In theory, the Information and Consultation Regulations mean firms face fines of up to £75k if they fail to consult staff – but what will it mean in practice?

By the time you read this, construction employers who fail to set up national works councils when required to do so or consult their employees before taking business decisions may have to pay a penalty of £75,000.

This is one effect of the Information and Consultation of Employees Regulations 2004, which came into force on 6 April 2005. It is probably a prospect that many companies view with alarm, particularly those whose industrial relations have not always been smooth.

The idea of having to talk to staff reps before taking business decisions will no doubt go against the grain for many employers, but the consequences of failing to do so could be serious.

As well as the financial penalty, non-compliant employers risk conflict with staff and unions. In addition, employers bidding for public sector construction work may find their prospects for success jeopardised if actions have been brought against them for failing to comply with the regulations.

Employers may already have completed questionnaires on their track record on race and sex discrimination claims as part of a bid process. It’s easy to imagine that, in future, it may also be necessary for employers to disclose details of how they inform and consult with staff.

The implementation of these regulations gives the building unions the chance to get a foot in the door at firms where they have no presence. Unions not officially recognised by an employer may be able to gain access to its workforce and compel the employer to deal with the union at least for certain purposes. Unions already recognised by an employer may seize upon the regulations as a way of enhancing their role within the business and increasing their profile with the workforce.

That may worry construction employers, but for a number of reasons things may not be as grave as they seem. First, only those employers with 150 or more employees will be required to comply with the regulations from 6 April 2005. However, employers with 100 or more employees will have to comply from April 2007, and employers with 50 or more employees from April 2008, so the stay of execution may be temporary.

Another crumb of comfort for reluctant employers is that the obligation to set up a works council and to inform and consult with its employees is only triggered if formally requested by at least 10% of the employees in the business. This may mean that construction employers may not receive many valid requests because their workforce does not perceive a works council as conferring any real benefit on them or because the employees cannot motivate themselves to attain the 10%. Despite some employers’ attempts to employ more permanent employees as opposed to relying on CIS subbies, the pattern of “here today, gone tomorrow” remains common. Employees who do not anticipate a long-term working relationship with an employer may have little interest in whether they are consulted.

Additionally, if an employer has already set up a form of works council that meets the requirements set out in the regulations of a “pre-existing agreement”, the employees will need to succeed in a ballot where more than 40% of the workforce vote in favour of a works council. Such an deal can be on whatever terms the employer is able to get its employees to go along with. As such, it may be able to agree far less onerous obligations than those contained in the regulations.

Employers have a choice to make: consider setting up a pre-existing agreement on terms that they can live or wait to see if the employees attain the 10% that triggers the obligation to consult.

Furthermore, even if the provisions of the regulations are triggered, the obligation to inform and consult does not mean that employers actually have obtain staff consent before implementing a decision. All that is required is “to work in a spirit of co-operation and with due regard for […] rights and obligations” and, in certain circumstances, to consult “with a view to reaching agreement”. The regulations recognise that the interests of employers and employees are not always the same, and that all the informing and consulting in the world will not necessarily produce consensus.

Edward Goodwyn is a partner at Pinsent Masons. Email him at