USA v Nolan

The Court of Appeal in this case unanimously decided to refer to the ECJ the question of whether the obligation to consult arises before or after the making of a strategic or commercial decision that will lead to collective redundancies.

Implications

The Court of Appeal appears to be seeking to clear up a long standing conflict between two conflicting decisions in this area. On the one hand we have the EAT case of UK Coal v NUM, which is authority for the proposition that an employer is obliged to consult with representatives prior to making a decision to close a workplace, where that closure will “inevitably lead to redundancies”. On the other we have the ECJ case of Akavan v Fujitsi, which suggests that a narrower interpretation should apply so that the duty may only arise after the operational decision (for example to close a workplace) has been taken. As things stand, the timing and scope of the obligation is unclear. Let’s hope that the Court of Appeal’s referral will result in some much need clarification from the ECJ.

Background

Where an employer proposes to make large scale redundancies of 20 or more employees within a period of 90 days or less, it must consult on its proposal with representatives of the affected employees and also notify the UK Department for Business Innovation and Skills (“BIS”). This obligation arises from section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”), which implemented the European Collective Redundancies Directive (Directive 98/59) (“the Directive”).

There is ambiguity between the wording used in the Directive and TULRCA to describe when the duty to consult arises. The Directive requires consultation to commence when the employer is "contemplating" redundancies. Whereas section 188 of TULRCA requires consultation to commence when the employer is "proposing" to dismiss an employee.

In this case a decision to close an army base was taken in March 2006 by the Secretary of the US Army. The workforce were informed of the closure on 24 April 2006; and collective consultation commenced on 5 June 2006. The Employment Tribunal found that USA failed to engage in any meaningful consultation and made a protective award in favour of the affected employees. The USA appealed to the EAT, who upheld the protective award.