Select Committee on European Union Twenty-Second Report


188.  We took evidence on two issues which, while not central to the Green Paper, go to the very heart of the formulation and implementation of EU labour law: the role of the social partners in the EU legislative process; and the suggestion that the UK "gold plates" EU directives when implementing them.

Formulating EU employment regulation

189.  Article 137 of the EC Treaty provides the Commission with a legal base on which to propose legislation on working conditions and certain other matters relating to employment. Before doing so, the Commission is obliged, under Article 138(2), to consult management and labour (the "social partners") on the possible direction of Community action. These partners comprise the European employers' confederation Business Europe (of which the UK CBI is a member), the European Trade Union Confederation (ETUC) (of which the UK TUC is a member), and the European Centre of Enterprises with Public Participation, representing public sector organisations. This consultation process is termed the "social dialogue". The interests of small and medium enterprises are represented by the European Association of Craft, Small and Medium-sized Enterprises (UEAPME) which, however, has no representation from the UK.

190.  Additionally, under Article 139, the social partners can, if they choose, reach agreements on workplace matters which can be implemented throughout the EU by way of a Council decision on a proposal from the Commission. Social partner agreements can also be implemented by Member States acting independently or by the social partners working together at individual Member State level.

Small business and the social partners

191.  The Commission's action plan for better regulation[43] sets out the aim of "simplifying the body of Community law and reducing its volume". Furthermore, EC Treaty Article 137(2)(b) provides that any Directives adopted under Article 137 "shall avoid imposing administrative, financial and legal constraints in a way which would hold back the creation and development of small and medium-sized undertakings". Nevertheless, the Federation of Small Businesses (FSB) told us that, despite the importance of small business to the EU economy, the small business sector had no official status in the social dialogue process. There is a European Small Business Alliance, of which the FSB is a member, but the FSB told us this does not have a formal independent role in the social partner dialogue (although now a member of Business Europe, the Alliance must vote on issues as Business Europe directs).

192.  Mr Tyrrell from the FSB told us that it had been pressing for small businesses to have their own institution in Europe with the same ability to operate as the "two sides of industry" a phrase incidentally which he said was "anathema to us because there are not two sides of industry, as we know, there are many more, at least three." (Q 78)

193.  The DTI Minister, Mr Fitzpatrick, told us that he agreed with the FSB about the importance of small businesses engaging in the European Social Dialogue. He explained that, since 1998, the European Association of Craft, Small and Medium-sized Enterprises (UEAPME) had been recognised for consultation by the Commission. Unfortunately, however, there was currently no UK representation on this body. He suggested that the issue of the engagement of organisations representing small firms with the social dialogue is something that they could consider raising with the European Small Firms Envoy. (pp 106-107)

"Gold plating"

194.  Agreed EC directives specify an implementation date by which they must be transposed into national law. Directives often set minimum legal requirements and may be formulated in fairly general terms, which leaves Member States room for manoeuvre in implementing them.

195.  In the UK, the House of Lords Merits Committee on Statutory Instruments has the role of reporting to the House on any Statutory Instrument that it considers to have inappropriately implemented an EC directive. We welcome the work of this committee, but note that only a very small number of Statutory Instruments have been drawn to the attention of the House for this reason (one during the 2004/05 parliamentary session and three during the 2005/06 session).

196.  A common accusation, which we heard again during our Inquiry is that the UK sometimes implements measures far beyond what directives actually require as a minimum—a tendency popularly referred to as "gold plating". The FSB's Mr Tyrrell presented us with a number of examples of this, including that of the Part-Time Workers Directive: "It provided that part-time workers should be treated not less favourably than other workers employed by the same employer under the same contract. The UK Government transposed that in regulation from 'under the same contract' into 'any contract'". This, Mr Tyrrell concluded increased the scope of the Directive considerably. (Q 81)

197.  Miss Jane Whewell, Director of European Strategy and Labour Market Flexibility at the DTI, responded by outlining to us the reason why there was often a perception of gold plating: "I think there is a tension particularly inherent in EC law where it tends to be drafted in a very broad brush manner, there is a lack of detail and we are caught in the middle. It is perfectly possible for us to copy out the directive and say 'that is the law', and say to industry 'now get on with it'. I do not think they would be terribly happy because just as much as they are saying please do not gold plate, and we try very hard, they also ask us for the maximum flexibility under the directive. They ask us, above all, for clarity. Clarity is not a predominant feature of a lot of European law, so we do our best to make the law as clear as possible for business. Sometimes people feel that this is gold plating. One could debate that for a very long-time but we do our best and there is a programme now looking at large parts of UK legislation, both domestic implementation of European law and UK law, about can we simplify it? Can we make it easier? How can we help business?"(Q 170)

198.  Miss Whewell's explanation was consistent with the final report of the independent Davidson Review Implementation of EU Regulation[44]. This concluded that "Inappropriate over-implementation may not be as big a problem in the UK—in absolute terms and relative to other EU countries—as is alleged by some commentators." The review found firm evidence of gold plating to be lacking. Criticism sometimes arose because of concern about the fact there is a regulation at all rather than the details of its implementation. Moreover, similar concerns were found to be expressed by business representatives in other Member States suggesting that complaint about regulation was simply a widespread fact of economic life.

199.  We are persuaded that the current social partnership consultation arrangements for formulating EU legislation have an exclusive "two sides of industry" feel.

200.  We recommend, therefore, that the Government should support UK small business organisations in finding means to ensure that social dialogue in the EU includes a wider representation of interests, in particular representatives of the small business sector. This would seem the most appropriate way of making sure that the EU matches up to the spirit of its treaties which state that the EU should avoid imposing administrative, financial and legal constraints on small and medium sized enterprises.

201.  We recognise that the perception remains strong that the UK "gold plates" EC directives relating to employment. However, we have seen no conclusive evidence to support this view and indeed the final report of the Davidson review suggests that the perception is exaggerated. We recommend no further action on this matter.

43   Commission Communication: Action plan Simplifying and improving the regulatory environment COM(2002) 278 final, page 14 Back

44   HM Treasury report: Implementation of EU Regulation, November 2006 Back

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