Employment Update: Collective redundancies

21 November 2007

The duty to consult on impending redundancies when a workplace closes now includes a legal duty to consult on the reason for the closure.

In its recent decision in the case of UK Coal Mining v NUM, the EAT has reviewed UK law on collective redundancies and decided that it must be changed.

Under S188 Trade Union & Labour Relations (Consolidation) Act 1992 (TULCRA), an employer who is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less must consult ‘in good time’ and in any event at least 30 days before the first of the dismissals takes effect (which means before giving notice of the first dismissal).

The employer must consult on the reasons for the proposed redundancies and about ‘ways of avoiding the dismissals’. Since the law was changed in 1995 to bring UK law in line with the relevant European Directive, the employer must also consult about ‘ways of avoiding the dismissals’. However, previous decisions of the High Court and the EAT had held that it was permissible for an employer to decide to close down a workplace without consultation and only consult on ways of avoiding redundancies when the decision to close down the workplace was already ‘beyond discussion’.

The EAT in the UK Coal Mining case has now said that UK law must come into line with the Directive. Where workplace closure and dismissals are inextricably interlinked, a duty arises to consult over the reason for the closure in order to see if redundancies can be avoided.

The closure in the UK Coal Mining case had been precipitated by an unforeseen emergency, namely flooding at the coal face. However, the EAT agreed with the Tribunal that the employer could not rely on the exception in s 188(7) TULCRA – that ‘special circumstances’ had made it ‘not reasonably practicable’ for the employer to comply with the duty to consult. There are two elements to be satisfied if this exception is to apply. Firstly, that was not reasonably practicable to comply; and secondly, that the employer took such steps as were reasonably practicable i.e. made some effort to comply. In this case, the employer had not taken such steps so the exception could not apply; it had not discussed the true (economic) reason for the pit closure and it had also not consulted at all about the termination dates for the employees’ contracts.

The employer was ordered to pay the maximum protective award (90 days actual pay for each affected employee) for its failure to consult. The employer argued that this was inappropriate where there had been at least some measure of consultation (in this case, about alternative employment and the amount of redundancy compensation). The EAT disagreed. The protective award is a penal provision and the employer had not consulted properly. It had employed deliberate deception about the reason for the pit closure, stressing health and safety rather than the true (economic) reason. The employer had also deliberately not consulted about dismissal dates, it only announced them as a fait accompli.

Points to note:

  • UK Coal Miningis an extreme case. The fact that the employer had given the employees a false reason for the pit closure appears to have weighed heavily with the EAT when it decided that the employer should be under a legal duty to consult on the true reason. Although the EAT says that its decision will not in practice alter arrangements a great deal if union representatives are now required to be informed when the employer is considering closing a workplace and the employer has to respond to any union observations on the issue (presumably looking at possible alternatives to closure), this will surely involve some element of delay in the closure itself. Further advice on this point can be provided.

  • Employers should note that the maximum protective award will not exclusively be made in cases where there is an absolute failure to consult. It is intended to punish an employer and therefore, minimal consultation, or consultation on a false premise, will also merit the imposition of the maximum award.
    The Information & Consultation of Employees Regulations 2004 (the “ICE Regulations”) now require employers who employ more than 100 employees, to consult over economic issues where redundancies are not contemplated (and employers of only 50 or more employees will also fall under the regime of the ICE Regulations from 6 April 2008). One of the reasons given by the EAT for its decision in UK Coal Mining was that it would be strange if this obligation to consult did not apply at the very point where loss of jobs was envisaged. Employers should ensure that their procedures for employee consultation are up-to-date in terms of the expanding remit of the ICE Regulations as well as in terms of the change to the law made by the decision in UK Coal Mining.