Two recent cases have considered the appropriate value of a protective award where there has been a failure to inform and consult in (a) a collective redundancy situation and (b) a TUPE situation.
Firstly, in Shields Automotive Ltd v Langdon & Brolly UKEATS/0059/12 the business was being transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006, under which there is an obligation to consult affected employees and/or appropriate representatives.
In Shields Automotive the employer organised for an election to take place to elect two employee representatives. However, Mr Langdon and Mr Brolly believed these elections were not fairly held and raised a claim in the Tribunal. The Employment Tribunal did not criticise the quality or content of the consultation but found that there had not been a fair election process. In particular, the Tribunal found that the employer (i) had failed to set an appropriate timescale for the election to allow all employees to vote; and (ii) had been wrong to make a decision on the tie break which the election had produced, without informing the employees that a tie break had occurred and allowing them to determine the issue.
The EAT upheld the substantive decision of the Tribunal that the employer was liable to pay a protective aware but overturned its decision on the value of that protective award. Mr Brolly's award of seven weeks' pay was thought to be excessive by the EAT (the maximum award, in terms of the TUPE Regulations, that could have been made is 13 weeks' pay). They reiterated that the purpose of a protective award in these situations is to penalise the employer and not to compensate the employee for any loss suffered. Thus the Tribunal should focus on the seriousness of the employer's breach and not the personal circumstances of the employee. In reducing the award, the EAT took into account the fact that the employer had sought to comply with their consulting obligations and that there had been full consultation.
In a separate case, AEI Cables Ltd v GMB and others UKEAT/0375/12 the EAT found that where an employer's failure to consult properly in a redundancy situation is due to the company's impending insolvency, this operates as a mitigating factor when deciding the value of the protective award. In this case, the Employment Tribunal's award of 90 days' gross pay (the maximum award for failing to inform and consult in a collective redundancy situation) was reduced to 60 days by the EAT because the employer was unable to consult properly without trading while insolvent, which is unlawful. However, insolvency clearly does not act as a complete defence for a company who breaches their obligations to properly consult. This case reiterates the need for a Tribunal to look firstly at the seriousness of the employer's failure and then to determine whether there are any mitigating factors.