26 June 2015 #Employment
The issue of what is meant by “establishment” for the purpose of collective redundancy consultation having been dealt with recently by the European Court of Justice, the next vexed issue on collective consultation is at what point in the employer’s decision making processes does the obligation to consult arise?
The legal position as to the correct test remains unclear and the issue is due come back before the Court of Appeal in the long running case of USA v Nolan. It is not known at present when this might be as first Nolan will be heard in the Supreme Court on 15 and 16 July 2015 to establish whether the UK courts have jurisdiction as the case concerns the closure of a US military base.
What is clear is that getting the issue wrong can be very costly indeed for an employer, adding 90 days’ pay per affected employee to the redundancy bill, as a case reported this week shows.
In E Ivor Hughes Educational Foundation v Morris, the EAT has dismissed a school's appeal against a protective award of 90 days pay per employee in respect of a failure to consult over the closure of the school.
The school governors decided on 27 February 2013 that it would have to close at year's end if pupil numbers had not increased by April. Ultimately, the school decided to close in April 2013 and there was never any collective consultation over the decision, in breach of Section 188 of TULR(C)A 1992.
The employment tribunal considered both of the two different tests as to what the appropriate trigger point for consultation. As to which is the most appropriate test will hopefully be resolved in the Nolan case. In UK Coal Mining Ltd v National Union of Mineworkers  IRLR 4, the EAT held that in the context of business closure, consultation must begin sufficiently early to include consultation about the business reasons for making the redundancies, which may be before the strategic decision is made. However, in Fujitsu  IRLR 944, the ECJ decided that the duty to consult under the Directive is triggered only once a strategic or commercial decision has been taken that will foreseeably or inevitably lead to collective redundancies.
The approach of the tribunal was to consider both tests, holding on the facts that on the basis of either test, the duty to consult arose on 27 February 2013. The EAT agreed that this was an appropriate approach. It noted that the decision to close the School, unless numbers increased 'was either a fixed, clear albeit provisional intention to close the School or amounted to a strategic decision on changes compelling the employer to contemplate or plan for collective redundancies. On either analysis, the duty to consult arose on that date. The EAT did not find it necessary to decide which test applied.
The EAT also rejected a ground of appeal that special circumstances excused a failure to consult because of the need to keep the closure plans secret for fear of confidence in the school being lost. The problem was that the employer had not even considered the possibility of consultation at the time. That an employer which had not thought about consultation might, with hindsight, give consideration to the practicalities of consultation is not a special circumstance excusing the duty to consult.
Out of interest, the EAT also felt that the consultation could have been conducted by imposing on the employees a duty of confidentiality.