Thu 10 Dec 2020

Collective consultation - hindsight is a wonderful thing

European Court of Justice decision on redundancy consultation will have employers looking over their shoulder.

Back in the 1970s, in a case called TGWU v Nationwide Haulage Limited [1978] IRLR 143, an employment tribunal held that the law does not retrospectively impose the obligation to collectively consult in respect of dismissals that had already happened just because a decision is taken to make more redundancies - that would be to "demand the impossible".  A "proposal", the tribunal held,  refers to what may happen in the future, not what has already happened. 

Simpler times perhaps but a seemingly sensible conclusion which is relatively straight forward to implement on a practical basis.  However, this approach has been thrown into flux by the European Court of Justice (ECJ) following the judgement in UQ v Marclean Technologies SLU.  The case concerns the requirement to collectively consult on redundancies, an obligation that is founded in European law - specifically the Collective Redundancies Directive ("the Directive") - and implemented in the UK by the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA").  TULRCA requires collective consultation when an employer is "proposing to dismiss" as redundant 20 or more employees at one establishment within a period of 90 days. 

The case was referred to the ECJ by a Spanish court.  The claimant had been dismissed by her employer in May 2018.  Another 36 employees were subsequently dismissed within the next 90 days.  The Spanish court held that the employer could only look at dismissals taking effect before the claimant's dismissal when considering the collective consultation threshold.  This meant the threshold was not reached in her case.  The ECJ were asked by the Spanish court to confirm whether that was the correct approach.

The ECJ held that to look at either only the 90 day period before or only the 90 day period after a dismissal does not comply with the Directive.  Instead, employers should look at a rolling 90 day period - i.e. any 90 day period during which the dismissal occurred - to determine whether the threshold for collective consultation has been reached.  The intention of the employer was irrelevant for these purposes - the court should look at what happened in practice and not what the employer had intended to happen at the point of making the first dismissal.  In effect, the decision says that employers need to consider a rolling 90 day period and take into account any proposed dismissals that are already underway as well as any future dismissals.

Currently, under UK law, TULRCA provides “in determining how many employees an employer is proposing to dismiss as redundant, no account shall be taken of employees in respect of whose proposed dismissals consultation has already begun”.  In other words, if collective consultation has begun in respect of a batch of 25 redundancies, if a further 15 are proposed less than 90 days later (and at the time the first batch were proposed the employer was unaware of the need for this second batch) there is no need to add the 15 to the 25 and therefore no need to collectively consult with the smaller second batch.  This forward looking approach now appears to be incompatible with the Directive. 

To comply with the Directive, irrespective of what is set out in TULRCA, redundancy processes that have already started when further redundancies are proposed (and potentially dismissals that have already occurred) may need to be counted when calculating the trigger point for collective consultation.  The risk of getting it wrong brings with it the possibility of a protective award, for failure to inform and consult, of 90 days' actual gross pay per employee.  There is also the risk that an employer fails to notify the Government of a collective redundancy which is a criminal offence. Where the threshold is met dismissals will be delayed by either 30 or 45 days (depending on the number of proposed redundancies) which will have direct cost implications.

It is possible that that the significance of this case will be dampened significantly, at least for employers in the private sector, for two reasons. Firstly, due to the wording of the TULRCA it is arguable that Employment Tribunals will not be able to interpret the TULRCA in a way that is consistent with the ECJ decision. If that is indeed the case then, unless the employer is what is known as an emanation of the state, (very broadly, a body which provides a public service under the control of government) then the only remedy would be a claim against the UK Government directly for its failure to correctly implement the Directive (a Francovich claim) - i.e. the claim would not be brought against the employer in that situation. Secondly, this sort of claim (i.e. a Francovich) claim cannot be brought after 31 December 2020 as a result of Brexit. However, if an employer is an emanation of the state then a claim could be brought directly against the employer relying on the Directive rather than the TULRCA.

So what can employers do in the meantime to protect their position?  Until the position in the UK is clarified, the safe approach is for employers to carefully consider the risk of a rolling reference period being applied.  Careful planning will be required to ensure the threshold for consultation is not accidently triggered.  This will be particularly important where redundancies are taking place in batches.  Care will also need to be taken to ensure the correct numbers of proposed redundancies are reflected on an HR1 form, should the collective consultation threshold be met.

But even if employers do take these steps, from a practical stand point will they be able to comply with the obligation to notify the UK Government and begin collective consultation in respect of dismissals that have already taken place?  It does seem that, to an extent, this decision is doing something that is exactly what the employment tribunal warned against 40 plus years ago - demanding the impossible.  

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