Memorandum by the Federation of Small
Businesses
INTRODUCTION
1. The Federation of Small Businesses is
the UK's leading non-party political lobbying group for UK small
businesses, existing to promote and protect the interests of all
who own and manage their own businesses. With over 211,000 members,
the FSB is the largest organisation representing the self-employed
and small and medium sized businesses in the UK. FSB members together
employ more than 2.5 million people and turn over more than £10
billion a year. About 25% of the membership are self-employed,
the others being mainly one or two person companies, which are
owner-managed and one third of our members work from home. The
FSB welcome the opportunity to respond to the Call for Evidence
from the House of Lords Select Committee on the European Union
on the EU Reform Treaty.
1.2 This submission is limited to three
aspects of the effect of the changes in the proposed Reform Treaty
on employment law. The three aspects are:
— The competences of the two legislators,
being individual Member States and the European Union.
— The status of the Social Dialogue.
— The elevation of the Charter of Rights.
2. COMPETENCES
2.1 The combined effect of the Article 2
TFEU 1, 2 and 3 is that control of employment policy passes to
the EU. This includes employment law. Member States can only legislate
in this area when the EU has not exercised its competence or has
decided to discontinue doing so.
2.2 The FSB regards this with apprehension,
in the light of our existing experience because:
— The British labour market has, perhaps
only until recently, been the most flexible in Europe. Union legislation
in this area has been founded on various articles of the existing
treaties for example equal treatment, discrimination and health.
These have created regulation and restriction both costly and
complex which have reduced flexibility.
— They have also borne disproportionately
on small businesses.
— They have ignored the principle of
subsidiarity.
— They have proved inflexible, in that
a EU Directive is very difficult to amend as experience shows.
An instructive example is the Working Time Directive, where the
judgements of the ECJ in the Simap and Jaegar cases in 2003, dealing
with workers on call but not working were greeted with surprise
and dismay in most Member States because of their effect on the
medical services sector. Great efforts at all EU levels to rectify
the inadvertent error in drafting by simple amendment have failed
to secure the required majority.
— The proposed ordinary revising procedure
will inevitably be complex and protracted.
3. THE SOCIAL
DIALOGUE
3.1 The new Article 136a recognises and
promotes the role of the social partners. For many years, small
business organisations in the EU, including the FSB, have pointed
to the unfairness and lack of representation caused by their exclusion.
The employers in the social dialogue are predominantly very large
businesses, frequently international, who have very different
ambitions and needs from those in small businesses. The largest
EU small business organisation, UEAPME, even took their claim
for representation to the ECJ but lost. The employees are represented
by trade unions, although the small business sector employs about
half of the EU labour force, few of their employees are in a trade
union. A majority of those trade union members are employed in
the pubic sector.
3.2 It is contrary to democratic principle
that the Etuc and Uropmi should be able to reach agreements on
legislation and have it passed unquestioningly into law. Naturally,
they have a priority interest of their own members.
3.3 No status is given in the Reform Treaty
to small businesses even though 99% of EU businesses are SMEs
whose needs are crucial, but who are denied a voice.
3.4 Once this has received ratification
in all Member States, it will be impracticable to amend. The FSB
regards this position with grave concern.
4. THE CHARTER
4.1 The objections to the charter being
elevated to supranational legislation are well known and accepted
in the UK so are not repeated here. It is subject to a protocol
referring to the UK and Poland. The question arises whether that
protocol excludes the charter from judicial application in these
countries.
4.2 The question has particular importance
because the judgments of the ECJ are given premier authority and
the ECJ is in practice, supreme, there being no right of appeal
and no minority judgments. Further, it is thought by some to lack
the will to protect the sovereignty of member states against EU
assumptions of power.
4.3 The FSB has the following comments on
the proposed text with the reservation that, within the time available,
an exhaustive foray into constitutional law has not been practicable.
This submission refers only to Chapter 4, "Solidarity".
4.4 The starting point for the application
of Protocol Art.1(1) requires the ascertainment of the "present
ability of the Court of Justice", since the new Article makes
the assumption that there is some ability to "find that laws
. . . of . . ..the UK . . ..are inconsistent with the fundamental
rights . . . which it reaffirms" The ECJ has already observed
that in its case law that EU law has regard to the principles
of the European Convention of Human Rights, though it may not
have been incorporated into EU law.
4.5 The new test applies to rights which
are reaffirmations which it states are not justiciable, but not
to new affirmations. Many will consider that it is the new rights
in Chapter 1V that give most cause for alarm, but these are not
covered by Article 1(1).
4.6 Article 1 (2) appears to accept that
the effects of Article 1 (1) are uncertain because it specifically
excludes from what is justiciable anything in Chapter IV except
insofar as the UK has provided for such rights in its national
law. This appears to apply to Articles 27 (information and consultation),
28 (collective bargaining and strikes), 30 (unjustified dismissal),
but not 29, 31 to 38 and importantly 31 (working time and paid
holidays). There will be plenty of room for argument as to whether
rights granted under national law are the same rights as in the
Charter.
4.7 Article 2 of the Protocol provides "To
the extent that a provision of the Charter refers to national
laws or practices, it shall only apply to the UK to the extent
that the rights or principles it contains are recognised in the
law or practices of the UK". This appears to apply to the
rest of the Charter rights similar treatment as is provided for
cases under Chapter IV. The same comment applies as under Article
1(2).
4.8 The FSB considers that it is wrong to
convert contractual rights in employment contracts into fundamental
rights.
13 December 2007
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