Summary

A recent landmark ruling by the Employment Appeal Tribunal (“the EAT”) has significantly altered the position concerning collective redundancies.  The key finding in UK Coal Mining Limited v National Union of Mineworkers is that there is now a duty on employers to consult on the business reasons for making redundancies as part of the obligation to consult on ways in which the redundancies can be avoided.  

Background

To understand why this is potentially such an important decision it is necessary to consider the historic position, in respect of both the legislation and the case law in this area.  

The Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) requires employers to consult collectively with employee representatives or trade unions where they “propose to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less”. 

Under TULRCA the subject matter of such consultation should include, amongst other matters, “ways to avoid dismissals”.  This requirement, along with others, was introduced by amendments to TULRCA in 1995.  Prior to 1995 there was simply a duty on employers to consult “about dismissals”. 

The decision in UK Coal has overturned two cases in this area (Securicor and Vardy).  Vardy was decided before TULRCA had been altered, and Securicor was decided after 1995, but followed the position taken in Vardy.  It was decided in UK Coal that neither of these cases was good law in light of the changes made to TULRCA.

Facts of the case

There had been concern for some years that the colliery in question (owned by UK Coal) was not financially viable.  The colliery was subject to some flooding, and so it’s owners decided to close the colliery on safety and economic grounds.  This resulted in 158 employees being proposed to be made redundant. 

The Employment Tribunal found that the closure of the colliery was in fact for economic reasons. 

Changing law

The old position, which had been accepted as good law since Vardy, was that when there is a business closure leading to redundancies and the duty to consult under TULRCA is triggered (by the number of redundancies within the time frame), consultation does not have to include reasons for the closure.

It is important to note that although UK Coal deals with a situation where a whole site was being closed, the logic and principles applied may also extend to situations where collective redundancies are taking place for reasons other than the closure of a site, such as restructuring.   

As a result of UK Coal the law has now changed.  There are two key points to take from this case:

First, the subject matter of consultation has changed.  The new interpretation of the obligation to consult over ways to avoid dismissals (introduced by the amendment to TULRCA in 1995) has significantly widened the scope of the consultation obligation and has extended it to include consulting about the reasons for the closure itself. 

Secondly, the timing of the consultation has changed.  Consultation with appropriate representatives must happen before any final proposal is in place in order for consultation about the reasons for closure to be meaningful.  This means that employers seeking to close a site are now required to start consultation at an earlier stage than previously.

In practice it is questionable how meaningful the consultation over the business reasons for the redundancies will be.  Will businesses merely go through the motions of consultation without ever acting upon suggestions of the employee representations? 

Practical points

  1. Board minutes should make clear that any closure proposal is subject to consultation with appropriate representatives, otherwise consultation could be viewed as meaningless and in breach of TULRCA. 
  2. When closure is for economic reasons there may be a disclosure of sensitive business information during the consultation process.  Businesses should be wary of this and seek advice if there is concern.
  3. The duration and cost of consultation could be increased by this widening of the scope of consultation.  However, provided the employer performs meaningful consultation with the employee representatives and considers any suggestions put forward, it will still be able to go ahead with the planned redundancies. 
  4. As a result of the consultation duty widening, there is an increased chance that employers will fail in their consultation duties.  Employers need to be wary that tribunals have the power to make penal awards to punish employers – this can be 90 days’ full pay for each affected employee. 

Looking forward

This case marks a shift towards the European position where consultation with employee representatives on a wide range of issues is customary.  The EAT’s decision also made clear that TULRCA does not properly implement the relevant European directive on collective consultation.  It is interesting to note that the EAT was also persuaded by obligations under the Information and Consultation of Employees Regulations 2004 (“the ICE Regulations”).  The ICE Regulations contain a broad obligation to consult over a number of economic decisions, and they were influential in the EAT reaching its decision. 

This is unlikely to be the last word on the subject…  

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