Background and collective consultation obligations
The company owned the Ellington Colliery in Northumberland. In January 2005, there was penetration of water on the coalface which halted production. Shortly afterwards, the company announced that it was closing the mine.
The decision to close the mine triggered the collective consultation obligations under s188 of the Trade Union and Labour Relations (Consolidation) Act 1992 which provides for consultation with representatives of employees affected by proposed dismissals.
Consultation must begin ‘in good time’ (to enable meaningful consultations to take place) and where 100 or more redundancies are planned over a period of 90 days or less (which was the case here) consultation must begin at least 90 days ahead of the first proposed dismissal. Consultation must be completed before notices of dismissal are given to the workforce.
Collective consultation is begun by giving to each of the employees’ representatives certain information in writing which includes the reasons for the proposed redundancies; the numbers and descriptions of employees the company proposes to make redundant; and the proposed method of selection.
The parties must then consult over ways of avoiding the dismissals, reducing the numbers of employees to be dismissed and mitigating the consequences of the dismissals.
Failure to comply with any of the requirements of the legislation may lead to an application to an employment tribunal for a protective award. This is an order that the company pays redundant employees their gross pay from the date of the first dismissal or of the tribunal award, whichever is earlier, for a period of up to 90 days according to the seriousness of the company’s failure which can clearly be very costly.
Tribunal’s decision
In this case, the unions argued that the company had breached its consultation obligations and therefore sought a protective award. Finding in favour of the unions, the tribunal held that this was a case of ‘a deliberate and very serious breach’ of the legal requirements and awarded the maximum protected day period of 90 days.
Employment Appeal Tribunal’s decision
The company appealed against the tribunal’s decision but was unsuccessful. On appeal, the unions also argued that previous EAT decisions, which had held employers were not obliged to consult over the reasons for redundancies were wrong.
When considering the point, the EAT noted that not consulting over the reason behind redundancies necessarily limits the opportunity to consult over ways of avoiding them. Therefore, the EAT decided to depart from earlier case law and held that ‘the obligation to consult over avoiding the proposed redundancies inevitably involves engaging with the reasons for the dismissals, and that in turn requires consultation over the reasons for the closure’.
In short, the EAT said that ‘where closure and dismissals are inextricably interlinked, the duty to consult over the reasons arises’.
The EAT noted that ‘most employers already inform union representatives why they are considering the need to close a plant and will respond to any union observations, even if they do not feel themselves legally obliged to do so’. Whether or not this is the case, in future employers will have to consult – not just inform - about the reasons or business decision for a workplace closure.
Comment
This decision will affect not just the subject matter, but potentially also the timing of consultation. From now on, consultation should begin, according to the EAT, when closure is ‘a clear, albeit provisional, intention’, i.e. prior to the business decision about the closure having already been reached.
Although this case concerned a closure, there is no reason why the impact of the decision should be limited to closures and should apply to all collective consultation situations.
It is also possible that, following this case, unions will call for more information about the business reasons behind the proposed redundancies which employers should provide if consultation is going to be meaningful.
Remember, though, consultation is undertaken ‘with a view to reaching an agreement’ and although this will be a form of negotiation, employers are not actually under an obligation to reach an agreement with employee representatives.