The EAT has upheld a decision that collective redundancy consultation was triggered where an employer decided to close a school subject to an improvement in pupil numbers. Although the decision was subject to the proviso regarding pupil numbers, the duty to consult had been triggered. The EAT also upheld the decision that special circumstances did not apply to prevent collective consultation. The special circumstances defence requires a contemporaneous assessment of events and relevant circumstances and cannot be identified in hindsight. Here, the employer was ignorant of the law and had recklessly failed to obtain legal advice about the proposed closure of the school. The maximum protective award of 90 days was upheld (E Ivor Hughes Educational Foundation v Morris and others).

Background

Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) requires employers who are proposing 20 or more redundancies within a 90-day period to collectively consult on the proposal with representatives of the employees. 

However, the trigger point for consultation is a vexed issue, which has resulted in conflicting case authorities.  Does the obligation arise when the employer: (i) proposes to make a strategic business or operational decision that will foreseeably lead to collective redundancies; or (ii) has taken the strategic decision and is proposing to make collective redundancies?  If it is the former, then the scope of the consultation is widened and the employer would be obliged to begin consultation at an earlier stage i.e. before a decision was taken which meant that the redundancies were inevitable.  The case law has not yet resolved this uncertainty.

Where an employer fails to meet its obligation to collectively consult it may be able to rely on the "special circumstances" defence.  This applies where there are special circumstances which meant it was not reasonably practicable for the employer to comply with the obligation to collectively consult. 

Where there is a breach of the duty to collectively consult, an Employment Tribunal may make a "protective award" in respect of the affected employees of up to 90 days' actual pay.  The protective award is punitive and the length of the award should reflect the seriousness of the employer's default.  In situations where there has been no consultation at all then it is appropriate to start with maximum award and then consider whether there are any mitigating circumstances which justify a reduction.

Facts

The employer was a charity (the Foundation) which ran a number of private schools and nursery schools.  This case concerned the closure of one of its schools (the School).  Pupil numbers at the School had declined by approximately 22% between 2007 and 2013. The projected figures for the 2013 / 2014 academic year were uncertain but it was thought likely that they would continue to decline, which would result in a deficit of between £130,000 to £250,000.

On 27 February 2013 a meeting of the School's governing body was held (First Meeting), at which the Headteacher discussed the declining school numbers and the options for keeping the school open.  A second meeting of the governing body was held on 25 April 2013 (Second Meeting).  At the Second Meeting it was confirmed that pupil numbers for the 2013 / 2014 academic year were lower than anticipated, resulting in a deficit of about £250,000.  It was, therefore, decided that the School would close at the end of the 2013 summer term. 

No collective consultation was undertaken by the Foundation at any point.  The governing body had no knowledge of the obligation to do so and did not seek legal advice about the closure of the School.  Instead, the staff (in excess of 20) were given notice of dismissal on 29 April 2013 (the end of the Spring term).  As staff were entitled to one term's notice, this meant that the notice would expire on 31 August 2013.

Twenty four employees brought Employment Tribunal (ET) claims for breach of the duty to collectively consult.

ET decision

Trigger point

The ET held that the duty to collectively consult was triggered at the First Meeting when it was decided that the School would close unless pupil numbers could be improved, which was said to be unlikely.  In the ET's view, this was more than just discussion of a possibility (which would not trigger consultation) but constituted a clear, albeit provisional, intention and a strategic decision compelling the Foundation to contemplate or plan for collective redundancies.  Whichever approach to the trigger point was taken, this amounted to a proposal to make redundancies.

Special circumstances defence

The Foundation submitted that if they had commenced consultation at the First Meeting the information could have leaked.  This would have led to parents removing their children and would have worsened the School's position.  The ET rejected this argument and said the Foundation could have dealt with this risk by notifying staff that the proposal was confidential and any breach would amount to gross misconduct.  In any event, this could not amount to special circumstances since the same would apply to very many proposals to close down a business.  In other words, these were standard not special circumstances.

The ET also rejected the Foundation's argument that it was not reasonably practicable to consult after the First Meeting as waiting until April 2013 offered the best possible chance to save the School.  This was not a special circumstance.

Finally, the ET rejected the Foundation's argument that it was not reasonably practicable to consult after the Second Meeting on the basis that they had to issue notice by the end of April to avoid having to provide further term's notice.  The ET said that contractual obligations were not capable of amounting to special circumstances.  Further, had the Foundation dealt with the matter competently, legal advice would have been taken and they would have ensured that consultation took place 30 days before the date on which they needed to give notice to avoid the additional term.

Protective award

The ET ordered a maximum 90-day protective award.  This was on the basis that no collective consultation had been undertaken prior to dismissal and this represented a complete disregard of the statutory obligation to consult.  The Foundation's ignorance of the law was a result of a "reckless failure" to take legal advice.  There were no mitigating circumstances justifying a reduction in the length of the award.

EAT decision

The Foundation appealed to the EAT.

Trigger point

The Foundation argued that the obligation to consult only arose when the decision to close the School had been taken at the Second Meeting, and not when it was proposing to make a decision to close.  They submitted that the ET had erred in finding that consultation had been triggered at the First Meeting since there was no evidence that the governing body had decided to close the School on that date. 

The EAT held that the ET had been entitled to find that the governing body had decided at the First Meeting that the School would close unless pupil numbers improved.  At the First Meeting the Headteacher admitted that the school had reached the stage where it was no longer viable.  The EAT noted the different approaches to the trigger point issue, but agreed with the ET that the position at the First Meeting was capable of satisfying either approach.  There was both a "fixed, clear, albeit provisional intention" and a "strategic decision…compelling the employer to contemplate or plan for collective redundancies".  Accordingly, the EAT did not need to decide which one applied.

Special circumstances defence

The EAT held that the special circumstances defence requires a contemporaneous assessment of events and relevant circumstances.  Circumstances identified in hindsight cannot be special circumstances.  Here, the Foundation was simply not aware that it had to collectively consult and this was the reason for the breach - not because there were special circumstances which meant that it was not reasonably practicable to do so.  

Protective award

The Foundation argued that the ET had failed to consider mitigating factors, including that employees suffered no actual losses.  The EAT rejected this argument noting that the award is not intended to compensate for loss, but is punitive.  They also decided that the ET had given adequate consideration to other mitigating factors including that the breach was not deliberate but due to ignorance of law.  However, the EAT agreed that this ignorance arose from the failure to obtain legal advice.

Comment

Consultation was triggered at the First Meeting on the basis that the decision taken at that point satisfied both approaches to the trigger point.  Unfortunately, this meant that the EAT did not have to grapple with which approach should be preferred and so the confusion remains.  The Court of Appeal is due to consider the trigger point issue again in the case of USA v Nolan.  For more information on this case you can read our report here.  However, the decision does demonstrate that a decision which is not final, but subject to conditions, may be sufficient to trigger consultation.

The decision also helpfully clarifies how the special circumstances defence works.  The focus will be on the facts and circumstances at the relevant time.  Circumstances identified in hindsight will not come to an employer's rescue.  Similarly, ignorance of the law will not assist an employer in reducing the penalty for breach.  Employers considering large scale redundancies should be careful to obtain legal advice on the extent of their obligations in advance of giving notices to terminate. 

E Ivor Hughes Educational Foundation v Morris and others