CAC makes a declaration under paragraph 4 the relevant applicant may within the period of three months beginning with the date on which the declaration is made make an application to the appeal tribunal for a penalty notice to be issued.”

13.	Paragraph 7 provides that on any such application, the EAT shall issue a written penalty notice requiring the employer to pay a penalty to the Secretary of State  in respect of the failure:
 “unless satisfied on hearing representations from the employer that the failure resulted from a decision beyond the employer’s control or that he has some other reasonable excuse for his failure”.

14.	Regulation 23 sets out certain provisions on penalties. The first three paragraphs are material. They are as follows:
“(1)	 A penalty notice issued under regulation 22 shall specify –
(a)	the amount of the penalty which is payable;
(b)	the date before which the penalty must be paid; and
(c)	the failure and period to which the penalty relates.
(2) 		No penalty set by the Appeal Tribunal under this regulation may exceed £75,000.
(3) 		Matters to be taken into account by the Appeal Tribunal when setting the amount of the penalty shall include –
			(a) the gravity of the failure;
			(b) the period of time over which the failure occurred;
			(c) the reason for the failure;
			(d) the number of employees affected by the failure; and
(e) the number of employees employed by the undertaking or, where a negotiated agreement covers employees in more than one undertaking, the number of employees employed by both or all of the undertakings.

15.	Surprisingly, the employers have not been represented before us. They made it plain that they did not wish to contest this matter. They have made a number of points in mitigation, which have been provided in writing to this Tribunal. 

16.	They asserted that they have operated a formal system of staff consultative committees for approximately thirty years; that they were committed to the concept of informing and consulting the work force; that they thought it was good enough to adapt their existing mechanisms to the new legislation; and that they had now taken appropriate expert advice and were actively seeking to carry out their legal obligations. They stated that they were in the process of consulting interested parties about the election of a national information and consultation body. Finally, they expressed regret at what they submitted was a misguided attempt to comply with their legal obligations.

17.	We have heard submissions made by the applicant as to the gravity of the breach.  Mr Edwards reminded us in particular that the purpose of the Directive and the regulations is to involve employees in the affairs of the undertaking employing them; that Article 136 of the Treaty provides that social dialogue between management and labour is “a particular objective of the Community”; and that Article 8(2) of the Directive specifically provides that the sanction for a breach of the obligation must be “effective, proportionate and dissuasive”.   We have also had regard to the matters which must be taken into account under regulation 23(3).

18.	First, the gravity of the failure.  We consider that this was a significant failure because it must have been plain, reading the legislation, that the relevant provisions were being ignored at almost every stage. The regulations provide a generous period in which to set up the relevant information and consultation procedures and the company continued to provide what can only be called a ‘fudged’ response to the CAC when it sought for detailed information. 

19.	This is compounded by the fact that there had been the earlier occasions when, with respect to these very same regulations, the employers were found to be in breach of their obligation to provide information.  On the first occasion there had been a failure to provide information which the regulations make plain has to be disclosed in order for the union to know how many employees had to ask for the arrangements in order for the obligations with respect to them to be triggered.    We do not criticise them for defending the case on the second occasion.  That raised a genuine issue of construction of the regulations about precisely what information had to be provided.  However, the experience of these two hearings should have alerted the employers to the significance of these provisions. This is certainly not a technical or inadvertent breach.  Moreover the company has the resources and access to the relevant expertise.  Indeed, they have said that they sought legal advice with respect to the second information complaint.

20.	The standard information and consultation provisions ought to have been in place by the 16 September, and the ballot would have had to be held some time prior to that.  They have still not put the arrangements in place or held the ballot despite the order of the CAC being made on 16 February. We consider that to be an aggravation of the breach. We do not say that the employers have done nothing; apparently they had a meeting with the union on the 5 May and indicated that they were going to take advice from a consultant with expertise in the field.  But Mr Edwards tells us that nothing further was heard until yesterday when the company indicated that it wished to hold a further meeting in early August.  That will be six months after the CAC order.  This is an unacceptable dragging of feet.

21.	No adequate reasons have been given for failing to comply with these obligations.  The most generous interpretation of the company’s response is that they had consultation arrangements in place for many years and they thought these would suffice.  But a moment’s consideration of the regulations would have demonstrated that they would not. 

22.	The provisions here, if implemented, would cover a large number of employees, somewhere in excess of 1350. They would apply to all the employees in the undertaking. These workers have been deprived of the benefit of procedures on information and consultation which the UK Government has implemented as part of its European obligations.

23.	We do recognise that these regulations impose on employers certain requirements which they might consider to be antithetical to their own needs, or potentially undermining their current arrangements.  However, the regulations themselves determine the circumstances in which allowance will be made for pre-existing agreements or arrangements. As the CAC found, they did not justify the employer’s conduct in this case and that should have been obvious to the company. 

24.	We do take into consideration the fact that the company does appear to have recognised, albeit belatedly, its legal duties.  However, it has acted in a dilatory way even in putting right its original breach.  It is difficult not to form the impression that it is opposed to these regulations and is seeking to delay their implementation for as long as it reasonably can.

25.	Employers must recognise that these are important rights conferred on workers.  The provisions must be complied with.  We think it appropriate, in fixing this penalty, to stipulate a sum which, within the limits imposed by the legislation, will deter others from adopting what can only be described as the wholly cavalier attitude to their obligations that has been demonstrated by this company. 

26.	This is not the most serious breach of these obligations which might be envisaged, but it is nonetheless a very grave breach affecting many employees. In the circumstances, we consider the appropriate sum is a penalty of £55,000.00.

27.	Accordingly, we fix a penalty notice under regulation 22 which: 
(a) is fixed at a sum of £55,000
(b) is to be paid within 14 days; and 
(c) is with respect of a failure to comply with the legal obligation under regulation 19(1) from 16 September 2006 and continuing.