The question of when collective consultation provisions are triggered under Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULRCA’) is a tricky issue for employers to grapple with and has been the subject of a number of ET cases over the years leading to some conflicting case law.
Summary
The recent case of E Ivor Hughes Educational Foundation v Morris & Ors does not resolve this difficult issue but does provide some helpful guidance and insight where redundancies arise from the closure of a workplace (though the same principles can be applied to other redundancy circumstances). Specifically, it makes it clear that the statutory duty can arise at an early stage of decision making (i.e. where there is a proposal to make redundancies).
In the Ivor case, the EAT determined that an employer’s collective consultation obligations arise when the ‘provisional decision’ to close a workplace is made. The extent to which an employer must consult about strategic decisions, which may ultimately result in redundancies remains uncertain. However, once a decision to make redundancies is clear, albeit provisional, consultation must begin. The safe option for employers is therefore to consult as early as possible.
Background
The collective consultation provisions under TULRCA are engaged where an employer proposes to make large scale redundancies of 20 or more employees at one establishment within a period of 90 days or less. In such circumstances, the employer is obliged to consult with employee representatives on the proposals. The consultation must ‘begin in good time’ and be conducted with a view to reaching agreement: on avoiding the need to make dismissals; reducing the number of dismissals; and/or mitigating the consequence of any dismissals. Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes place and for fewer than 100 redundancies, the minimum period of consultation is 30 days.
The employer must also notify BIS of the proposed redundancies and a failure to do so is a criminal offence.
Failure to consult may result in a protective award being made by the ET to each affected employee. The maximum protective award is 90 days gross pay meaning that protective awards can be substantial. Further, where a dismissal takes place, a failure to consult may render the dismissal unfair and an employer could face a further ET award for a successful unfair dismissal claim.
Facts
E Ivor Hughes Educations Foundation (‘E Ivor’) is a charity for private schools and nurseries. The Claimants were all teachers at one of the schools. Discussions were held in relation to one of its schools, with the head mistress, due to concerns about a reduction in the number of pupils attending, which was impacting on the school’s revenue. In February 2013, a meeting was held during which it was decided that if numbers did not increase (and it was thought unlikely that they would) then a decision would be made in April 2013 to close the school. As anticipated, the numbers did not increase (in fact they diminished further) and accordingly, in April 2013, the school governors decided that the school would close at the end of the summer term. The staff (more than 20) were issued with notices of redundancy confirming a termination date of 31 July 2013. E Ivor did not undertake any consultation with the affected staff, as the governors contended that they did not know they had a legal obligation to do so and they did not seek any legal advice.
The staff brought claims for unfair dismissal and protective awards for a breach of the TULRCA collective consultation obligations.
Employment Tribunal decision
The ET decided that the obligation to consult with the affected staff arose in February 2013 when E Ivor identified that redundancies would be made if the number of students did not increase, because this amounted to a ‘proposal to dismiss’ under TULRCA. The ET applied the principle in the well-known case UK Coal Mining Ltd. v National Union of Mineworkers (Northumberland Area). This case expressly stated that the duty to consult arose where a closure is fixed as a clear, albeit, provisional intention. The decision that the school would close unless numbers increased was a provisional intention to dismiss the employees. It was accepted that this was not the final decision (which was taken in April 2013) but that it was enough to trigger the collective consultation obligations.
All of the claimants were awarded 90 days uncapped pay for the failure to consult and further their claims for unfair dismissal were successful.
Employment Appeal Tribunal decision
E Ivor appealed the ET decision. The EAT agreed with the ET that the obligation to consult arose in February 2013 and not in April 2013. The meeting in February amounted to a strategic decision on changes compelling the employer to contemplate or plan for collective redundancies. In reaching this decision the EAT dismissed E Ivor’s submissions that it was not reasonably practicable to consult due to special circumstances, namely that the closure plans needed to be kept secret for fear that it would undermine confidence in the school.
The EAT upheld the protective award made by the ET. However, the unfair dismissal finding was remitted to a freshly constituted ET to consider whether reductions to the unfair dismissal award should be made on procedural grounds.
Conclusions
The maximum protective award was made in this case and the fact that E Ivor was not aware of their legal obligations provided it with no defence; which mirrors earlier decisions. In cases where there has been no consultation the ET must start with the maximum protective award and then determine if this should be reduced on account of any mitigating factors. This case emphasises the importance of seeking legal advice at an early stage of redundancy processes especially where there is uncertainty and also because of the punitive financial implications of getting it wrong can be significant. It is notable that the failure of the employer to take legal advice in this case was described as being ‘reckless’ by the courts.
Finally, this decision highlights the dangers of employers leaving it too late to consult. It is beyond doubt that the duty to consult can arise at an early stage even if a final decision is dependent upon future circumstances. If in doubt, it is safer to start the consultation sooner rather than later making it clear that definite decisions have not been made, to provide some reassurance to the affected staff and also requesting in cases such as this where there is a concern of damage being caused if the redundancy proposals become public knowledge that the potential redundancies (background information) be kept confidential by staff.
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