Examination of Witnesses (Questions 1
- 19)
WEDNESDAY 4 FEBRUARY 2004
MR MARTIN
STANIFORTH, MS
JULIE CARNEY
AND MS
SUSAN SMITH
Q1 Chairman: May I welcome you to this session
of the Social and Consumer Affairs Sub-Committee of the Select
Committee on the European Union. Thank you very much for coming
along. We are glad that we have people here from the DTI and from
the Department of Health because obviously there are consequences
directly affecting the DTI and also consequences of the ECJ judgments
in particular for the Department of Health. This session is open
to the public and is being webcast and can be broadcast, which
is the practice now for sub-committees. It means, of course, that
asides can sometimes be heard, so please bear that in mind. There
will be a verbatim transcript, of which you will be sent a copy,
and you can of course check it for accuracy and let us have it
back. As we are trying to move quite fast in this inquiry we would
like to have it back within seven days. Similarly, if there are
any further questions that we leave with you for an answer, if
you could deal with those within seven days that would help us
very much. We are a bit short of time because, as you know, the
Commission has set a deadline of March for consultation on this
issue. I will invite members of the committee to put questions
to you, but would you like to make any comments first?
Ms Carney: Yes, just to put the Commission communication
in perspective and to explain that the Working Time Directive
was implemented in the UK under the Working Time Regulations in
1998. It provides for an average 48-hour weekly working time limit,
night work limits, health assessments for night workers and entitlements
to weekly, daily and in-work rest breaks and four weeks' paid
annual leave. The 48-hourly week limit is averaged over a 17-week
reference period but under the directive that 17-week reference
period can be extended to 52 weeks by a collective or work-based
agreement. The directive and regulations do not apply to anyone
who is genuinely self-employed and the 48-hour weekly limit does
not apply to autonomous workers. As described in the directive,
these are people where the duration of working time is not measured
or pre-determined or can be determined by the worker themselves.
The examples they give in the directive are managing executives
or other persons with autonomous decision-taking powers, family
workers and workers officiating at religious ceremonies in churches
and religious communities. Any worker can also opt out of the
weekly working time limit providing they agree this with their
employer and record this in writing. If they do so, they can still
change their mind and give notice if they decide they do want
to enforce their right to refuse to work for 48 hours. The employer
and worker agree how much notice should be given. The maximum
allowable is three months. If there is not a notice period then
the minimum the worker can give is seven days' notice. Under Article
18 of the Working Time Directive there is a requirement on the
Council of Ministers, on the basis of a Commission proposal accompanied
by an appraisal report, to re-examine the opt-out provision and
decide what action to take by 23 November 2003. That was the deadline.
The Commission have missed that by a little bit, but that is essentially
the communication they have put out now. It was a pre-arranged
review of parts of the directive. They have also taken the opportunity
to raise the issue of the implications of the recent ECJ judgments
and Martin might want to say something about those.
Mr Staniforth: Yes indeed. Our central concern
from the Department of Health perspective is the implications
of the two judgments, the SiMAP and Jaeger judgments.
We have been supporting the NHS in preparing for the extension
of the Working Time Directive to cover junior doctors for some
time, but these judgments have significantly affected the way
in which the directive is interpreted, in particular by defining
all time spent resident on call in a hospital or other place of
work as working time rather than non-working time and in requiring
compensatory rest for broken periods of rest to be taken immediately
rather than within a reasonable time. This has, as our paper to
you has explained, made it more difficult for the Health Service
to achieve full compliance by 1 August this year when the directive
applies to doctors in training and I know it also has some implications
for other sectors of the economy. We are aware that other Member
States share our concerns at the implications of these two judgments
for their health services and we are discussing with them the
extent of their concern and the scope for working jointly to seek
an appropriate amendment to the directive to change the impact
of the two judgments. At this stage that is all I want to say
by way of introduction.
Q2 Chairman: Thank you very much. Ms Smith,
do you want to add anything?
Ms Smith: No, thank you.
Q3 Chairman: We will want to explore some
of these points because we have a lot to learn. We have taken
on board two points. One is that the Commission document has a
lot about the UK's opt-out, pages and pages of it, and the second
is that the consequences of the two ECJ judgments are obviously
fairly important. What is your judgment about how important is
the flexibility which is given by the opt-out for British competitiveness
and have you quantified that in comparison with other factors?
We are going to have employers and employees' representatives
coming and no doubt they will take a view too, but I would like
to have a first comment from you on that point.
Ms Carney: Flexible labour markets are key to
a successful economy and we see the flexibility that the UK opt-out
gives to both employers and employees as an important factor in
a flexible market and therefore British competitiveness. While
the UK has more employees working above average working hours
it also has more working below average hours. We have got a wider
range of working hours than most other Member States. This flexibility
makes it easier for both employees and employers to match working
hours to their needs. As a point of reference, working hours in
the UK were going up through the nineties. They peaked in 1997
and that upward trend was reversed in 1998, when the Working Time
Directive came in. The Government also launched its Work/Life
Balance campaign in 2000 and the proportion of full-time employees
who work more than 48 hours a week has fallen from 23.5 per cent
in 1998 to 20.4 per cent in spring 2003, so we are making progress.
The average weekly hours have also fallen in the UK over that
period. We believe it is important that people have a choice,
both individuals and employers, on how to balance work to suit
business needs and individuals' needs. The Treasury analysis shows
that while there is broad agreement about the impact of institutional
practice, such as employment protection legislation, tax and benefit
incentives to work, and labour market policy or the role played
by unions, opinion is more divided regarding the quantity of importance
of each, so we have not attempted an assessment to quantify precisely
the flexibility given specifically by the opt-out compared with
other factors that affect labour market flexibility. The Treasury's
study also shows that since 1997 the UK labour market has become
more flexible. This is due to a number of factors, including the
introduction of employment legislation in such a way that it has
not acted to reduce labour market flexibility, and that was the
approach taken in implementing the Working Time Regulations in
the UK. The directive gives absolute protection to workers who
do not want to work more than 48 hours a week but it also allows
workers who want to work more than 48 hours to do so and we think
that choice is the right approach. We have undertaken some research
looking at business reasons for the use of long hours working.
In November 2003 the DTI published research called The Business
Context to Long Hours Working which, among other things, looks
at the business reasons for long hours working. That report noted
that the main reason cited by employers for sustaining long hours
working was to meet a deadline or cope with a backlog of work.
However, the report also indicated that some of the hours could
be avoidable because employers were giving extra hours to workers
because they wanted the overtime; and the research highlighted
the difficulties that firms could face in reducing overtime hours
when employees want to work those hours and have relied upon overtime
pay to boost their earnings.
Q4 Lord Harrison: I would like to dwell
on the question of flexibility. In your first answer you implied
that flexibility applied both to the employer and to the employee.
Would you agree with me that the exercise of flexibility on behalf
of the employer who would like the employee typically to come
in a certain number of hours and so on may well conflict with
the desire of the employee to match what is an ambition of the
Commission to bring a greater ability to the employee to exercise
flexibility in favour of home and family matters? Do you see those
as possibly in conflict? Are they reconcilable and, if we take
the second area, in other words, giving flexibility to the employee
to manage his or her own affairs in such a way as to benefit the
family, do you see that as providing a competitive edge for the
industry in which the employee finds himself or herself?
Ms Carney: The Government's Work/Life Balance
campaign is very much aimed at promoting flexibility and the business
benefits of organisations offering flexibility to their employees.
We see that as potentially a win-win situation and we do not see
that there has to be conflict between employers and workers about
the hours they work. We have introduced new legislation allowing
parents of children aged up to six and disabled children up to
18 the right to request flexible working. Flexibility is the key
issue. The Working Time Directive is a health and safety measure
and it only looked at the maximum limit and for most people that
is not the point, because most people are not working anything
like 48 hours, so the question of flexibility for most people
is not dealt with through the Working Time Directive. We have
other legislation and other campaigns in the UK, in other words
UK-specific legislation, which provides that for workers in the
UK.
Q5 Lord Colwyn: I am in a much better mood
than I was before you came in because, having worked between 16
and 17 hours yesterday in three different jobs I now think that
I am probably autonomous and it is not going to apply to me at
all and so I am very pleased about that. I wonder if you could
clear up something? The MEPs have called for an end to what they
call the loophole that allows British firms to break the working
time limit as laid down by the laws and abuse the existing deal.
I also read that there was a cliff-hanger vote where it was 19
to 15 with three abstentions and the committee called upon the
European Commission to take Britain to court for widespread and
systematic abuse of the directive and, given the recognition by
the Commission of widespread systematic abuse, they insisted that
the Commission institute an infringement process against the UK
Government. If all that happens and we lose our opt-out what are
going to be the economic and social consequences?
Ms Carney: It is a big "if" for a
start because the Commission consultation document does not propose
the removal of the opt-out, although it does spend quite a lot
of time debating how it has been used or abused in the UK. It
is difficult to say exactly what would happen, but we can give
you the scale of the impact in terms of the numbers of people
it will affect. Currently 20 per cent, as I mentioned earlier,
of full-time workers report through the labour force survey that
they usually work more than 48 hours a week. That equates to 3.7
million workers. Some of those might be autonomous workers, some
of them might not be covered. If you asked on two consecutive
quarters, which replicates the 17-week reference period, this
drops to 2.5 million workers, and if you asked every year over
the four quarters the figure drops again to 1.7 million, so they
are the numbers of people involved. Of those who work over 48
hours a week the indications are that they are split into roughly
three equal groups of those who are paid overtime rates to do
so, those who work long hours as part of their normal contractual
hours, and the third group are those who are working those hours
without overtime, who may possibly be autonomous workers but may
not be. We know there would be a substantial impact on the UK,
both economically as businesses lose flexibility and try to grapple
with this, and socially as all those workers would not be able
to work those patterns and a large proportion of them would therefore
not earn extra money for doing so.
Q6 Lord Harrison: I am sorry, Chairman,
but on the competitiveness issue I really go back to the flexibility.
Surely it is the case that there can be an employer who requires
an employee to be working because of a high period of activity
in a particular industry such that the reference points are overturned
but the employee on his or her part may well not want to work
for a sustained period. I think your original answer may not be
accurate and the two forms of flexibility can come into conflict.
Ms Carney: The point is that under the law the
individual worker has the right to refuse to work more than 48
hours on average over the reference period.
Ms Smith: The regulations do contain provisions
whereby, by collective agreement, the reference period can be
extended, so if, for example, in your example you have an employer
who has a very busy period and a less busy period, he might well
by collective agreement with his workforce decide to have an extended
reference period so that employees can work longer during the
busy period and to that extent yes, that is clearly different
from the individual opt-out, but it is part of the nature of collective
agreements that once the agreement is agreed collectively then
it applies to both the employer and the workforce in general.
Q7 Lord Harrison: I was trying to establish
that there was a conflict there. In a sense your follow-up to
my example demonstrates that.
Ms Smith: Any individual, when they are working
within an organisation, has to work within both the structure
laid down by the employer and also the structure laid down by
collective agreements.
Q8 Chairman: Obviously, Ms Smith is right
about that although, of course, one feature of Europe as a whole
is that we have much fewer collective agreements, in particular
in the private sector, compared with other countries.
Ms Smith: Yes.
Chairman: That is one of the main points
that has been made in the Commission documentation. Overall the
pattern will probably be quite important when we come to further
negotiations.
Q9 Baroness Massey of Darwen: Do you have
any estimate of the scale of abuse of the regulation in the UK
and what might be done to prevent it?
Ms Carney: It depends what you mean by "abuse".
It is clear that if you are talking about the 48-hour limit overall
the vast majority of employers in the UK are complying with this
because the vast majority of people are not working sustained
long hours and they are not doing night work or shift work.
Q10 Lord Colwyn: How do you know that?
Ms Carney: We know that from the labour force
survey. We know that, as I said, 3.7 million are reporting that
they work longer than 48 hours, so 80 per cent of people are not
working more than 48 hours. It depends what you mean by "abuse".
You are in breach of the directive and the regulations if you
coerce people to work longer than 48 hours, or if you coerce them
into signing an opt-out. According to the Barnard Report, which
the Commission drew on in its paper, there is some anecdotal evidence
suggesting that in some instances there has been pressure on individuals
to sign an opt-out from an employer. However, the report indicates
that in most cases there was not. The process of obtaining an
opt-out for new employees was sometimes part of the recruitment
or induction procedure in case study organisations that the report
looked at, but the report concludes that it is difficult to say
whether this provided evidence of responsible employers just doing
the paperwork, or whether it suggested indirect pressure was being
applied to employees to sign the opt-out. The TUC suggested in
a press release that almost a quarter of employees who worked
over 48 hours were forced to sign opt-outs. This is based on responses
to an omnibus survey published in August 2003 which indicated
that nine per cent of workers said they did not really have a
choice if they wanted to keep their job and another 15 per cent
said they were told to sign when they started a job. It is quite
difficult to get underneath that and know exactly what is happening.
Q11 Baroness Greengross: When you have something
like an agricultural group of people, labourers working in a large
farming industry, for example, they might work for a lot of hours
for a very short period and then after the harvest or whatever,
or, let us say, in Italy when the olives or the grapes have been
harvested, there is a great period of rest. How is that calculated?
Is it based on a six-monthly period or if you go over the 48 hours
in one week is that already against the regulation?
Ms Carney: It is back to the reference period.
The default reference period is 17 weeks. Many other Member States
use collective agreements to extend that, and, as Susan said,
a classic example would be a sectoral industry where there are
seasonal variations like agriculture. They only introduced the
directive in Italy in April of last year, so I am not quite sure
what Italian agricultural workers are doing.
Baroness Greengross: I can imagine!
Q12 Baroness Greengross: We are having difficulty
hearing you with the acoustics in this room, so I apologise if
I ask you something that you might have just answered. It is clear
that the evidential base on which this is formulated is terribly
important, particularly if the Commission are going to make comments
on what we are doing in the UK based on this. We were interested
in the Barnard Report and I have to say I have never seen this.
It is unpublished so I assume that is why I have never seen it.
We wondered what the Department's view was of the report and why
it has not been published.
Ms Carney: It is a Commission report. They were
not obliged to publish it but we understand they are making it
available to anyone who asks, so we can provide the details to
the Clerk and probably get you copies of it. We have seen the
report and basically the researchers sought views of key stakeholders—the
CBI, the TUC, government officials—on the use of the
opt-out in the UK as well as interviewing human resources
managers from 13 case study organisations. The report looked closely
at whether the UK could operate equally well by using collective
and workforce agreements instead of the opt-out or by using unmeasured
working time provisions (autonomous workers provisions), but found
no clear evidence that this would work. We think it is a well-balanced
report. It represents all the views put to the researchers
from the stakeholders. The Commission press conference, when they
released their report, represented the report as being very critical
of the UK. We think it is actually more balanced than that when
you read the report and there were press and public comments by
the authors of the report who made that point themselves.
Q13 Baroness Howarth of Breckland: If it
appears that it is critical of the UK because I assume that is
the way the media has reported it and that will have had an effect
on how people interpret it. How do you think your Department and
whoever else can make an impact on that so that it is evidentially
based rather than based on basic assumptions, which is what you
are really saying?
Ms Carney: We are going to be talking to stakeholders
and drawing on the report ourselves in our response to the Commission's
communication, so we will try to marshal the evidence ourselves
in response.
Q14 Baroness Brigstocke: When was it published
and what years was it referring to? I understand there is quite
a switch between the earlier years up to about 2000 when work
was increasing, but there has been a static year in 2003. Was
this written before 2003 or after or during the year?
Ms Carney: I think most of the field work was
done in 2002. It was published and presented to the Commission
in December 2002.
Q15 Baroness Brigstocke: When will we hear
what has been happening in 2003, particularly if it is a year
where there has not been a great switch in practices?
Ms Carney: I do not think we would see it as
especially out of date. There were no significant changes in 2003
and we are carrying on collecting evidence, but we have not noticed
any changes in the continuing trend. The reduction in long hours
worked in the UK carried on in 2003.
Q16 Chairman: I am slightly concerned about
the Commission document not just because it aims at the United
Kingdom quite a bit, but on one or two key points it is incorrect
or out of date because it is specific in the Commission document
that one of the wicked things that has happened is that the weekly
working time has increased over the last decade. That is not the
point, is it? The question is what has happened since we had the
Working Time Directive. It looks rather sloppy, if I may say so.
You say in the DTI Memorandum that although the regulations are
the subject of infraction proceedings, these are on different
aspects of the regulations. You also say that there are technically
good arguments to support the amendments which we made in the
UK. Could you deal with those points because we do not know exactly
at this stage what the infraction proceedings relate to and whether
they are relevant or not relevant to our inquiry.
Ms Smith: The infraction proceedings mentioned
in paragraph 14 of the Explanatory Memorandum have no relevance
to the opt-out provision or the SiMAP/Jaeger rulings.
Four issues were raised in the infraction proceedings. Two of
those issues challenge the 13 week qualifying period for paid
leave and the calculation of night workers' hours and they have
resulted in the Working Time regulations being amended. Because
the infraction proceedings have a very protracted timescale, they
have been going on for a couple of years. There are two other
outstanding points but because they are still being considered
as part of the proceedings we would rather not discuss exactly
which regulations are under consideration. Suffice it to say that
one of them concerns another regulation entirely and the final
outstanding point is on some guidance which was issued with the
regulations so it is not on the regulations themselves at all.
We apologise if paragraph 14 is perhaps a bit confusing, but the
reference to the infraction proceedings was included in the Explanatory
Memorandum to demonstrate that although the Commission has infracted
the UK on some aspects of the regulations it has not done so on
the areas which the Commission focused on and which they were
critical of. Our point there is only a narrow one. If the points
which have been focused on substantially did not follow the Directive,
there would have been ample opportunity, bearing in mind the regulations
were dated from 1998, to infract us. In the intervening period
of some five or six years, the legal part of the Commission has
not infracted us, although the policy part of the Commission has
expressed dissatisfaction with how the Directive has been implemented
on the opt-out point. The second part of your question related
to our statement concerning the amendments which were made in
1999 and our saying, "We feel that technically there are
good arguments to support the amendments . . .". The Working
Time Regulations 1999 amended the original 1998 Regulations so
that while an employer is required to keep a record of those employees
who have agreed to opt out of the 48 hour week, the employer is
not then required to keep a record of the hours which are worked
by those workers who have opted out. This reflects the strict
wording of Article 18 of the Working Time Directive, which is
why we have said "technically". Article 18(1) (b) (i)
states that a Member State shall have the option not to apply
Article 6, which is the 48 hour week, provided it takes necessary
measures to ensure that the employer keeps up to date records
of all the workers who carry out such work. That is basically
what our regulations provide. When the Regulations were made in
1999, in the regulatory impact assessment produced in support
of the Regulations, a saving of £13 million per annum was
identified in connection with the record keeping, by making the
change to the requirement for records.
Chairman: As a long time worker in the
European Union I have noted that you followed meticulously the
text which is favourable for Britain and as we know the European
Commission is going a bit beyond it, I can see the basis for the
argument.
Q17 Lord Harrison: Ms Smith in her first
reply talked of four infractions, two of which have been removed
on the 13 week holiday complement and on out-workers, but who
has withdrawn? Have the Commission withdrawn their infraction
proceedings against us or have we altered to conform with them?
Ms Smith: We have amended our regulations.
Q18 Lord Harrison: On the other two, you
implied that you had some difficulty telling us the area of concern
of the supposed infraction. I do not understand that. I can understand
you might have a negotiating position on such proceedings but
surely the Committee can have divulged to it the area that is
covered in the disagreement between the UK Government and the
Commission.
Ms Smith: Certainly. To date, the correspondence
relating to the infraction proceedings has been between the UK
Government and the Commission because we have got to the stage
of the Commission sending us a Reasoned Opinion and us responding.
The matter is not before the European Court at the moment. We
can provide in writing information concerning the issues which
are under dispute.
Lord Harrison: We would welcome that
but I must say I am surprised that the area where the dispute
lies cannot be made public in this Committee.
Q19 Chairman: We normally have the mise
en demeure and then we have the reasoned opinion which goes
to the Court. On these cases, are we at the stage where we have
received the Reasoned Opinion?
Ms Smith: We have received the Reasoned Opinion
and we have been to the Law Officers who have said we can defend
it. We have put in our defence and we are waiting for the case
to be listed before the ECJ.
Chairman: We know the reporting requirements
were modified but can we move on to why?
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