An issue of major practical importance to employers engaged in a collective redundancy exercise is when the obligation to begin consultation with the employee or union representatives is triggered. Employers need this knowledge to ensure they comply properly with their consultation obligations and avoid potentially significant liabilities for protective awards. Unhelpfully, however, the law on this issue has been uncertain for some time following conflicting case law (in UK Coal Mining Ltd v National Union of Mineworkers and Akavan Eritysialojen Keskuslitto AEK RY v Fujitsu Siemens Computers OY) and protracted litigation in the case of United States of America v Nolan. The Nolan case is finally hoped to resolve the issue but, although it is due to be heard again in the Supreme Court on 15 July 2015, it is not clear whether this point will be considered then, or at a later date. However, the EAT has now also considered the issue in a separate case.
Where an employer proposes to make large scale redundancies of 20 or more employees within a period of 90 days, it must consult on its proposal with either employee or union representatives of the affected employees. Consultation must be with a view to reaching agreement on avoiding the need for dismissals, reducing the number of employees to be dismissed, and mitigating the consequences of the dismissals.
A critical issue is whether, as part of the obligation to consult on ways of avoiding dismissals, an employer is obliged to consult at the stage when it is proposing to make (but hasn’t yet made) a business decision that will inevitably lead to collective redundancies. If so, this considerably widens the scope of consultation and could, for example, require employers to consult over the business reasons for the proposal. If not, employers will only need to begin consultation once the decision has actually been made.
This was one of the live issues in the Nolan case, where the United States of America sought to argue that employers are not obliged to consult over a proposed operational decision to close a workplace. The issue was referred to the ECJ but, in the circumstances of the case, the ECJ considered it had no jurisdiction to decide the issue. The case then returned to the Court of Appeal which ordered a further hearing on the issue.
E Ivor Hughes Educational Foundation v Miss J E Morris and others
However, before the Nolan case has been heard again, the issue has arisen before the EAT in a separate case. In the case of E Ivor Hughes Educational Foundation v Miss J E Morris and others, the Foundation decided at a meeting on 27 February 2013 to close one of the schools it operated, unless pupil numbers increased. The final decision to close was taken on 25 April 2013 when pupil numbers for the forthcoming academic year were known. The tribunal held that the obligation to collectively consult arose on 27 February 2013 as on that date the decision was taken to close the school unless numbers increased, and this was either a fixed, clear, albeit provisional decision intention to close, or amounted to a strategic decision on changes compelling the employer to contemplate or plan for collective redundancies. A protective award of 90 days in respect of each claimant was made on the basis that the Foundation carried out no consultation at all, with the tribunal holding that it was irrelevant that the claimants had not actually suffered any loss. The tribunal’s decision was upheld by the EAT.
In this case, the tribunal found that the earlier consultation date applied under each of the tests for the commencement of collective consultation currently laid out in case law, and the conflicting nature of these tests was not therefore material on the facts. Importantly, however, the tribunal did come down on the side of the earlier, rather than the later date even though, at that date, pupil numbers (and therefore the impact on the school’s future) weren’t known. In practice, the issue of when an employer’s plans are at a proposal stage, or when they are deemed to be clear and fixed, may be a somewhat grey area and it is to be hoped that the higher appellate courts will eventually give comprehensive guidance on this so that employers can fully understand, and meet, their obligations and avoid potentially costly liabilities for protective awards.