United States of America v Nolan [2015] UKSC 63

Why care?

Section 188 of the Trade Union Labour Relations (Consolidation) Act (‘‘TULCRA’‘) requires that, where an employer proposes to make 20 or more dismissals within a 90 day period, it must first consult (with a view to reaching agreement on avoiding or reducing the number of dismissals, and mitigating the consequences of those which are unavoidable) with representatives of the affected employees. Section 188 implements the EU Collective Redundancies Directive.

However, at present it is not clear precisely when the duty to consult is triggered; in particular, is this when the business decision is made which will result in redundancies (for example, a site closure)? Case law in this area differs. In UK Coal Mining Ltd v National Union of Mineworkers, the EAT confirmed that ‘‘proposing to dismiss’‘ means employers must consult on the business reasons for the proposed redundancies, and the consultation obligation arises where there is a clear intention to make redundancies. However, the ECJ case of Akavan Erityisalojen Keskusliitto AEK ry and others v Fujitsu Siemens Computers Oy suggested that consultation obligations arise only when a firm strategic or commercial decision has been taken compelling it to contemplate or plan for collective redundancies – not when the decision is merely contemplated.

This long running case concerns the closure of an American military base in the UK and the dismissals of its civilian employees.

The case

Until 2006, the Claimant was employed with 200 other civilians at a US Army base in Hampshire. The US made a strategic decision to close the base and then informed and consulted with employee representatives over the proposed redundancies. The Claimant, an employee representative, brought an employment tribunal claim for a protective award for failure to inform and consult because (since the closure had already been decided, and the redundancies were inevitable) there was no prospect of meaningful consultation. The employment tribunal agreed, and so did the Employment Appeal Tribunal, following the UK Coal Mining case.

The USA appealed to the Court of Appeal, relying on the Akavan case. The Court of Appeal asked the ECJ whether the obligation to consult collectively arose when the employer is proposing a strategic business decision which will inevitably lead to redundancies, or only once the decision had been made. Unfortunately for any businesses or employees wanting an answer to this, the ECJ declined to answer, holding that it could not comment, since the EU Directive does not apply to “workers employed by public administrative bodies or by establishments governed by public law’‘. Since, however, the UK law applies to all employees except those in Crown employment and limited other categories of public servants, the Court of Appeal held the USA was bound to comply with TULRCA.

The Supreme Court dismissed the USA’s appeal against that decision by a 4:1 majority. It held there was no requirement to limit TULRCA by reference to the EU Directive. Whilst TULRCA is wider than the Directive, this was a conscious drafting decision. It may be that those drafting the law had failed to anticipate that it might apply to employees of foreign non-EU member states, but on the other hand state immunity is available in such circumstances. TULRCA was clearly drafted and there was no scope to adopt an alternative interpretation.

Sovereign decisions of foreign states should not be exempted from s188, held the Supreme Court, rejecting the USA’s argument that as a matter of international legal principle, one state cannot legislate to affect the sovereign activity of another. The Supreme Court held that simply because a decision was taken in Washington which led to UK dismissals did not mean that the UK was legislating extra-territorially. TULRCA applies only to redundancies in Great Britain. Again, this was a situation in which the foreign state would normally claim state immunity.

What to take away?

It is surprising that this case ever came to court: another sovereign state is generally immune from the jurisdiction of the UK courts, unless it submits to this jurisdiction. Here. the USA only raised the principle of state immunity after the employment tribunal’s decision on liability, when it was too late to do so. However, their decision not to claim state immunity earlier does mean that – probably next year – the Court of Appeal will have to determine the crucial point: when is the duty to consult collectively triggered? At present, it remains unclear whether the obligation to collectively consult arises at an earlier stage (UK Coal Mining) or only at a later stage, in line with Akavan. Employers who are considering business decisions which will lead to redundancies (such as site closures) should therefore consider at an early stage whether it is necessary or desirable to begin collective consultation with employee representatives.