National Union of Mineworkers (Northumberland area) v UK Coal Mining Board EAT October 2007

The decision in this case could have serious repercussions for struggling businesses and their advisers. It was held that an employer should consult not only on the impact of redundancies and how to avoid them, but also on the reasons for the redundancies, an area relating to the management of the business that has not previously been brought within the scope of the redundancy legislation. It also has the consequence that the consultation process will need to be commenced at a much earlier stage of the company’s rescue planning.

Section 188 of the Trade Unions and Labour Relations (Consolidation) Act 1992 requires employers proposing to make 20 or more employees at one establishment redundant within a period of 90 days or less to consult for at least 30 days (and to consult for 90 days where 99 or more employees are concerned) about the intended dismissals.

In this application, the miners’ union argued that a consultation about ways to avoid redundancies was meaningless if only commenced once the decision to close the site had been made, as the closure was already determined and the redundancies inevitable. This argument was upheld.

A statutory consultation should begin at the stage the employer starts to consider a course of action that could lead to employees becoming redundant. The decision does not go as far as to say that the parties to the consultation have a right to interfere with the management of the company. However, it does pose practical problems for the directors of distressed companies and any insolvency adviser to the company, as it could lead to adverse information about the state of the business becoming public earlier, leading to a loss of value to the business and a consequential reduction in the options for the rescue of the business or recovery of creditors. In addition, a failure to correctly discharge this duty to consult about the intended dismissals and the reasons for the redundancies will result in a protective award being payable to the affected employees.