The Gazette 1982

JULY/AUGUST1982

GAZETTE

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 • (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. FOOTNOTES (1) OJC 297 of 15-11-1980. (2) The Protection of Employment Act 1977.

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 16 . 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 17 , stated that suchmeasures could include the refusal to authonse collec-

153