Since 1993, it had been widely accepted that legally (at least for private bodies in England and Wales) an employer did not have to consult about the reasons behind its proposals when proposing collective redundancies. That was a matter for management. Instead, the consultation obligations were focused primarily on addressing the consequences of the employer’s proposals. In a case heard by the Employment Appeal Tribunal (EAT) last month, two unions have successfully challenged this received wisdom. The legal landscape on consultation has changed.
For some organisations the change may in reality have little practical impact. That will be the case for those employers who engage with unions or employee representatives at an early part of the planning process. For others the case will be seen as further interference in and potential disruption to the efficient management and running of an organisation’s business. Previously the case law could assist in organisations which sought to avoid discussions with representative bodies on potentially sensitive business decisions, like the decision to close an operation. Doing so now raises the financial stakes.
In the case of UK Coal Mining Ltd v National Union of Mineworkers (Northumberland Area) and The British Association of Colliery Management, the EAT has decided that the previous case law is out of date and does not accurately reflect the requirements of the legislation on collective consultation. Employers must ensure that collective redundancy consultation exercises incorporate consultation about the business reasons for the proposed redundancies. Otherwise, they could be faced with protective awards of up to 90 days’ gross pay per affected employee.
The starting point, in terms of collective redundancy consultation obligations, is Part IV, Chapter II of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). The key points for employers are set out in “TULRCA Part IV Chapter II: Key points” below.
These provisions are designed to implement the European Collective Redundancies Directive into domestic law. It is widely accepted that they do not go as far as the full requirements of the Directive. This mismatch has particular implications for public bodies, which are bound by European law to follow the more onerous provisions of the Directive. The key point of difference is that, under TULRCA, the duty to consult arises where redundancies are “proposed” whereas, under the Directive, the duty arises where redundancies are “contemplated”. “Contemplating” clearly falls at an earlier stage in the thought process than “proposing” and public bodies must accordingly commence consultation earlier.
The case law
In the 1993 case of R v British Coal Corporation and Secretary of State for Trade and Industry ex parte Vardy and others, the Divisional Court stated that: “section [188 of TULRCA] does not require a consultation about the reasons for the redundancy…”. The judge recognised that the requirements of the Directive went further than TULRCA but he felt unable to stretch the language of section 188 to encompass a requirement to consult on the reasons for proposed redundancies.
The Vardy judgment was followed by the EAT in 2002 in the case of Middlesbrough Borough Council v TGWU. In Securicor Omega Express Ltd v GMB, heard in 2004, the EAT followed the decisions in Vardy and Middlesbrough, finding that section 188 “does not require a consultation about the reasons for the redundancy, including whether or not a plant should close”.
UK coal mining: the facts
This case was about the proposed closure of the Ellington Colliery in Northumberland, which was the last deep mine in the north east coalfield. Over the years there had been various concerns about whether or not the colliery was financially viable.
On 12 January 2005, water began to rise at the face line of the particular seam being worked at the colliery. Pumps were installed but the water continued to come in more rapidly than it could be pumped out. Over the following weeks, various steps were taken to try to deal with the issue.
On 21 January 2005, the company told the Department of Trade and Industry that it was close to announcing the closure of Ellington. Information was provided to unions and staff and a series of discussions took place. The first compulsory redundancies were effected on 26 February 2005. In its official communications with the unions and with the DTI, the company maintained that safety was the reason for the closure and the consequent redundancies. But the Tribunal found that the real reason for the closure was economic. The company had “deliberately falsified” the reasons given for the closure.
The unions brought a claim, alleging that the employer had failed to discharge its consultation obligations in accordance with TULRCA. The employer argued that there was no obligation on it to consult about the reasons for the closure at all. Because there was no such obligation, there could be no breach of TULRCA in relation to those reasons, even if the reasons which it had given and discussed (voluntarily) were false.
The Tribunal accepted that there was no specific obligation to consult over the reasons for the closure but rejected the employer’s argument that this got it off the hook. It held that: “In the real world employers cannot announce closures … without at least giving some indication of the reason for the closure decision itself. In any event, if the employer chooses to give the information, it is important that the information should be true and should be given in good faith.” Most employers will agree that this is the reality of consultation. The Tribunal awarded maximum protective awards of 90 days’ gross pay per employee.
The employer appealed. The unions cross-appealed, arguing that there is an obligation on employers to consult over the reasons for any decision to propose redundancies.
UK coal mining: the EAT decision
The union argument was that the Directive requires there to be consultation about the reasons for the proposed redundancies (the closure of the colliery in this case). The unions accepted that this requirement had not been properly implemented into TULRCA at the time of the Vardy decision since, at that time; section 188 only required consultation “about the dismissals”. However, section 188 had since been amended to require consultation “about ways of avoiding the dismissals”. The unions argued that this amendment to section 188 had widened the scope of the consultation obligation and extended it to an obligation to consult about the reasons for the closure itself. They argued, correctly, that UK law must be interpreted as far as possible in line with the relevant EU Directive. On that basis, the Middlesbrough and Securicor cases had been wrongly decided.
The unions contended that it would make a mockery of the obligation to consult over the ways of avoiding redundancies if the decision to close the plant was beyond discussion. What is the point of providing information about the reason for the proposed dismissals if there can be no consultation over it?
The EAT liked the unions’ arguments and examined the wording of section 188 to see whether it was possible to read it in a way which supported their position. It was recognised that one way of achieving that result would be to read the word “proposed” as being synonymous with “contemplated” (bringing TULRCA into line with the Directive). If consultation obligations were triggered when redundancies were merely contemplated, this would have the effect of bringing the initial business proposals (i.e. the reasoning behind the proposed redundancies) under the umbrella of the consultation obligations. But the EAT did not feel able to manipulate the wording of section 188 in this way.
Instead, the EAT considered the word “proposed” and decided that the use of that word in section 188 did not prevent the consultation obligation extending to consultation over closures leading to redundancies (i.e. over the reasons for proposed redundancies). It was the EAT’s view that: “In a closure context where it is recognised that dismissals will inevitably, or almost inevitably, result from the closure, dismissals are proposed at the point when the closure is proposed.” The duty to consult will still only arise where closure is “fixed as a clear, albeit provisional, intention. But the obligation to consult over avoiding the proposed redundancies inevitably involves engaging with the reasons for the dismissals, and that in turn requires consultation over the reasons for the closure”.
The unions’ cross-appeal was allowed.
So where does this leave us?
The EAT decision arguably achieves a fair result on the facts of this particular case, given the way in which the employer had behaved. The Tribunal had found that there was no credible evidence that the reason for the redundancies was the official reason given (i.e. safety). The real reason for the closure was an economic one and the employer’s communications were deliberately misleading in that regard.
However, the EAT held that, where closure (i.e. the reason for the proposed dismissals) and dismissals are inextricably interlinked, a duty to consult over the reasons arises.
So, consultation merely about the effect of redundancies, in isolation from their cause, will not be enough to discharge an employer’s obligations.
The EAT was careful to emphasise that it was not intending to extend the meaning of “proposed” and thereby alter the trigger point for the collective consultation obligations under TULRCA. In its view, this decision will not have any great impact on the practicalities of collective consultation. This was based on the assumption that “most employers will already inform representatives why they are considering the need to [(for example)] close a plant and will respond to union observations, even if they do not feel themselves legally obliged to do so”.
For those employers who already conduct collective redundancy consultation exercises with a keen eye on good and effective industrial relations practice, the EAT decision will make little practical difference. Such employers will be, as the EAT predicts, well used to engaging in an open and effective two-way dialogue with representatives about the reasoning behind any proposed redundancies.
Arguably, this is just a question of the case law finally catching up with the amended version of TULRCA and better reflecting the requirements of the Directive but the decision will give food for thought to those employers who, perhaps for reasons of commercial sensitivity, prefer to keep business proposals which may lead to redundancies under wraps until those proposals have been fully formulated. The EAT has given a clear signal that that sort of approach is likely to fall foul of TULRCA.
TULRCA Part IV Chapter II: Key points (post the UK Coal Mining case)
- The duty to consult collectively will arise when an employer proposes to dismiss as redundant 20 or more employees in one establishment in a period of 90 days or less.
- Where the consultation duty is triggered, the employer must also notify the Department for Business, Enterprise and Regulatory Reform (formerly the DTI) about the proposed redundancies.
- Consultation must begin before any decisions to dismiss have been made.
- Employers must consult with a recognised trade union or (if there is none) appropriate representatives of the affected employees who have been elected in accordance with the statutory requirements.
- Consultation must be approached with an open mind and with a view to reaching agreement.
- Notice of termination cannot be served before the consultation is concluded.
- Consultation must begin in “good time”. Where there are 100 or more proposed redundancies, section 188 provides for a minimum period of 90 days (before the first termination takes effect). Where there are between 20 and 99 employees, the minimum period is 30 days.
- The employer should begin consultation by providing the representatives with details about the proposed redundancies. Section 188 contains a list of information which must be provided as a minimum (which includes information about the reasons for the proposed dismissals).
- The employer must ensure that consultation covers ways of avoiding the dismissals, of reducing the number of dismissals and of mitigating the consequences of any dismissals.
- Where the consultation requirements are breached, an Employment Tribunal can make a protective award of up to 90 days’ gross pay per employee. Protective awards are penal, not compensatory, and should reflect the seriousness of the employer’s breach.