Collective Redundancies:

Information, Consultation and Protection

By

Giles Powell

Contents

1. When does the duty to consult arise and what does it extend to?

2. The “Special Circumstances” Defence

3. Protective Awards

WHAT IS REDUNDANCY ?

By s.195(1) of TULRCA “references to dismissal as redundant are references to dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related”.

Junk v Kuhnel [2005] IRLR 310 (ECJ) – redundancy is the declaration of the intention to terminate (ie the giving of notice) rather than the actual termination of employment on the expiry of the notice period.

(Application in the UK confirmed by the EAT in Leicestershire County Council v Unison [2005] IRLR 920)

WHAT IS DISMISSAL ?

Dismissal (and those dismissed) includes:

• Non renewal of a limited term contract• Those whom the employer hopes to re-deploy if it intends

to withdraw existing contracts of employment• Those who accept voluntary redundancy

WHEN ARE EMPLOYEES “AT ONE ESTABLISHMENT”?

Rockfon A/S v Specialarbejderforbundet i Danmark [1996] IRLR 168 (ECJ) – Establishment means “the unit to which the workers made redundant are assigned to carry out their duties. It is not essential, in order for there to be an “establishment”, for the unit in question to be endowed with a management which can independently effect collective redundancies”.

Athinaiki Chatropoiia AE v Panagioutidas [2007] IRLR 284 (ECJ) – applied Rockfon – separate production unit could constitute an establishment.

WHEN DOES THE EMPLOYER “PROPOSE TO DISMISS”? (1)

R v British Coal Corporation ex p Vardy [1993] IRLR 104 (Divisional Court) – “verb “proposes” .. relates to a state of mind which is much more certain and further along the decision-making process than “contemplate”

NB UK Coal Mining v NUM [2008] IRLR 4 (EAT) – “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.”

WHEN DOES THE EMPLOYER “PROPOSE TO DISMISS”? (2)

See also Akavan Erityisalojen Keskusliitto AEK v Fujitsu (Case C-44/08) – referred to the ECJ on 8 February 2008. Concerns the link between the point at which consultations must begin and the point at which strategic decisions are made. It also concerns the application of the requirement to consult in a group scenario when decisions may be taken at a group rather than subsidiary level.

WHAT IS “CONSULTATION”?

Previously accepted position: consultation must be fair and reasonable but there is no need to consult on the economic background or context in which redundancy proposal arises.

However, see now UK Coal Mining v NUM [2008] IRLR 4 (EAT) – in the context of the closure of a mine, 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 “SPECIAL CIRCUMSTANCES” DEFENCE (1)

Section 188(7) gives the employer a defence if there are “special circumstances which render it not reasonably practicable for the employer to comply with a requirement of subsection (1A), (2) or (4).”

A high test:

- Clarks of Hove Ltd v The Bakers’ Union [1978] IRLR 366 (CA) – events that are “normal” for companies facing difficulties will not constitute special circumstances. There must be something out of the ordinary such as a sudden disaster or unexpected insolvency. Insolvency is not on its own a special circumstance.

THE “SPECIAL CIRCUMSTANCES” DEFENCE (2)

Examples of unsuccessful defences:

• Being told by the Department of Employment that consultation was not necessary;

• Lack of orders and the inability to sell the company• The mere fact of being in administration or insolvent• The mere fact of being in serious financial difficulties

THE “SPECIAL CIRCUMSTANCES” DEFENCE (3)

Examples of possible successful defences:

• Disappearance of last prospective purchaser for company in real difficulties when there had been a real prospect of a purchaser being found

• Unexpected refusal of a government loan• Withdrawal of a prospective purchaser followed by a sudden

withdrawal of bank support

NB It is still necessary for an employer to take “all such steps towards compliance with that requirement as are reasonably practicable in those circumstances” (Section 188(7) TULRCA 1992)

THE “SPECIAL CIRCUMSTANCES” DEFENCE (4)

Futility of consultation as a defence?

No – see Iron and Steel Trades Confederation v ASW Holdings Plc (in administrative receivership) UKEAT/0694/04/DM

Possibly – see Amicus v GBS Tooling Ltd (in administration) [2005] IRLR 683 (EAT)

CAN THE EFFECT OF NOTICE AND CONSULTATION EXPIRE?

Yes – it is not a piece of elastic that can be stretched forever – Vauxhall Motors Ltd v T&GWU [2006] IRLR 674

THE PROTECTIVE AWARD

Focus to be on employer’s default and not loss to employees. – Susie Radin Limited v GMB [2004] IRLR 400 (CA)

Futility of consultation should not affect the amount of the award - Susie Radin

“Maximum period” means 90 days even where the requirement to consult was for 30 days – Hutchins v Permacell Finesse Ltd (in administration) UKEAT/0350/07

Insolvency of employer does not mean that a protective award should not be made - Smith v Cherry Lewis [2005] IRLR 86 (EAT)

POINTS OF JURISDICTION AND PROCEDURE

Who may claim?• If it is recognised, then only the trade union• If there are “employee representations” only them• Only if neither of the above applies can the individual affected

employees complain.

A trade union, if recognised in respect of a class of employees, may only complain of failure to consult on behalf of that class and not on behalf of other employees – T&GWU v Brauer Coley Ltd [2007] ICR 226

TUPE AS COMPARED WITH SECTION 188 TULRCA

• No minimum numbers of employees• Requirement to consult “long enough before the relevant transfer”

as opposed to specific minimum numbers of days

BUT -• Identical employee representatives provisions• Similar (ish) consultation requirements• Special circumstances defence• Protective award – approach the same as under TULRCA – Sweetin

v Coral Racing [2006] IRLR 252

Collective Redundancies:

Information, Consultation and Protection

By

Giles Powell

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