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This article first appeared in the May 2014 issue of the Employment Law Journal, published by Legalease (www.lawjournals.co.uk).
Ongoing uncertainty about employers' duty to collectively consult staff about redundancies and business transfers means that the law in this area remains complex.
Over the past year, there have been several cases, as well as legislative changes, which affect employers' collective consultation obligations in respect of redundancies and transfers of undertakings.
This article provides a round up for practitioners.
Following the insolvencies of Woolworths and Ethel Austin Ltd, there were large-scale redundancies in both businesses.
The shop workers' union USDAW brought a claim against both companies in the employment tribunal for protective awards of up to 90 days' gross pay per employee because the retailers failed to consult the employees before dismissing them.
Where an employer is unable to pay due to insolvency, the secretary of state for business, innovation and skills is liable to pay out of the National Insurance Fund.
The employment tribunal held that the consultation requirements in s188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) applied where there was a proposal to dismiss 20 or more employees 'at one establishment' within a period of 90 days.
Therefore, employees who worked in shops with more than 20 staff succeeded in their claim, but about 4,500 employees who worked in shops with fewer than 20 staff did not receive protective awards.
The Employment Appeal Tribunal (EAT) took a different view, interpreting TULRCA purposively in the light of the EU Collective Redundancies Directive.
It disregarded the 'at one establishment' test and held that the duty to consult is triggered where an employer proposes to dismiss 20 or more employees within 90 days, regardless of those employees' locations.
The secretary of state then appealed the 'Woolworths' case to the Court of Appeal. He argued that the case should be stayed pending the outcome of a Northern Irish case referred to the European Court of Justice (ECJ), Lyttle v Bluebird UK Bidco Ltd, which concerned redundancies arising from the insolvency of the Bonmarché clothing chain.
The Court of Appeal decided to refer the Woolworths case to the ECJ, since the claimants had legal representatives and to avoid a further reference if the Lyttle case did not dispose of all the issues. The ECJ may join the Lyttle and Woolworths cases, but no decision is imminent, bearing in mind the usual 18-month timeframe from reference to ruling.
A decision in Lyttle may be expected in October 2014.
Until the ECJ gives its view, there will be considerable uncertainty about when redundancies and reorganisations, including dismissals followed by re-engagement on new terms of employment, trigger the collective consultation rules.
The cautious approach would be to follow the EAT decision (by consulting employees where the employer is proposing to dismiss more than 20 employees within a 90-day period across its business, regardless of location).
However, this may not be easy to do in practice. The delay is also of little help for those claimants seeking protective awards in the employment tribunal whose claims were stayed pending first the Court of Appeal decision and now the ECJ ruling.
The Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (CRATUPEAR) came into force on 31 January 2014.
The legislation helps clarify the position on collective consultation for redundancy prior to a transfer covered by TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006).
CRATUPEAR now permits a transferee to start collective redundancy consultation before a TUPE transfer providing the transferor consents. The transferor may provide information for and assistance with this consultation but it is not obliged to do so.
A transferee that has elected to carry out consultation pre-transfer can cancel that election but it cannot make a second election if it subsequently changes its mind. If it does cancel the pre-transfer consultation, it will still need to comply with its consultation obligation post-transfer.
As a result of the new legislation, transferors should seek protection from the transferee for liabilities that may be caused by pre-transfer consultation.
The longevity of these changes has, however, been called into question after the Labour shadow cabinet, led by Ed Miliband, tabled an early day motion (EDM) in Parliament calling for the annulment of CRATUPEAR.
While EDMs are rarely debated, they do allow MPs to draw attention to causes. Alternatively, if Labour wins a majority in the next general election on 7 May 2015, this may also result in CRATUPEAR being annulled.
Currently, where there is a business transfer, a transferor and transferee must inform and consult appropriate representatives of employees who will be affected by the transfer. This obligation applies regardless of the number of affected employees.
Strictly speaking this means that there would be a technical breach of TUPE if a transferor, a small employer of 5 employees for example, failed to elect appropriate representatives and instead chose to inform and consult with its staff directly.
CRATUPEAR provides that from 31 July 2014, in certain circumstances, small businesses with fewer than 10 employees will be allowed to inform and consult with affected employees directly.
The Court of Appeal in United States of America v Nolan (No 2) has held that the collective consultation obligations under s188 of TULRCA applied when the US closed one of its UK army bases and dismissed approximately 200 employees as redundant.
This was despite the ECJ refusing jurisdiction to answer a question in the case because the military base employees fell within an exemption under the EU Collective Redundancies Directive.
TULRCA does not include the same exemption and the Court of Appeal held that s188 could not be read as having the same effect.
The court observed that had the US wanted to avoid the employment tribunal having jurisdiction, it could have claimed state immunity. It did not do this and instead submitted to the tribunal's jurisdiction by lodging its response.
The US could also have relied on the 'special circumstances' defence under s188(7) of TULRCA and asserted that it was 'not reasonably practicable' to comply with parts of the collective consultation obligations. Again, it did not do this.
The court stated that there would need to be a further hearing (unless the parties reached a compromise) to consider the key issue in the case, namely when the obligation to collectively consult is triggered.
The claimant sought to argue that consultation should have started before the strategic decision was taken to close the base, because to do so afterwards would prevent meaningful consultation to avoid the redundancies taking place (as per the EAT approach in UK Coal Mining Ltd v National Union of Mineworkers).
This is, however, contrary to the more recent decision in Akavan Erityisalojen AEK ry and others v Fujitsu Siemens Computers Oy. In that case, the ECJ provided that the duty did not start until after the strategic decision had been taken, as it was only then that an employer would actually have to contemplate redundancies.
We must wait to see whether the parties settle after seven years or if there is a further hearing (albeit without the benefit of ECJ guidance as set out above).
Changes introduced on 6 April 2013 confirmed that where an employer proposes to dismiss fixed-term employees, such dismissals will not trigger the collective consultation obligations providing they take place 'at the agreed termination point'. (This can mean either the agreed termination date or the agreed termination event such as the completion of a specific project). The changes were brought about by the Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment) Order 2013.
The Scottish Court of Session reached the same conclusion in University College Union v University of Stirling, although that decision concerned events before the 2013 Order came into force.
The 2013 Order also provided that where 100 or more redundancies are proposed, collective consultation must start at least 45 days before the first dismissal takes effect.
Notification that 100 or more redundancies are being proposed must also be given to the secretary of state in writing (usually on form HR1) at least 45 days before the first dismissal.
Previously, the minimum period was 90 days. The minimum period where 20 to 99 redundancies are proposed remains at 30 days.
It is important to remember that while the maximum consultation period has been reduced, the maximum protective award for breach of the collective consultation obligations remains at 90 days' gross pay per dismissed employee.
Since 6 April 2014, claimants must comply with the ACAS early conciliation rules if they wish to bring a claim for breach of the collective redundancy consultation requirements under TULRCA or breach of the obligation to inform and consult under TUPE.
This means that before lodging a claim at the employment tribunal, claimants must contact ACAS who will explore whether a settlement can be facilitated between the parties. If not, an early conciliation certificate will be issued.
From 6 May 2014, it will not be possible to submit a claim to the employment tribunal without such certificate. In certain circumstances, the time limit for lodging a claim will be paused or extended depending upon when contact with ACAS was first made.
The changes to collective consultation obligations in respect of fixed-term contracts and the minimum period for large-scale redundancies are welcome news for employers.
However, collective consultation (both in respect of redundancies and under TUPE) remains a complex area of employment law due to uncertainty from political posturing and cases awaiting decisions.
This article was written by Jessica Shemmings and Clare Davis.
For more information contact Jessica on +44 (0)20 7427 6499 or email@example.com