Collective redundancy - employer must consult on the reason for redundancies

United Kingdom

In a radical judgment, the President of the Employment Appeal Tribunal has overturned previously binding authority and ruled that an employer must consult about why it wants to make redundancies.

In UK Coal Mining Ltd v National Union of Mineworkers (judgment given on 22.10.07) the employer had suddenly closed a coal mine employing over 300 employees after it flooded. The Employment Tribunal ruled the employer had deliberately given false information about the closure to the unions and that there was no consultation at all when the redundancy proposal was still at the formative stage. The Employment Tribunal therefore awarded the maximum 90 day "protective award" to the employees and ordered the employer to pay the unions’ legal costs. The employer appealed, trying to overturn the award arguing, based on a line of case law going back to Vardy (1993 Court of Appeal), that as there was no obligation to consult on the reason for the redundancy proposal - the decision to close the mine - there could be no liability at all.

Giving the judgment of the Employment Appeal Tribunal, the President said that they were in no doubt that the underlying EU law did require consultation over a decision to close, but they reluctantly accepted that UK law was not in line on this point and it was impossible to interpret it to have that effect. But, in their judgment, in a closure context, where dismissals will inevitably or almost inevitably result, dismissals are "proposed" at the point when the closure is itself first fixed as a clear albeit provisional intention . Further, the obligation to consult over avoiding the proposed redundancies inevitably involved engaging with the reasons for the dismissal, and that in turn requires consultation over the reasons for the closure. So where closure and dismissal are inextricably linked, the duty to consult over the reasons arises. For good measure, they also accepted there was no distinction in practice, in this case at least, between the closure and the dismissals. And that it would be artificial to treat the closure as the reason for the dismissal and so preclude any discussion of what lay behind the closure decision.

The EAT highlighted that many companies will, as a matter of course, explain why they are considering closures as well as the consequential redundancies and be willing to listen and respond to union observations on this.

However, employers must now be aware that this is a particular requirement if they are to satisfy their legal obligations and avoid costly protective awards. Tribunals will no longer accept employers presenting the reason for redundancies as a fait accompli.

Unions will no doubt be emboldened by this decision and, while it would be dubious to try to read the decision across to outsourcing decisions, given the different provisions of TUPE on consultation, employers should not be surprised to meet claims by unions to that effect.