Bosses fear Labour crackdown on councils

The number of companies forced to establish European works councils will double under a Labour government, according to employers' leaders.

Some 300 UK-based multinationals will be covered by the Brussels directive, compared with the present 150 because a Blair administration is expected to sign up to the Social Chapter of the Maastricht Treaty.

The full impact of Labour policy will surprise British companies, many of which are strongly suspicious of works councils, and could damage Mr Blair's attempts to make his party appear business-friendly.

Peter Reid, an employment law specialist at the federation, yesterday pointed out that under the Social Chapter British workers would be included in the count to decide whether firms were big enough to be covered by the directive. All companies with 1,000 staff in the European Union with at least 150 in each of two countries have to set up legally backed structures to consult and inform employees. At the moment only workers in Continental EU countries are used in the calculation.

Mr Reid said that while Britain was currently third in the league table of European economies affected by the law, Labour policy would put the UK at the top because of the existence of a large number of medium-sized firms.

The federation yesterday pointed out that there were just 100 working days left before companies which met the present conditions could establish a voluntary structure. After 22 September, UK-based multinationals will have to enter legally backed negotiations to establish the structures.

If a company refuses to co-operate, then employee representatives can apply for a council to be established within six months of the deadline.

If genuine negotiations prove fruitless, a works council structure will be imposed in September 1999.

In informal contacts with the Labour Party Mr Reid believes he has won assurances that companies would be given a fresh deadline to reach a voluntary agreement. The federation has asked for a "breathing space" of up to two years.

A future Labour government would also have to introduce its own laws on how negotiations should take place and the exact structure of works councils. Till then companies can opt to be "headquartered" for the purpose of works council legislation in any country it found the most favourable.

Under the status quo. German laws were among the most strict, providing for imprisonment where there was unconstitutional interference with the business of works councils. The law in Ireland appeared to be the most liberal.

The federation official said that some British businesses were facing a "very messy" time after 22 September. He estimated that some 20 companies did not appreciate the full impact of the legislation.