Employment Update October 2009: Employee consultation

14 October 2009

Employment Group

Extent of duty to consult on parent company’s strategic decisions

The European Court of Justice (ECJ) has given its decision in the Finnish case of Akavan etc v Fujitsu Siemens Computers.

The background to this claim was the merger of certain IT businesses of Fujitsu Ltd and Siemens AG into a joint undertaking, known as the Fujitsu Siemens Computer group (FSC), which was a subsidiary of a parent company established in The Netherlands.

The executive council of the parent company made a proposal to the directors of the parent company that a particular factory in Finland should be disposed of.

Several weeks later, the parent company decided to terminate FSC’s operations in Finland and, one week thereafter, FSC began the process of making its Finnish employees redundant.

The employees alleged that FSC’s duty as an employer to consult with its employees under the European Directive on Collective Redundancies (98/59) (‘the Directive’), arose at the point at which the parent company was considering making strategic decisions which might compel the employer to contemplate or plan for collective redundancies.

The ECJ agrees. It says that this will be the case even if, at that point, the employer (the subsidiary company) is unable to provide its employees’ representatives with all the information required by the Directive. The obligation falls on the subsidiary company, as employer, and not the parent company, and the consultation process must be concluded before employee contracts can be terminated.

Point to note –

  • For UK employers, the obligations imposed by the Directive are set out in section 188 of the Trade Union & Labour Relations Act 1992. There are penal sanctions for failure to consult. Our employment law team can advise further.