In Seahorse Maritime Limited v Nautilus International, the Court of Appeal has considered the meaning of ‘establishment’ in relation to a fleet of ships, and the territorial scope of the collective redundancy obligations in the Trade Union and Labour Relations (Consolidation) Act 1992 (section 188).
Seahorse, a company incorporated in Guernsey, employed crew to work on a fleet of ships managed by a third party, Sealion Shipping Limited. These ships were chartered to international clients in the energy and telecoms sectors and mostly operated outside UK territorial waters. The employees’ contracts of employment were governed by UK law. Although their contracts did not allocate them to particular ships, in practice most were posted to the same ship throughout their employment. Seahorse used a UK agent based in Surrey to manage administrative functions in relation to its employees.
Due to a downturn in the oil industry, Sealion took four ships out of service which meant that Seahorse had to make a number of redundancies. It did not follow a full collective consultation process. Nautilus International, a trade union recognised by Seahorse, brought a claim for protective awards in the Employment Tribunal in relation to the UK-domiciled employees of Seahorse who had worked on ships based outside the UK. The legislation does not specify the territorial scope of the collective redundancy consultation requirements.
At a preliminary hearing, the Employment Tribunal held that, since each ship could not be said to be a distinct undertaking and employees were not assigned to a particular ship, the entire fleet constituted one establishment. The Tribunal also held that the legislation applied to the employees because, individually, they had a sufficiently strong connection with the UK. The Employment Appeal Tribunal (EAT) upheld this decision.
The Court of Appeal disagreed with this approach and allowed an appeal by Seahorse. Under EU law, an establishment is the unit to which workers are assigned to carry out their duties and does not need to have any legal, economic, financial, administrative or technological autonomy. In this case, since each ship was a self-contained operating unit with its own assigned workforce, it constituted a separate establishment. Contrary to the findings of the Tribunal and EAT, the Court of Appeal also held that in practice the crew were assigned to particular ships, since over time they returned to the same ship and correspondence referred to ‘their’ ship. The collective consultation obligations would therefore only have been triggered where 20 or more dismissals were proposed per ship within a period of 90 days or less. However, the Court of Appeal also held that, in any event, the Tribunal did not have jurisdiction to hear the claim because it was the establishment which had to be shown to have a sufficiently strong connection with the UK, not individual employees. The only connection between the ships and the UK was that some of the employer’s administrative functions were performed by an agent based in Surrey.
This case confirms that an ‘establishment’ does not need to have any financial or administrative autonomy, nor be a separate legal entity. As regards the territorial scope of the collective redundancy consultation legislation, the Court of Appeal has also clarified that it is the establishment, not individual employees, which must have a sufficiently close connection with the UK.