A victory against common sense

Comments are closed. The Government has announced plans to review the law on consultation overcollective redundancies. But new obligations created by the tribunals havealready made it a trap for unwary employers, reports Nicholas RobertsonThere is a lot of speculation at the moment about the state of the Britisheconomy. If there is a downturn, this will inevitably mean a correspondingincrease in the number of large scale redundancies. For many employers thiswill mean getting to grips with the current thinking on their duty to consultstaff where collective redundancies are proposed. Ensuring that all the staff receive the news at the same time is difficult.Personnel director Allan Johnson of steel giant Corus recently refutedaccusations that the company did not consult with staff before it announcedover 6,000 redundancies. He said, “Once announced, the proposals were bignews and were straight on the news wires within one minute, but not beforeconsultative meeting had begun in every plant affected.” As Johnston’s experiences demonstrate, collective redundancies are nevereasy. Preparation and advanced planning will go a long way to smoothing thepath. However, as a result of three recent tribunal decisions employers need tobe fully up to speed on their legal obligations as well and factor these intotheir planning. The difficulty is that those who take a common sense approachmay easily find themselves in hot water. Basic rules on collective consultation The basic principle is that an employer should consult with appropriaterepresentatives of employees affected by large scale redundancies. The duty toconsult arises where the employer is: proposing to make redundant 20 or moreemployees; from any one establishment; in any 90-day period. The first three elements of this duty have recently been reviewed by thecourts, and on each occasion interpreted in a manner designed to give maximumprotection to employees. The penalty for failing to consult in accordance withlegal obligations is a maximum of 90 days’ remuneration. Is it a “proposal” or an option? Scotch Premier Meat v Burns In this recent case the company reviewed its business operations following adownturn in trading. There was a board meeting on 15 April in which it wasdecided the business would either be sold as a going concern or closed and theland sold. If the business was closed then more than 150 employees would losetheir jobs. This meant that there should have been at least a 90-dayconsultation process. The closure operation was subsequently followed throughand completed by 1 June, by which time the redundancies had gone through. The employees claimed there had been a failure to consult in accordance withthe employer’s obligations, an allegation which the company defended on theground that there had not been sufficient time to consult. This meant it wasnecessary to decide when the company was first proposing to dismiss staff byreason of redundancy. The employment tribunal decided that the employer had proposed to dismissstaff from 15 April, even though this was not the only option under activeconsideration. The company had gone a fair way down the road of formulating theredundancy option even though there was an alternative which would not havenecessitated redundancies. Consequently, the tribunal decided the company”proposed” redundancy on 15 April. Since consultation had not startedat all during April, there was a breach of the legislation. The EAT accepted this finding was open to the tribunal, and refused tooverturn the decision. This analysis of the point at which the employer was “proposing”to dismiss is puzzling. It is difficult to understand how an employer can be”proposing” redundancy when it is actively and genuinely consideringalternative options. It is not what most people would understand by the term. In many cases the point will not be crucial. Employers are no longer obligedto consult “at the earliest opportunity”. They merely have to consultin good time and in accordance with the minimum period laid down by statute. Ifthe employers here had been able to allow 90 days for the consultation periodthen it would not have mattered whether the employer first proposed redundancyon 15 April or subsequently. However, since the tribunal found there had beenless than adequate consultation, the start date became crucial. Is the employer proposing “redundancies”? GMB v Man Truck Following a merger, the employer wanted to harmonise the terms andconditions of two groups of employees. As a result it gave notice oftermination of the old contract and accompanied this with an offer ofemployment on new terms. The employer wanted all members of staff to accept thenew offer as there were to be no job losses. The employees claimed there hadbeen a breach by the employer of its obligations to consult on a collectivebasis. The employer claimed there was no need to consult as no-one was beingmade redundant. The EAT rejected the argument. It confirmed that the term”redundancy” has an extended meaning for the purpose of thecollective consultation obligations. It pointed out that under the legislation,collective consultation is required where 20 or more employees are beingdismissed for reasons which are not related to the individuals concerned. Inthis case the old contracts were terminated by the employer. Consequently therewere dismissals. These were unconnected with the capability or conduct of theemployees, and so the collective consultation obligations were triggered. Are the redundancies from one “establishment”? Mills & Allen v Bulwich The employer is only obliged to consult if 20 or more employees are beingmade redundant from any one establishment. The legislation does not define theterm “establishment” but the meaning had been relatively clear-cutuntil recently. The few reported cases in this area have tended to focus onwhether satellite offices should be aggregated with main offices or whetherthey should be treated as separate for the purposes of establishing whether thethreshold is met. In the Mills case, however, the employer had a number ofsites across the country. There was a direct sales force, which included theapplicant, of which 23 were made redundant. The employer took the view that itwas not required to consult collectively because the Manchester office, wherethe employee was based, had only two redundancies. But the applicant claimedthe employer had been obliged to consult on a collective basis. The applicant’s claim was upheld by both the employment tribunal and theEAT. According to the tribunal, the direct sales staff were autonomous andtreated as a separate entity within the organisation – they were not reallylinked with the office out of which they worked. Redundancies were announced asapplying to the direct sales force. On that basis the tribunal decided the”establishment” was the employer’s direct sales team and not theManchester office. Consequently, there had been a breach of the legislation. This is undoubtedly the most significant of the three cases. Until now itwas commonly understood that an establishment meant a physical location. Thisis the first time, in any reported case, that a tribunal has taken a departmentlocated across a number of separate sites and treated that as an establishment.This seems to be a very artificial interpretation of the word”establishment”. No one speaking in an ordinary non-legal contextwould describe a sales force as an establishment. Unfortunately, we understand that the employers in this case have decidednot to appeal to the Court of Appeal, which means this case will be theyardstick by which future cases are judged, for the time being at least. It islikely to mean that employers will have to consult more frequently than atpresent or risk indirectly breaking the law. Nicholas Robertson is a partner in the employment department at Rowe& Maw A victory against common senseOn 1 Mar 2001 in Personnel Today Previous Article Next Article Related posts:No related photos. read more