UK Coal Mining Ltd v National Union of Mineworkers
The EAT has held, contrary to previous authorities, that in a collective redundancy situation the employer can be obliged to consult over the reason for a proposed closure where that closure will inevitably result in dismissals.
For a number of years there had been concerns about the financial future of the colliery in Ellington, Northumberland. In January 2005 there was a flood at the pit and the owner, UK Coal, informed the Department of Trade and Industry ("DTI") that they were on the point of announcing the closure of the pit. In total, it proposed to make 158 employees redundant as a result of the closure and therefore the duty arose to carry out collective consultation under s188 of the Trade Union and Labour Relations (Consolidation) Act 1992 ("the 1992 Act"). The 1992 Act requires the employer to inform employee representatives in writing of (amongst other things) the reasons for the proposals and to consult about avoiding dismissals, reducing the number of dismissals and mitigating the consequences.
Where 100 or more redundancies are proposed, consultation must begin at least 90 days before the first dismissal takes effect. On 26 January 2005, the managing director of UK Coal met with the union representatives for the first time and told them that the colliery was being closed on safety and economic grounds and that consultation would begin. UK Coal told the DTI and the trade unions that the redundancies were as a result of "special circumstances as a result of our being forced to cease production… for safety reasons." This was not factually correct – there were no safety concerns necessitating immediate closure. Despite the unions pressing for the full 90-day consultation period, the vast majority of workers were made redundant in February 2005. The unions brought a claim for failure to consult.
The tribunal found that UK Coal had failed to comply with the 1992 Act by failing to consult the unions about proposals to dismiss. UK Coal argued that it was immaterial that it had given a false reason for the closure and the timing of the redundancies and that previous case law had established that there was no obligation to consult over the business reasons behind the proposed redundancies. The tribunal rejected this argument and held that, in the real world, an employer cannot announce a closure leading to several hundred redundancies without giving at least some indication of the reason for the closure. If the employer chose to give information, it is important that it was true and given in good faith. The tribunal also held that, even if there were special circumstances, UK Coal had still failed to carry out such consultation as was reasonably practicable. It awarded the maximum protective award of 90 days.
UK Coal appealed. The EAT accepted the unions' argument that UK Coal, by giving deliberately misleading reasons for the redundancies, had failed to comply with its obligations under the 1992 Act to disclose the reasons for the redundancy proposals.
The EAT also upheld the tribunal's decision that UK Coal had failed to consult. In a closure situation, where dismissals will almost inevitably result, dismissals will be "proposed" at the point at which the closure itself is proposed. In those circumstances, the obligation to consult over the ways of avoiding the proposed redundancies will inevitably involve engaging with the reason for the dismissals and therefore consulting over the reason for the closure.
The EAT upheld the 90 day award making it clear that the penalty was intended to be punitive not compensatory.
Impact on Employers
This case means that where the closure of a business and dismissals are inextricably linked the duty to consult over the reason for the closure arises. To comply with this obligation and avoid potentially expensive protective awards, employers will need to explain the reasons behind a proposed closure as well as the consequential redundancies and be willing to listen and respond to union views on the issue. Employers must be aware of this requirement where a closure of all or part of their business will result in collective redundancies and factor it in to their proposals for informing and consulting employee representatives and their implementation timetables.