The Gazette 1982

GAZETTE

JULY/AUGUST1982

Another suggestion has been that when consultations are

held they should not be required to be held with a view to

reaching agreement. It should be noted however that man-

agement's power to take economic decisions, in the last

resort, remains unhampered, since once consultations are

held management is free to adopt whatever decision it likes.

The workers have no power of veto as such.

Confidentiality

The third and final criticism relates to the issue of con-

fidentiality of information. The management has no right

to withhold any information on grounds of confidentiality

or secrecy. Members and former members ofbodies repre-

senting employees anddelegates authorisedby them are, on

the other hand, required to maintain discretion relating to

information of a confidential nature. In communicating in-

formation to third parties they are obliged to take account of

the interests of the undertaking and not divulge secrets

regarding the undertaking or its business. The Directive

provides thatMember States should provide for the imposi-

tion of penalties for breach ofthe secrecy requirement, and

in addition empower a tribunal or other national body to

settle disputes concerning the confidentiality of certain

information. Employers, however, argue that the provision

in question should be amended to take into account the

situation where non-disclosure on grounds of confidential-

ity is required to prevent substantial injury resulting to the

undertaking

. The difficulty lies in the interpretation of

"substantial injury"— could it for instance include poten-

tial loss of competitive advantage or possible stockmarket

reaction to the disclosure? Information disclosed about an

undertaking's products, its investment andmarketing strat-

egy and its research and development plans may indeed

prove to be potentially injurious to the undertaking. Cert-

ain commercial tenders may require that the terms contain-

ed therein be kept secret to ensure that subsequent bids be

made independently. As to products incapable of protec-

tion under intellectual property laws, secrecy as to the com-

position or nature ofthe product may be essential ifit is to be

successfully launched on a market without fear ofpoaching

by other competitors. Furthermore information required to

be divulged about a hostile takeover bid will make the

takeovermore difficult andmore expensive, and indeed, the

disclosure of price sensitive information in a pending take-

over situation may conflict with the requirements of the

Stock Exchange Regulations and the City Code on Take-

overs and Mergers. A blanket provision in the Directive

which requires full disclosure couldjustifiably be regarded

as unacceptable by employers.

Penalties

Member States are required not only to lay down pen-

alties for failure to complywith the disclosure requirements

and the information and consultation procedures outlined

in the Directive, but also to ensure that employees repre-

sentatives, affected by the decision adopted in contraven-

tion ofthe consultation requirements, have a right ofappeal

to tribunals or other competent national authorities for

measures to be adopted to safeguard their interests, in so far

as these are directly threatened. The Commission, in its

explanatory memorandum to the Directive

, stated that

suchmeasures could include the refusal to authonse collec-

tive redundancies, suspension of therights of the majority

shareholder (i.e. the dominant undertaking) in the subsidi-

ary and the imposition of a periodic penalty payment for

each day's delay in fulfilling the obligations in relation to

disclosure of information and consultation. It is unclear

whether the penalties imposed are such as to compensate

employees for loss suffered (damages awarded to the em-

ployees or to their representative institutions), as seen for

example in Section 103 of the Factories Act 1955 as

amended by Section 56(i) of the Safety in Industry Act

1980, or to punish management for bad industrial relations

(fines payable to the State).

Future Trends:

The Proposed Directive is at present being discussed by

the European Parliament and is unlikely to be adopted by

the Council in the absence ofsubstantial amendments to the

text. The eventual adoption will necessitate an amendment

of the Companies Act 1963 (as amended) to ensure dis-

closure ofinformation to employees athalfyearly intervals,

and the enactment of further legislation necessary to im-

plement the provisions of the said Directive •

FOOTNOTES

(1) OJC 297 of 15-11-1980.

(2) The Protection of Employment Act 1977.

(3) European Communities (Safeguarding of Employees' Rights on

Transfer of Undertakings) Regulations 1980. S.I. No. 306 of 1980

("the Acquired Rights" Regulations).

(4) Defined in Article 2(c) as being"the place where themanagement of

an undertaking actually performs its functions".

(5) Bull, ofthe E.C. Supplement 3/80 at p.6. The United Nations is also

in the process of formulating a comprehensive code for transnational

corporations — the full scope of the obligations contained therein

will probably not be known until 1985. The ILO Tripartite Declara-

tion will form the basis for the Employment Section of the Code.

(6) OJNo .L 222/11 of 14-8-78.

(7) OJNo . L65 of 14-3-68.

(8) OJNd .L 222 of 14-8-78.

(9) OJNo .L 48 of 20-2-82. Article 7.

(10) Howard Gospel, "Disclosure of Information to Trade Unions" ILJ

Vol.5. 1976. p. 223.

(11) Department of Labour Discussion Paper, "Worker Participation"

PRL8803 (1980).

(12) This list is the same as that put forward by the Commission in its

amended proposal for a regulation establishing a Statute for Euro-

pean companies. Supplement 4/75 —Bull, of the E.C. Article 120

(for example).

(13) Group I (Employers) of the Economic and Social Committee

expressed the opinion that the Proposed Directive did not tie in with

other Community Company Law proposals relating to information

to be conveyed to shareholders. It considered that companies would

be burdened with the task ofpreparingone set of information fortheir

shareholders and another for their employees, and in addition be

obliged to provide some information at six monthly intervals and

other information at annual intervals. See OJ. C. 77 of 29-3-82 at

page 13.

(14) See Section 9 of the Protection of Employment Act 1977 and

paragraph 7(2) ofthe European Communities (Safeguardingof Em-

ployees' Rights on Transfer of Undertakings) Regulations 1980

both of which refer to consultation procedures with a view to seeking

agreement.

(15) 27 January 1982, OJ. C. 77 of 29-3-82 page 6 at page 10.

(16) The Employer-Labour Conference Sub-Committee document on

works councils (1980) recommended that economic information

should be made available subject to the criteria that the disclosure

would not be detrimental to the organisation's well being. The Sub-

Committee also recommended that where partners disagreed about

interpretation a referral could be made to the Employer Labour

Conference. Discussion Paper ibid footnote (11).

(17) Ibid footnote (3) at page 9.

153