|May 3, 2012|
Previously published on May 2012
When an employer is "proposing" to dismiss as redundant 20 or more employees at any one establishment within 90 days or less, the employer has a legal duty to consult with representatives of the affected employees (such as representatives from a recognised trade union or specially elected employees). Consultation must be in "good time" and at least 90 or 30 days before the first dismissals take effect (depending on the number of employees to be made redundant). If an employer fails to comply with this requirement, it is liable for a "protective award", which is effectively a penal award for failure to comply with the legislation in respect of which (broadly): the maximum liability is 90 days' pay per affected employee; and the onus falls upon an employer to show why the award should be less than 90 days' pay.
The U.K. legislation, section188 of the Trade Union and Labour Relations (Consolidation) Act, implements the E.U. Directive on collective redundancies (the "Directive"). The Directive imposes obligations to consult collectively when an employer is "contemplating" collective redundancies.
The case of U.S.A. v Nolan addresses the issue of the precise point of the redundancy decision making process at which the duty to consult is actually triggered.
The U.S. Army made a decision to close a military base located in Hampshire, U.K. with effect from 13 March 2006. This was reported in the U.K. press on 21 April 2006 prior to any military employees having been notified. Three days later, on 24 April 2006, the commanding officer called a meeting to inform the civilian workforce that the base would close in September 2006. Following consultation, on 30 June 2006, 200 employees including Mrs. Nolan, were given notice that their employment would terminate at the end of September 2006.
Mrs. Nolan brought a claim in the Employment Tribunal that her employer had failed to consult in "good time" under section 188 about the decision to close the base in Hampshire and avoid redundancies primarily because the U.S. Army had only started the consultation process after the decision to close the base had been made.
Mrs. Nolan's claim was upheld by the Employment Tribunal and the U.S.A. was ordered to pay a protective award of 30 days' pay. The U.S.A. appealed to the Employment Appeal Tribunal and then the Court of Appeal. The Court of Appeal referred a question to the European Court for a preliminary ruling.
"Does the employer's obligation to consult about collective redundancy pursuant to [the Directive], arise (i) when the employer is proposing but has not yet made a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancy; or (ii) only when the decision has actually been made and it is proposing consequential redundancies."
The Attorney General's Opinion
The Attorney General has suggested the decision to consult does not arise in either of the options put forward by the U.K. Court of Appeal. Rather, it suggests that the obligation to consult is triggered when a strategic or operational decision is taken which compels the employer to contemplate or plan collective redundancies. Consultation under the first option proposed by the Court of Appeal would be premature, whilst consultation under the Court of Appeal's second option would be too late (because if a decision has already been made which makes redundancies necessary it means that it would be too late to consult about alternate options in order to avoid redundancies).
The case of U.K. Coal Mining v National Union of Mineworkers has already considered and determined that where an employer is contemplating collective redundancies, it is required to consult about the business decision underlying the redundancies (in this case, the decision to close the military base). Whilst the Attorney General did not comment on the correctness of that decision, it may in time be that the UK Coal Mining case is wrong and inconsistent with the Directive, if the Attorney General's suggestion that consulting under the Court of Appeal's first option is premature, is correct.
The ECJ will now consider the Attorney General's opinion and provide its judgment on when collective consultation obligations are triggered. The ECJ is not bound by the Attorney-General's opinion, but in most cases it follows it. From a practical perspective, it is hoped that the ECJ will provide clarity on precisely when the obligation to consult in collective redundancies is triggered.