House of Lords - European Union

Select Committee on European Union Written Evidence

Memorandum submitted by Dr Alan L Bogg

1. "Flexicurity" navigates a precarious course between, on the one hand, the social costs of a deregulatory agenda based on individual freedom of contract and, on the other hand, the rigidities and inefficiencies arising out of bluntly constructed mandatory employment rights. What is most striking about the "flexicurity" agenda is its alignment with a procedural mode of employment regulation.[32] Characteristically, "flexicurity" measures specify default standards susceptible to modification through a range of procedural mechanisms. The distinctiveness of the "flexicurity" agenda lies in its perception of the competitiveness problem implicit in procedural regulation: the need for adequate safeguards to prevent the opportunistic abuse of flexibility by employers. Without "credible commitments to fair treatment at work" from employers,[33] the conditions for trust-based employment relationships and so high levels of productive cooperation between employers and workers are undermined.[34] Thus, in evaluating the prospects for a viable "flexicurity" agenda, the devil lies in the detail of the safeguards against opportunistic abuse contained in the procedural modes for modifying labour standards. The focus in this short paper will be on the procedural framework established in the Working Time Regulations 1998 (WTR).[35]

2. There are a range of procedural modes for modifying default standards in the WTR framework. First, certain labour standards may be varied through individual agreement between employers and workers.[36] Secondly, certain labour standards may be varied through a collective procedure.[37] In turn, the WTR provides for two kinds of collective procedure: collective agreements and workforce agreements. Collective agreements are those concluded between employers and recognised independent trade unions, and these have regulatory priority in the legislative scheme. In the absence of a recognised independent union, the employer may conclude binding "workforce agreements" with directly elected worker representatives. Each of these procedural modes will now be evaluated from a "flexicurity" perspective.

MODIFICATION THROUGH INDIVIDUAL AGREEMENT

3. WTR provides for an individual opt-out from the 48 hour maximum working week. From a "flexicurity" perspective the procedural mode of individual agreement is controversial. Given the inequality of power between employers and individual workers the potential for opportunistic abuse of flexibility is very great. This is supported by evidence suggesting workers are routinely subjected to illegitimate pressure to opt-out of the 48 hour maximum, leading for calls to eliminate the individual opt-out entirely.[38] Nevertheless, there is also evidence that some workers prefer to work longer hours willingly for reasons of personal autonomy, professional advancement, or economic gain.[39] The law should presumptively respect the genuine exercise of valuable personal autonomy wherever possible. The challenge for "flexicurity" is to devise a procedural mechanism that discriminates between these two kinds of situation. This raises three issues.

4. First, the technique of waivable worker rights found in the WTR is innovative in British labour law. Allocating the relevant entitlement to the worker before bargaining commences ensures that the bargaining baseline is modified in the worker's favour.[40] The entitlement is more likely to stick at its initial allocation to the worker, and in theory the worker is more likely to assign a higher economic value to the entitlement in selling it to the employer than she would if she were required to purchase it from the employer.[41] In practice, this "endowment effect" is displaced in situations where contracting parties routinely use "standard form" contracts.[42] This form of contracting is common in the British employment context, and this probably accounts for the routine use of the opt-out as a standardised term of the worker's contract.[43] The "endowment effect" could certainly be harnessed more effectively if the recent Commission proposal to invalidate opt-outs at the inception of the contractual relationship were adopted.[44]

5. Secondly, there is an urgent need to clarify the regulatory objectives. Presumptive respect for individual autonomy through waivable worker rights may be overridden where there are competing "third party" interests such as promoting the collective good of family life or ensuring gender equity in labour market participation.[45] Given the prevalence of long-hours working by fathers in the UK in particular,[46] "family friendly" and gender equity objectives might be better achieved through the restriction of individual worker choice and the enforcement of mandatory working time limits.[47] It remains obscure whether the WTR is a strategy solely for the protection of workers' health and safety, or whether it also forms part of a strategy for promoting gender equity/"family friendly" policy. This ambiguity has significant implications for the regulatory choice between waivable and mandatory rights.

6. Finally, if individual opt-outs are retained, procedural protections need to be bolstered to ensure better safeguards against opportunistic abuse by employers. Informal or diffuse work pressures might elude the current "detriment" provisions in the WTR, whereby workers are protected from subjection to detriment for refusal to opt-out. Reform options include more restrictive criteria for valid waivers (for example, compulsory "cooling off" periods, the possibility of retrospective withdrawal of waiver within a fixed time period, a requirement to take independent advice) or substantive constraints on waiver (mandating overtime premiums for hours worked over the 48 hour maximum).[48] More radically, waiver might be channelled through collective agreements with trade union or workforce representatives who potentially negotiate from a position of greater bargaining power with employers.[49]

MODIFICATION THROUGH COLLECTIVE AGREEMENTS OR WORKFORCE AGREEMENTS

7. Given the "security" risks with individual waiver, the modulation of labour standards through collective procedures is often advantageous from a "flexicurity" perspective. In the Supiot Report, collective bargaining was praised "as the most dynamic institution for coping with the diversity of types of work organization... collective bargaining proves its worth as a valuable tool that can be used to ensure adaptability [and] provide security in the face of uncertainty".[50] This would be complemented by a symbiotic inter-relationship between union-led collective bargaining and works council representation at enterprise level. Thus, in evaluating "flexicurity" within the context of working time regulation, much depends upon the existence of widespread and stable structures of collective representation at different levels in the labour market. This necessitates an appraisal of the provision for collective agreements and workforce agreements in the WTR framework.

COLLECTIVE AGREEMENTS

8. Collective agreements have regulatory priority in the scheme of procedures for varying normative standards. Given the independence and expertise of union representation this priority is appropriate. Nevertheless, recent evidence indicates a continuing union representation gap, particularly in smaller private sector organisations, although there are signs that the rate of contraction of union recognition has slowed in recent years.[51] Union recognition now stands at 16 per cent of workplaces in the private sector, although the incidence of union recognition is much higher in larger firms and in the public sector.[52] As such, the promise of "flexicurity' is likely to remain illusory without concerted action at EU and domestic levels to promote the extension of collective bargaining. This raises three issues.

9. First, while Community legislation on working time "relies upon the existence of thriving collective bargaining structures at the national level",[53] the EU has been remarkably reluctant to take any responsibility to ensure that such structures are in place. In part, this is due to the tightly circumscribed legislative competence of the EU in respect of trade union rights.[54] Nevertheless, "soft law" techniques for the co-ordination of member state activities in the field of collective bargaining may be utilised by the Commission under Article 140. To date, the efficacy of this kind of "soft law" promotional technique has been hobbled by a failure to prescribe specific targets and monitor compliance.[55] Secondly, while the implementation of the statutory union recognition procedure (SRP) is a positive step forward in promoting union recognition, the quantitative impact of the SRP has been small.[56] In part, this is due to its confinement to single employer bargaining and its exclusion from small firms (21 worker threshold).[57] In line with the Supiot Report, State support for collective bargaining in new bargaining units arranged along regional, group, network, or sectoral lines would be a valuable support to the "flexicurity" agenda in the UK.[58] Finally, the allocation of consultation rights to "representative" unions (with something less than the majority support threshold specified in the SRP) for the purposes of varying normative standards should be given serious legislative consideration.[59]

WORKFORCE AGREEMENTS

10. The WTR is based on a dual channel model of collective representation, permitting the variation of normative standards through "workforce agreements" in the absence of applicable collective agreements. In theory, this closes the representation gap associated with declining union recognition. In practice, two significant problems may be identified. First, "workforce agreements" have been rarely utilised in practice due to a cultural lack of familiarity with consultation procedures;[60] moreover, there is evidence that the prevalence of consultative bodies is in fact declining in British workplaces and that they are more likely to exist where there is already a union presence.[61] Secondly, even if "worker representatives" are consulted there is no statutory requirement that such representatives are "independent" of management.[62] While there is an extensive set of principles for evaluating trade union independence,[63] there is no parallel jurisdiction to scrutinise the independence of non-union representatives. Since the emergence of dual channel strategies has been largely stimulated by European legislation, it is regrettable that there has been no attempt to ensure the independence and representativity of this second channel at the European level.

11. The recent implementation of general consultation measures in the UK is unlikely to make any significant difference to these "security" risks to "flexicurity" in the "workforce agreement" channel.[64] First, consultation structures are not mandated by ICER 2004; 10 per cent of the workforce must request the initiation of "negotiations" as a trigger to the procedure.[65] This is a rather high threshold, and given the lack of any tradition of general consultation in the UK, it is unlikely that many employees will be sufficiently aware of its existence to pull the trigger.[66] Secondly, the conditions of validity for "pre-existing" and negotiated agreements are extremely undemanding, and are arguably not compliant with the Directive.[67] Even the prescribed "fall-back" provisions are `extremely "minimalist" in infrastructural terms'.[68] We should expect a greater degree of fluidity still with arrangements emerging out of the negotiated/pre-existing agreement phases. Thirdly, unions, even recognised unions, have no formal role under ICER 2004. There is no prescribed platform for integration between union and consultation structures. It is worth recalling the observations of the Supiot Report, that dual channel structures should be understood as complementary and symbiotic forms of collective representation.[69]

12. In conclusion, the "flexicurity" agenda has been a valuable corrective to debates presenting flexibility and security in opposed antagonism to each other. The most pressing challenge in labour law terms is to ensure fair and democratic procedural modes for the variation of labour standards. As this overview of working time regulation has indicated, there is much more to be done in ensuring that flexible procedures embody sufficient safeguards against opportunistic abuse. This requires a tightening of the conditions for valid individual waiver of certain employment rights; and concerted action to ensure there are viable collective representation structures in place for the variation of labour standards.

29 March 2007

32 H Collins, "Regulating the Employment Relation for Competitiveness" (2001) 30 ILJ 17. Back

33 Collins, above n 1 at 36. Back

34 For a theoretical analysis of the determinants of trust, see M Warren, "Democratic theory and trust", in M Warren (ed), Democracy and Trust (1999) 325. Back

35 Working Time Regulations 1998, implementing Directive 93/104 concerning certain aspects of the organisation of working time, [1993] OJ L307/18. Back

36 Most notably, waiver of the 48 hour maximum working week can only be effectuated through individual agreement between the employer and the worker. Back

37 In particular, collective and workforce agreements may modify standards on night work, daily and weekly rest periods, rest periods, and the reference period for calculating the average weekly hours worked. Back

38 TUC, "Working Time Directive Review 2003: the use and abuse of the opt-out in the UK". Back

39 C Barnard, S Deakin, and R Hobbs, "Opting out of the 48-hour week: employer necessity or individual choice? An empirical study of the operation of Article 18 (1) (b) of the Working Time Directive in the UK" (2003) 32 ILJ 223, 247-248. Back

40 C Sunstein, "Human Behavior and the Law of Work" 87 (2001) Virginia LR 205. Back

41 For a discussion of the economics of endowment effects, see C Sunstein, "Switching the Default Rule" (2002) 77 NYU Law Review 106. Back

42 Sunstein, above n 10 at 118. Back