Collective Redundancy Consultation - An Employer's Duties

Under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), employers have a duty to consult with appropriate representatives of employees concerning forthcoming redundancies if 20 or more employees are to be dismissed at one establishment within a 90-day period. Failure to do so can lead to a protective award requiring the employer to pay each affected employee 90 days' pay.

In May 2013, in a decision involving the protective awards payable to employees made redundant by retail chains Woolworths and Ethel Austin, the Employment Appeal Tribunal (EAT) ruled that the words 'at one establishment' should be deleted from TULRCA, in order to give effect to EU Council Directive 98/59EC, which it is intended to implement, and protective awards were payable to former employees who had worked at stores with fewer than 20 members of staff (USDAW and Another v Unite the Union and Others).

The effect of that ruling would be that the duty to consult would be triggered when at least 20 employees were to be dismissed as redundant from a business as a whole, irrespective of the number of people employed in each individual workplace.

Permission to appeal was granted, and the Court of Appeal sought the opinion of the Court of Justice of the European Union (CJEU).

In the CJEU's view, where an undertaking comprises several entities, it is the entity to which the workers made redundant are assigned to carry out their duties that constitutes the 'establishment', not the business as a whole. The term 'at least 20' requires account to be taken of the redundancy dismissals in each establishment considered separately.

Whilst member states are entitled to increase the level of protection afforded to workers when there are to be collective redundancies, they are nonetheless bound by the 'autonomous and uniform interpretation' given to the term 'establishment' in EU law.

The case was referred back to the Court of Appeal to determine whether the stores could be classified as separate establishments.

In United States of America v Nolan, the Supreme Court ruled that the US Government did have collective redundancy consultation obligations with regard to civilian workers during the closure of a US army base in Hampshire.

The case arose after some 200 civilian employees were dismissed by way of redundancy following a decision by the Secretary of the US Army to close its base in Hythe. One of the employees, Christine Nolan, brought a claim on behalf of the redundant employees for compensation by way of a 'protective award' on the ground that the USA had failed to consult with representatives of the civilian workforce in accordance with its obligations under Section 188 of TULRCA.

Difficulties over when consultation should commence have arisen in the past because EU Directive 98/59/EC, the Collective Redundancies Directive, provides that an employer should begin consultations when 'contemplating' making collective redundancies, whereas this duty is given effect in domestic law as being a duty to consult when an employer 'proposes to dismiss' employees as redundant.

Mrs Nolan argued that the consultation period was far less than the 90-day period required and, in particular, that there had been a failure to consult before, and about, taking the operational decision to close the base. The USA did not at this stage seek to rely on state immunity or 'special circumstances' in order to defeat the claim, although it was common ground that it could have done so.

The Employment Tribunal found that no meaningful consultation over the closure of the base, and the redundancies this would involve, had taken place and awarded Mrs Nolan a 30-day protective award. The Employment Appeal Tribunal upheld this decision, relying on the decision in UK Coal Mining Limited v National Union of Mineworkers that where closure and dismissals are inextricably linked, a duty to consult over the reasons for the closure arises.

The USA appealed to the Court of Appeal on the ground that the more recent judgment of the Court of Justice of the European Union (CJEU) in a Swedish case (Akavan Erityisalojen Keskusliitto AEK ry and Others v Fujitsu Siemens Computers) is authority for the proposition that, on the true interpretation of the Directive, the consultation obligation is not triggered by a proposed business decision to close down a workplace but only arises at the later stage when the decision has been made and the intention to make the employees redundant has been formed.

The Court of Appeal sought guidance from the CJEU as to the precise point at which the obligation to consult arises under the Directive. However, the hoped-for clarification was not forthcoming. Although TULRCA does not exclude workers employed by public administrative bodies or by establishments governed by public law, the Directive expressly provides for them to be excluded from its scope. The CJEU held that the dismissal of staff at a military base did not fall within the scope of the Directive and declined to hear the case as it did not have jurisdiction to do so.

The case returned to the Court of Appeal, where the USA argued that since EU law did not require or intend a foreign state to be subject to the Directive's consultation obligations, TULRCA should be construed in the same way. The Court rejected this argument and made an order that there be a further hearing to decide on the UK Coal/Fujitsu issue.

The USA appealed to the Supreme Court, arguing that TULRCA should be interpreted in such a way as to accord due respect to its authority as a foreign state to make strategic decisions which are non-commercial in nature. The decision to close the base had been taken at a very high level in Washington, and the interpretation thus far favoured did not accord with principles of international law.

However, the Supreme Court found that the wording of the legislation was clear and that there was no reason to read into it a tailored exemption for a foreign power operating a base within the UK. The Court found that this was the case even though TULRCA goes beyond the requirements of the Directive it implements.

Arguments that the UK had breached international law by seeking to exercise legislative power outside its own territory were also rejected.
Because of the narrow basis of the appeal, the Supreme Court was unable to provide any assistance on the resolution, as a matter of domestic law, of the difficult UK Coal/Fujitsu issue.

The case will now return to the Court of Appeal for it to consider whether or not the US Government complied with its redundancy consultation obligations under domestic law.

It seems likely that resolution of the question as to precisely when the consultation obligation is triggered may take some time. In almost all other cases, the issue will depend on EU law. However, this case must be decided without guidance from the CJEU on this point.

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