In this article...

• The background
• The facts
• The tribunal’s decision
• The EAT’s decision
• What does it mean for me?

Employers will be concerned by the EAT’s ruling that they are under a duty to consult collectively about the business reasons for making redundancies. Fiona Killingworth examines the implications of the decision.

The background

Article 2 of the EC Collective Redundancies Directive provides that employers are obliged to consult collectively where they are “contemplating” collective redundancies. It is transposed into domestic legislation by section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), which provides that the duty arises where the employer “is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less”.

Notably, the language of section 188(1) does not reflect the language of the Directive and the difference between “proposing” and “contemplating” has been the subject of much debate in case law over recent years.

Section 188(4) identifies the information which the employer must disclose in writing to the union or other representatives to facilitate the consultation. This includes information about the reasons for the proposals – section 188(4)(a).

An employer is relieved of the full duty to consult only where there are “special circumstances” which render it not reasonably practicable to comply with the obligation – section 188(7). The burden of proof with regard to establishing special circumstances lies with the employer, who must still take all reasonably practicable steps towards compliance.

In 1995 new provisions were inserted into TULRCA to give effect to the precursor to the current Directive. Section 188(2) now provides that consultation should cover ways of:

		avoiding the dismissals;
		reducing the numbers of employees to be dismissed; and
		mitigating the consequences of the dismissals.

In R v British Coal Corporation and Secretary of State for Trade and Industry, ex parte Vardy the High Court took the view that there is no obligation to consult over the reasons for the redundancies, even though this limits the opportunity to consult over ways of avoiding dismissals. This decision preceded the 1995 changes but the High Court’s reasoning has been adopted by the EAT in a number of subsequent cases.

The scope of the duty to consult recently came under scrutiny by the EAT in UK Coal Mining Ltd v National Union of Mineworkers (Northumberland Area) and anor.

The facts

UK Coal Mining Ltd (“UK Coal”) employed 329 employees at Ellington Colliery in Northumberland. For some years there had been concerns regarding the economic viability of the pit. In January 2005, water began to enter the colliery and water levels subsequently rose too high for production to continue. On 26 January 2005, UK Coal announced its decision to close the mine on safety grounds.

The company proposed 158 redundancies, triggering the duty to consult under section 188 TULRCA. It commenced consultation with the unions but soon afterwards, on 26 February, it went ahead with the first compulsory redundancies. The unions brought a tribunal claim for failure to consult.

The tribunal’s decision

The tribunal found that there was no credible evidence that the colliery was being closed for safety reasons. The real reason was economic. The reason given by UK Coal was deliberately misleading and involved a breach of section 188(4)(a) TULRCA.

Consultation on issues of principle had not been possible, in the tribunal’s view, because there was no interval between the announcement of the redundancy proposal and the decision to proceed with the redundancies as proposed. The only consultation that did take place was with regard to alternative employment and redundancy payments.

The tribunal rejected the argument that the flooding had created an unforeseen event which ought to be treated as relieving UK Coal of the duty to consult. The evidence as to the time and costs involved in pumping the pit dry was unconvincing and had the character of “back of the envelope” calculations. In any event, there had been a failure to take such steps towards compliance as were reasonably practicable.

For these reasons, the tribunal concluded that UK Coal had committed a number of “deliberate and very serious breaches of the statutory requirements” and decided to award the maximum protective award of 90 days’ remuneration.

UK Coal appealed to the EAT, arguing that the tribunal had fundamentally misdirected itself about the nature of the employer’s breach. The unions cross-appealed on the basis that there was an obligation to consult over the reason for the closure itself.

The EAT’s decision

Before the EAT, UK Coal submitted that there was no duty to consult over the decision to close the pit and no obligation to give reasons for the closure. Accordingly, there could be no infringement of section 188 TULRCA where the employer voluntarily chose to give reasons, even if the reasons were false or misleading.

The EAT rejected this argument. The employer had failed to comply with its obligation under section 188(4)(a) by giving a false reason for the closure. There could not be compliance when a deliberately misleading reason was given, and the employer’s subsequent conduct affected the nature of the consultation that did take place.

The unions, in their cross-appeal, submitted that Article 2 of the Directive, if properly implemented, would require consultation over the reasons for the closure. The case of Vardy had to be seen in the context of the legislation as it was at the time, which provided that there was no duty to consult about ways of avoiding the dismissals but only about the dismissals themselves. The comments made in Vardy no longer held good in light of the amendments made to section 188 in 1995.

The EAT agreed with the unions’ submission. The obligation to consult about avoiding the proposed redundancies involves engaging with the reasons for the dismissals, and that in turn requires consultation over the reasons for the closure.

Furthermore, where it is recognised that dismissals will inevitably or almost inevitably result from the closure, dismissals are proposed at the point when the closure is proposed. The difference between “proposed” and “contemplated” will still impact on the point at which the duty to consult arises; it will not be when the closure is mooted as a possibility but only when it is fixed as a clear, albeit provisional, intention.

In relation to the “special circumstances” defence, the EAT held that it was for the employer to satisfy the tribunal that there were economic circumstances of a nature justifying the failure to consult. The tribunal required detailed evidence which the employer had failed to provide.

Finally, the EAT held the tribunal had not erred in awarding the maximum protective award based on the employer’s deliberate deception and rejected the argument that the award should have been reduced on the basis that limited consultation did take place.

What does it mean for me?

		The EAT’s decision makes it clear that, where the closure of a workplace will inevitably result in redundancy dismissals, there is an obligation to consult collectively about the reasons for the closure. This represents a significant departure from previous case law.
		The two lay members of the EAT pointed out that some employers already inform union representatives why they are considering the need to close and respond to union observations, even if they do not feel legally obliged to do so.
		Employers who do not already follow this practice will now have to ensure that they consult over the reasons for redundancies, as this could otherwise lead to a large protective award being made against them.
		It will be the proposed dismissals that are the subject of the consultation and not the closure itself. In the rare case where an employer plans to close a workplace but believes that dismissals can be avoided, there will be no need to consult over the closure decision. In most cases, however, closure and dismissals are likely to be inextricably linked.
		The “special circumstances” defence to a failure to consult can be relied upon only in exceptional cases and will require detailed evidence from the employer.