Select Committee on European Union Twenty-Second Report


Why we carried out our Inquiry

1.  Many factors other than the operation of the labour market can influence the success of a country's economy. However, the way in which its labour market functions can have a major impact on a country's social and economic well being. If the labour market performs well, citizens can benefit from plentiful job opportunities and low unemployment, while employers can benefit from the ready availability of the skilled workforce they need to conduct their business effectively.

2.  The European Commission's Green Paper "Modernising labour law to meet the challenges of the 21st century"[1] set out to launch a public debate about how legislation on labour law within the EU is affecting the operation of labour markets in Member States, and about whether this law could benefit from modernisation. In particular, the Commission wished to identify how labour law could evolve to support the Lisbon Strategy's objectives of increasing the competitiveness of the EU economy and creating high levels of employment.

3.  Our Inquiry had the aim of assessing whether there could be benefits for the UK in following up some of the suggestions made by the Commission in the Green Paper. We sought views on the extent to which flexibility in the labour market had benefited the UK economy and whether the Green Paper concept of modernised labour law could help it further. We sought also to examine whether existing employment protection measures in the UK, arising both from EU and domestic legislation, were working well and whether any changes were needed in these measures.

What the Commission Green Paper says

4.  The Commission's point of view, set out in the Green Paper, is that the modernisation of labour law is a key element of the actions needed to ensure the adaptability of enterprises and workers in the face of the challenges which arise from globalisation and the ageing of the EU's population.[2] The Commission refer to their 2006 Annual Progress Report on Growth and Jobs[3] in support of the view that the current balance between flexibility and security in many EU Member States has given rise to increasingly segmented labour markets; and that greater attention should be given to establishing conditions of "flexicurity".[4]

5.  In the Green Paper, the Commission consider the role that labour law might play in advancing a flexicurity agenda. The following objectives for the Green Paper are identified[5].

  • To identify so far unresolved problems where the existing legal and contractual framework is in conflict with the realities of the world of work;
  • To open a debate across the EU about how labour law can assist in promoting flexibility combined with employment security;
  • To stimulate discussion of how different types of contractual relations, together with employment rights, could help to create jobs, ease labour market transitions, assist life-long learning and foster creativity; and
  • To contribute to the Better Regulation agenda.

6.  In describing the current situation in EU labour markets, the Green Paper sets out how the need for increased flexibility has been stimulated by rapid technological progress, increased competition from around the world, changing consumer demand and a significant growth in the service sector. A wider variety of employment contracts has been needed in order to accommodate increasing variations in work organisation, working hours and pay.[6]

7.  The Green Paper argues that, faced with these pressures, businesses have tended to seek to remain competitive by using more flexible contractual arrangements to avoid some of the costs of compliance with employment protection rules. As examples, it cites the use of: fixed term contracts; part-time contracts; on-call contracts; zero-hour contracts; contracts for workers hired through temporary employment agencies; and freelance contracts.[7]

8.  The Green Paper cites evidence of detrimental effects associated with this increased diversity of working arrangements. It suggests that there is a risk that part of the work force may become trapped in a succession of short-term, low quality jobs with inadequate social protection.[8] It recognises, however, that such jobs may serve as a helpful stepping-stone enabling some people to get into employment.

9.  Conversely, the Green Paper refers to the finding of its 2006 Employment in Europe Report that stringent employment protection legislation tends to reduce the dynamism of the labour market, worsening the employment prospects of women, young people and older workers.[9]

10.  The theme of the Green Paper is that a system of modernised labour law might be found which provided adequate employment protection for workers in all types of job without damaging the flexibility and competitiveness sought by enterprises. In search of this system, the Commission sought views in the Green Paper on a range of issues related to this theme.

UK labour law as it is now

11.  Table 1 at the end of this chapter provides a useful list of the most recently introduced labour law provisions in the UK. It is extracted from Annex B of a report published by the Confederation of British Industry (CBI) which assesses the impact of new employment rights introduced during the period 1998 to 2006.[10]

12.  Although much of the employment protection currently in place dates from the period since 1998 covered by the CBI table, a number of measures were already in place before that date. Table 2 at the end of this chapter reproduces a table available on the Department of Trade and Industry website which lists those EU employment-related Directives for which the DTI has UK responsibility.[11]

How we conducted our Inquiry

13.  The Members of our Social Policy and Consumer Affairs Sub-Committee (Sub-Committee G) who conducted the Inquiry, showing their declared interests, are listed inside the front cover of the Report.

14.  Our Call for Evidence is in Appendix 1. We are most grateful for the evidence that we received in response to this; and we thank, in particular, those witnesses who gave us evidence in person. Those who gave us evidence are listed in Appendix 2, and the evidence is printed with this Report.

15.  We acknowledge with considerable thanks the expertise and hard work of our Specialist Adviser for the Inquiry—Professor John Philpott—who played a key role in helping us to prepare this Report.

16.  We recommend this Report to the House for debate.


Labour market regulations introduced in the UK during the period 1998-2006


1998Working time regulations
1999National minimum wage regulations
  Reduction in qualifying period for unfair dismissal
  Public Interest Disclosure Act
  Right to take time off for study
  Employment Rights (Increase of limits) Order 1999
  Parental leave regulations
  Maternity leave regulations
  Time off for dependants
2000European works councils
  NMW adult rate increase
  NMW development rate increase
  WFTC paid through the payroll
  Student loans repayment regulations
  Trade union recognition
  Dismissal of striking workers
  Part-time workers regulations
  Accompaniment for disciplinary/grievance hearings
2001Sex Discrimination (Indirect discrimination & burden of proof) regulations
  NMW adult and development rate increases
  WTD—amendment to remove 13 week qualifying period
2002Parental leave regulations—changes to extend entitlement
  NMW adult and development rate increases
  Part-time workers amendment regulations 2002
2003Placing union learning representatives on a statutory footing
  NMW adult and development rate increases
  Employment Act 2002
a) Paternity leave
b) Maternity leave
Adoption leave
  Equality (religion or belief) regulations
  Equality (sexual orientation) regulations
  Right to request flexible working
  Amendment of Young Workers Directive: end of UK opt-outs
  WTD—amendment to extend coverage
2004Prohibiting the blacklisting of trade unionists
  NMW adult and development rate increases and new 16-l7yrs rate
  Statutory dispute resolution procedures
  Employment Relations Act—Review of ERA
  Information and consultation regulations
2005 Implementation of Equal Treatment Directive
  NMW adult and development rate increases
2006TUPE—Revision of 1981 regulations
  Employment Equality (Age) Regulations 2006—introduced on 1 October 2006 to implement the EU Equal Treatment Framework Directive 2000/78/EC
2007  Work and Families Act 2006—introduced on 1 April 2007, this mostly affects statutory maternity pay, maternity leave and also provides carers of elderly or disabled dependents the right to request flexible working

* Increase in holiday entitlement from three weeks to four weeks in November 1999

Source: CBI report Lightening the load—The need for employment law simplification: October 2006, Annex B (Note: the last two entries in the table are up-dates of the CBI table added for this Report)


EU Employment-Related Directives for which the DTI has UK Responsibility

Required implementation date for UK
(whether yet implemented—Yes, No or Partial)
Relevant UK legislation
Safeguarding employees' rights in transfers of undertakings & businesses (Acquired Rights Directive)
Transfer of Undertakings (Protection of Employment) Regulations 1981
Protection of employees in the event of their employer's insolvency
Employment Rights Act 1996
Pension Schemes Act 1993
Employer's obligation to inform employees of conditions applicable to the contract or employment relationship
Employment Rights Act 1996
Organisation of working time
Working Time Regulations 1998
Horizontal Amending Directive'—Extending the Directive on organisation of working time to excluded sectors and activities (road, rail, air sea, inland waterway and lake transport, sea fishing, offshore work and junior doctors)
2003 and 2004*
The Working Time (Amendment) Regulations 2003
Protection of young people at work
1996 and 2000
Working Time Regulations 1998
Working Time (Amendment) Regulations 2002
Establishment of a European Works Council or a procedure for informing and consulting employees
See below
Parental leave
See below
Posting of workers
Employment Relations Act 1999
Equal Opportunities (Employment Legislation) (Territorial Limits) Regulations 1999
Extending to the UK the Directive on establishment of a European Works Council or a procedure for informing and consulting employees
Transnational Information and Consultation of Employees Regulations 1999
Extending to the UK the Directive on parental leave
Maternity and Parental Leave etc. Regulations 1999
Part-time work
Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000
Collective redundancies
(NB: This Directive consolidated two earlier directives)
Trade Union and Labour Relations (Consolidation) Act 1992
Fixed-term work
Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002
Summer time arrangements
Summer Time Act 1972
Summer Time Order 2002
European Company Statute: Employment Involvement
The European Public Limited-Liability Company Regulations 2004
Equal treatment in employment and occupation
2003 and 2006
National information and consultation of employees
The Information and Consultation of Employees Regulations 2004
The burden of proof in cases of sex discrimination; and the meaning of indirect discrimination
Sex discrimination (Indirect Discrimination and Burden of Proof) Regulations 2001
Amending the 1976 directive on equal treatment for men and women in employment and vocational training

* 2004 for junior doctors

** Other relevant British legislation already covered posted workers, e.g. legislation on the employment of children, on health and safety, the Working Time Regulations 1998 and the National Minimum Wage Act 1998.
Source: DTI website web page under Employment Matters,

European Commission Green Paper-Modernising labour law to meet the challenges of the 21st century, November 2006 Back

2   ibid. page 3. Back

3   European Commission 2006 Annual Progress Report on Growth and Jobs-Time to move up a gear: the new partnership for growth and jobs, January 2006: page 6. Back

4   "Flexicurity" is defined in the Commission's report to consist of a combination of sufficiently flexible work contracts coupled with effective and active labour market policies to support switches from one job to another, a reliable and responsive lifelong learning system, and adequate social protection. Back

5   op. cit. page 4. Back

6   op. cit. page 5. Back

7   op. cit. page 7. Back

8   op. cit. page 8. Back

9   European Commission report Employment in Europe 2006: page 81 et seq. Back

10   CBI Report Lightening the load-The need for employment law simplification: October 2006, Annex B  Back

11   DTI web page under Employment Matters: EU Employment-Related Directives for which the DTI has UK Responsibility, 

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