Ministers bow to pressure over law forcing firms to consult on lay-offs

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The Government yesterday bowed to overwhelming political pressure and accepted new Europe-wide laws that force most companies to consult with their employees before large-scale redundancies.

The decision, successfully postponed by British ministers until after the election, also obliges companies to set up a permanent dialogue with their workers. Faced with the prospect of being outvoted, ministers decided to drop their objections to the principle of the legislation and seek concessions.

Peter Hain, the Minister of State at the Department of Trade and Industry, said that he had softened the proposed laws by winning a seven-year period for the measures to be phased in completely, rather than the three years originally on offer. That means that the measures will apply to all companies with 150 or more staff after three years, to those with 100 workers after five years and to those with more than 50 staff after seven years.

"We all agree that it is unacceptable for workers to be kept in the dark about important decisions affecting their livelihoods," said Mr Hain. "The final text is very different from the [European] Commission's original proposal and gives smaller firms more protection."

The European Commission, which wanted to insist on the right of staff to take out an injunction to stop mass closure plans, beat a tactical retreat because several member states were opposed. The result means that workers will have to take their cases to industrial tribunals. However, the European Parliament is likely to try to lay down the right to take out an injunction during a later legislative stage ­ a move that would entail further discussion between MEPs, the European Commission and its member states.

Meanwhile, the European Commission argues that companies will be able consult on a regular basis by e-mail, rather than have to set up a works council, if both parties agree. Despite the concessions offered to the UK the deal ­ approved in principle yesterday ­ is a setback for the Government which initially argued that laws on consultation of workers should be decided by member states.

Last night, the Confederation of British Industry (CBI) said it was "disappointed". John Cridland, its deputy director general, argued that "companies will find this really difficult to swallow". He added: "They will see it as a step in the wrong direction that could undermine the ability of managers to manage. We are particularly disappointed that countries that originally stood with the UK do not seem to have maintained their position."

But there was jubilation at the Trades Union Congress (TUC), where the general secretary John Monks, described it as "a breakthrough for employees across the EU. For the first time employees in all medium and large companies will have the right to find out what their companies plan and have their views listened to".

British companies are already expected to consult on redundancies and the laws can cover firms with as few as 20 employees if 10 are to lose their jobs.

But sanctions, which the European Commission wants to apply, are rarely applied in the UK. The UK and Ireland are the only two European countries without a formal law on information and consultation. There has been growing support for new information and consultation laws in European capitals following redundancy plans announced by Marks and Spencer. The British retailer is at the centre of court action in Paris for the peremptory nature of its announcement, because it was taken as part of a financial restructuring designed to return money to shareholders.