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There is no right to employee representation at board level in UK companies and, other than in a tiny handful of companies, it does not exist in practice. The government produced a consultative document on the proposed legislation but there were few responses and no wider public debate.

For further information on the SE legislation, such as the choice of SNB members, click on the more button.

There is no right to employee representation at board level in UK companies, and although there is nothing to prevent companies choosing to have employee representatives on boards, there are only a tiny handful of cases where this has occurred. These are companies which have substantial employee shareholdings, or companies fully-owned by municipalities – for example, some bus companies. The basic principle behind UK company law is that companies are operated for the benefit of shareholders and this leaves little room for employee involvement at board level.

The UK government published a single consultative document covering both the directive on employee involvement and the European company Regulation in October 2003. This emphasised that setting up as a European Company or SE “will be entirely voluntary”. The government indicated that it wanted to give “maximum flexibility in the way in which SEs are structured” and that it wanted to make as few changes as possible to the existing rules. There were only 22 responses to this consultation exercise, mostly from professional bodies, although the main employers’ body, the CBI, and the TUC union confederation both responded. There was, however, no formal separate consultation with unions and employers.

The implementation was achieved through a form of legislation, a Statutory Instrument, which does not require a parliamentary debate, and there was none. There was also almost no wider debate, as the issue was seen as being of little concern to the UK.

Form of transposition

Directive was transposed by law in September 2004, a month before the October 2004 deadline.

The directive was implemented through regulations which were drawn up on 6 September 2004, laid before parliament on 13 September 2004, and which came into effect on 8 October 2004. The official title of the legislation is Statutory Instrument 2004 No. 2326 – The European Public Limited-Liability Company Regulations 2004. These regulations implement the directive in Great Britain. There are separate regulations which implement the directive in Northern Ireland. These are based on the regulations for Great Britain but have different enforcement bodies.

The same regulations also included the changes necessary to adapt UK company legislation to the Regulation on European companies.

Special negotiating body (SNB)

Selection of national members

UK SNB members for a European company are elected by the employees, unless there is an existing consultative committee representing all employees.

SNB members from the UK are elected by employees unless there is an existing “consultative committee”, which meets certain conditions. These are that it represents all employees, that its normal functions include information and consultation, that it consists entirely of employees in the companies concerned and that it can carry out its functions without interference from management (regulations 23 and 25). If there is such a consultative committee, it can appoint the UK SNB members. In practice, most companies will not have a consultative committee which meets all these conditions – in particular one which represents all employees – and the SNB members will be elected.

If there is an election, it is the responsibility of company management to arrange it, although the company must appoint one or more independent ballot supervisors to supervise its conduct. Management should also, as far as reasonably practicable, consult with UK employees’ representatives on the conduct of the ballot and, as far as reasonably possible, let all employees know of the balloting arrangements. The legislation does not contain any rules on who can nominate candidates. Employees can bring complaints about the ballot to an independent body, the CAC, which has the power to make management modify its arrangements (regulation 23).

External trade union representatives

External union representatives from the UK can be members of the SNB but only if management agrees.

An external union representative from the UK can be a member of the SNB, but only “if the management of that participating company so permits”. This is the situation whether the SNB members are elected or appointed by the consultative committee (regulations 23 and 25).

Financing of experts

Funding is limited to a single expert.

The UK legislation states that the companies involved should pay “any reasonable expenses” for the functioning of the SNB and negotiations with it. However, it makes it clear that, where the SNB is assisted by more than one expert, the company is not required to pay the expenses “of more than one” (regulation 29).

Standard rules under the fallback procedure

Allocation of national seats on SE representative body

The legislation leaves the choice of members of the SE representative body to the SNB. There are no specific provisions for UK members.

The legislation does not lay down any detailed rules on the choice of members of the representative body – the phrase used in the regulations. It states only that “members of the representative body shall be elected or appointed by members of the special negotiating body, and the election or appointment shall be carried out by whatever method the special negotiating body decides” (Schedule 3 Part 1). There are no specific national arrangements for representative body members coming from the UK.

Budget of representative body

The funding of the representative body should enable it to perform its duties in an appropriate manner. But the funding is limited to a single expert.

The UK legislation states that the costs for the representative body should be borne by the SE and should be enough to enable it to perform its duties “in an appropriate manner”. This specifically includes the cost of organising meetings, interpretation, accommodation and travelling. However, the company is only obliged to pay the expenses of a single expert (Schedule 3 Part 2).

National procedure for the allocation of board seats

The legislation leaves the choice of employee representatives at board level to the SE representative body. There are no specific provisions for UK members.

The legislation does not lay down any detailed rules on the choice of employee board-level representatives. It leaves it entirely to the representative body, which “shall have the right to elect, appoint, recommend or oppose the appointment” of members of the board representing employees (Schedule 3 Part 3). There are no specific national arrangements for representative body members coming from the UK.

Misuse of procedures and structural change

Misuse of procedures

Employee representatives can complain to an independent body if they consider that the company is misusing the European company procedures to deprive employees of their rights to be involved. The burden of proof is on the company in the first year. This independent body can require the company to take appropriate action to remedy the situation.

The legislation provides for an employee representative, or, if there is no representative, an employee to complain to an independent body, the CAC, if he or she believes that a company is misusing an SE to deprive employees of their rights to employee involvement or to withhold rights from them. Where the complaint is made before the SE has been registered, or in the first year after it has been set up, the burden of proof is on the company that it did not misuse or intend to misuse the procedures. The CAC can require the company to take appropriate action to ensure that employees are not being deprived of their rights or having their rights withheld (regulation 35).

Structural change

There is no requirement in the UK legislation to renegotiate the agreement if there has been structural change, although this could occur where the procedures have been misused to deprive employees of their rights.

The legislation does not include a requirement to renegotiate the agreement if there have been major structural changes. In the consultative document, the government specifically stated that it favoured a voluntary approach on this issue. Changes which the CAC, an independent body, finds are designed to remove or curtail employees’ rights to be involved are not permitted, and the CAC could order a renegotiation (see section on misuse of procedures). But in other circumstances there is no requirement for the agreement to be renegotiated.

Position of trade unions and employers

Both unions and employers responded to the government consultation, although neither group saw the issue as being of major concern. While employers were anxious to limit the impact of the employee involvement rules, the unions were concerned about the lack of facilities for employee representatives, the limits on union involvement, and the low level of penalties.

The main employers’ body, the CBI, and the TUC union confederation both submitted responses to the government consultation document.

The CBI had initially been opposed to the directive, because of the involvement of employees at board level. However, it welcomed the fact that the government had avoided adding additional requirements in implementing it. It expressed the hope that the SE model of employee involvement would not be used as a precedent for future EU legislation, and it opposed the decision to leave the enforcement of the employee involvement aspects of the legislation in the hands of the CAC.

The TUC’s main concerns on the directive were management’s veto over the choice of external union representatives as SNB members, the need for members of the SNB to have adequate time off and facilities and the low level of penalties on companies which fail to follow its provisions – this is capped at £75,000 (about €100,000). In contrast to the CBI, the TUC is supportive of the idea of greater employee involvement at board level and expressed the hope that, if SEs become more widespread, this might over time reduce the opposition of UK employers to greater employee involvement.

However, the issue was not of great concern for either the employers or the unions.

L. Fulton (2008) Anchoring the European Company in National Law - Country Overviews (online publication, prepared for worker-participation.eu)

Alle United Kingdom