The High Court has handed down a very important decision which will affect how employers manage collective redundancy processes and, in particular, employers’ obligations to engage with employees and their representatives in relation to collective redundancies at a sufficiently early stage.
The Protection of Employment Acts 1977 to 2007 provide, in Section 9, that “where an employer proposes to create collective redundancies he shall, with a view to reaching agreement, initiate consultations with employees’ representatives” and “[s]uch consultations must be initiated at the earliest opportunity and in any event at least 30 days before the first notice of dismissal is given.” This obligation (breach of which is a criminal offence) requires employers to genuinely consult with employees’ representatives (whether trade unions or specially elected representatives) with a view to reaching agreement, and this obligation must begin prior to the notices of dismissals being issued.
As this obligation derives from European law, European case law is very important in considering the extent of the obligation. In the case of Akavan v Fujitsu Siemens Computers Oy, the Court of Justice of the European Union (the “ECJ”) had stated that the obligation to consult with employees in the context of collective redundancies arose where “the employer is contemplating collective redundancies or is drawing up a plan for collective redundancies” and prior to any decision to terminate the employment contract being reached. In the case of United States of America v Christine Nolan, the Advocate General to the ECJ stated that the obligation to consult arose following a “strategic decision” which “exerted compelling force on the employer” to commence employee consultations.
While these European decisions set out a legal test for when the obligation commences, from a practical point of view, it can be difficult for employers to determine exactly when the obligation arises, and therefore when must the collective consultation process commence. The concern of employers and employment lawyers alike is that the employer’s obligation might begin at such an early stage that the employer was not yet ready to engage with employees with a firm proposal, and that the obligation would be pre-maturely engaged. The Irish High Court in the case of Tangney & Others v Dell Products was concerned with such a situation.
On 8 January 2009, employees at the Dell facility in Limerick received a written communication furnishing information about a re-structuring plan for the company and were briefed by senior management on Dell’s plans to cease manufacturing at its Limerick facility. Subsequently, Dell engaged in a period of consultation with employees and their representatives which ultimately led to collective redundancies being implemented at the facility. However, the employees and their representatives claimed that the communications and events of 8 January 2009, of themselves, constituted a notice of dismissal and that therefore the consultation and discussions that followed were ineffective for the purposes of the Protection of Employment Acts 1977 to 2007. In other words, the employees argued that the decision had already been made and that the consultation followed the notice of dismissal rather than was at least 30 days prior to it.
While the employees and their representatives had succeeded with this argument before a Rights Commissioner (the first stage), on appeal, the Employment Appeals Tribunal rejected this argument and overturned the Rights Commissioners’ decision. Mr Justice Birmingham in the High Court supported this decision.
He noted that the initial letter could not be said to constitute a communication of a fait accompli. The letter itself stated that it was for information purposes only, and did not represent contractual terms. The Judge noted that several significant issues dealt with in the initial letter had altered over the course of the consultation period. These included the terms of redeployment of certain employees as well, as an improvement in the terms of the severance package on offer. Furthermore, the initial letter simply set out estimates of severance packages, rather than firm figures representing severance packages.The Judge noted that while the content of the letter suggests that the employer did not have an entirely open mind, he acknowledged that equally a blank sheet “couched in generalities” would be of little assistance to employees.
In light of all of these matters, the Judge found that there was no basis on which to overturn the determination of the EAT and therefore found that Dell had not acted in breach of the Protection of Employment Acts 1977 to 2007 in its communication of 8 January 2009.
Message for employers
This case will be of interest to employers who have reason to consider collective redundancies as it more clearly sets out that so long as a consultation process is genuine and the employer makes a legitimate attempt to engage with employees, they should be in a position to demonstrate compliance with the obligations of Section 9 of the Protection of Employment Acts 1977 to 2007. Clearly, however, employers should take care to ensure that communications to employees are not presented as a fait accompli and that there is genuine room to consult with employees’ representatives, with a “view to reaching agreement”.