Employers have less than a year to work out how they will comply with new rules covering the rights of employees to access company information and be part of business decision-making.
If they do not, they could face penalties of up to £75,000 for infringement, warns a leading Midland employment lawyer.
Tim Lang, partner at Black Country law firm George Green, says the new system of European-style work councils are a ticking time-bomb for employers.
"From March 2005, new regulations will be introduced into the UK, giving employees new rights to a minimum standard of information and involvement in major business decisions," said Mr Lang, who is based in George Green's Cradley Heath offices.
"Voluntarily setting up a consultation framework before the new legislation comes into force will be advantageous to employers, but those who wait too long will have a default framework foisted upon them."
Initially, the new laws will only apply to firms with 150 or more employees. However, by 2007 the laws will extend to those with 100 employees and, by March 2008, the threshold will drop to 50.
Under the new rules, employ-ees will be able to request information and consultation arrangements from their employer with a petition from ten per cent of the workforce.
There would then be a period of time for negotiating a voluntary agreement, detailing exactly what information must be provided, when, to whom and what level of consultation is required. If nothing can be agreed then a default framework, set out in the legislation, will apply.
"If an employer voluntarily sets up a framework before ten per cent of the workforce request negotiations it can be highly advantageous," said Mr Lang.
"First, the employer may be able to establish an agreement that avoids union involvement, or the need to elect employee representatives. Second, employers can avoid the inflexibility of the default framework.
"An employer can agree the extent of the information the company is obliged to provide, and the issues it must consult over, rather than having the information and consultation requirements in the default framework foisted upon it."
The proposed UK legislation, the Information and Consultation of Employees Regulations, is based largely on the European Information and Consultation Directive and will, in effect, extend the system of European works councils from a trans-national level to a national level.
Enforcement of the provisions will be by a range of bodies, such as the central arbitration committee, employment tribunals and the civil courts.
Sanctions, for companies who break the rules, will involve a mix of remedies based on specific performance orders and financial penalties of up to £75,000.
"It is envisaged that there will be considerable up-front implementation costs, but the regulators claim that in time these will be balanced out by lower turnover of staff and higher productivity," said Mr Lang.
Implementation costs will depend on the size of the under-taking, existing channels of informing and consulting employees and the effort firms put into making the most of the flexibility of the new regime.
The Department of Trade and Industry estimates that for those firms with no pre-existing structure, who just implement the standard legislative process for informing and consulting, the total set-up costs per firm would be £4,000 for medium-sized firms and £6,300 for large firms.
But Mr Lang disagrees. He said: "The cost in management time of this new directive could be huge, with companies having to think through their processes and then actually provide the information. Time is already short for the first businesses affected to start the process of putting measures in place."
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