E Ivor Hughes Educational Foundation v Miss J E Morris & Others.
The law concerning the start of the employer's obligation to consult in collective redundancies has changed. Employers were previously thought to be required to consult at the earliest opportunity once the redundancy decision had been made. The changes however, identify that the notification period exists prior to the redundancy decision being made and can incorporate discussions on the likelihood of redundancy. This case note discusses the implications of the changes on employers and demonstrates that failure to follow the correct procedure can have significant cost implications for the employer, who will inevitably be looking to save costs.
The precise point in which the consultation should begin has been a matter of uncertainty for some time. Hopes for a resolution were raised in the United States of America v Nolan. These hopes were dashed when the Court of Justice of the European Union (CJEU) applied the exclusion contained in Art 1(2)(b) of the Collective Redundancies Directive (98/59/EC) (the Directive) relating to public administrative bodies ruling that the United States Army fell within this exclusion. Nonetheless, the court identified that many countries within Europe had not fully implemented the provisions of the Directive. This case is now awaiting a final decision in its appeal to the Supreme Court however, in the intervening period the issue was once again raised in E Ivor Hughes Educational Foundation v Miss J E Morris.
The defendants operated a small number of private schools and nurseries. The decision to close one of the schools was first considered in January in respect of a general decline in pupil numbers in the preceding years. The school employed 24 teaching staff and thus fell within the requirement to consult contained in section 188 Trade Union and Labour Relations Consolidation Act 1992 (TULRCA); requiring consultation if more than 20 employees are to be made redundant in a period of 90 days.
A meeting held in February concluded that if pupil numbers did not improve then the school would need to close as it would be trading at a loss. The Head Teacher was present at the meeting and she put forward suggestions as to measures that could mean the school could remain open. These suggestions however, were not acted upon by the governors of the school who decided to close the school. The actual decision to close was not made until April, when the finalised pupil numbers for the following academic year were known. The school declared the redundancy notice period from the date of the meeting in April as they were contractually required to give a term's notice. The school did not follow a consultancy process with the staff at any point and thus opportunities were missed in both keeping the school open but also re-deploying the staff.
The EAT determined that the school should have begun the consultancy process at the point where the likelihood of redundancy was inevitable and thus in this case it should have commenced from the date of the meeting in February. The failure to consult at all was viewed unfavourably by the EAT and it is likely that this is why the full 90 days consultation period was imposed from the date of the February meeting when calculating the award. The EAT identified there was potential for some of the staff to be re-deployed at other schools in the group.
The decision identifies that the point in which the consultation should begin is when it is first contemplated. This will generally occur before the decision to undertake redundancies is finalised.
Arguably there is greater potential that the consultancy process will inevitably lead to confidential and sensitive information being leaked externally that could damage the company's prospects further. Failure to consult, or an inadequate consultation however, will result in the tribunal awarding a higher level of award to the employees and this could amount to the maximum period of 90 days.
When a firm is seeking to dismiss 20 or more employees, for reason of redundancy within a period of 90 days, they are required to follow the collective redundancy procedure. This is set out in section 188 TULRCA as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995. Section 188 provides that the consultation should discuss options that would either avoid the redundancy or reduce the numbers affected, in addition to mitigating the consequences of the dismissals. These regulations were intended to implement the Collective Redundancies Directive (98/59/EC) and bring the UK's collective redundancy provisions in line with Europe. Nonetheless, uncertainty in respect of the precise point in which firms are obligated to enter consultation, with trade union or employee representatives, when considering collective redundancies remained. Whilst the Directive required the employer to consult on the 'actual proposal' to close an establishment; this had been interpreted previously as a requirement to consult on the particular redundancies. In this context, the requirement to consult would only be required when a firm decision to close had occurred.
Following the EATs decision in E Ivor Hughes, any company considering redundancies of 20 or more employees should consider consulting with employee representatives. They must ensure that the decisions behind the redundancies are part of the consultation and therefore must ensure that the process is transparent. Furthermore, there must be a clear start and end of the consultancy period and redundancy notices cannot be issued during this period. The approach of the EAT in E Ivor Hughes brings the UK law in line with that of Europe and thus it is likely that the decision will stand. The Supreme Court decision in Nolan is due in July 2015 of which it is anticipated will support the outcome of E Ivor Hughes. It will be particularly interesting however, to see whether court will extend the application to armed forces operating overseas.
Employers who fail to consult on the decision to make redundancies and look at alternatives including redeployment are likely to face increased costs of a special award and failure to consult at all will increase the award substantially.
1E Ivor Hughes Educational Foundation v Miss J E Morris & Others 2015 WL 3875656
2United States of America v Nolan, CJEU Case C‑583/10 accessed 6 July 2015.
3United States of America v Nolan, CJEU Case C‑583/10 accessed 6 July 2015.
5Taylor S and Emir, Employment Law: An Introduction (3rd edn, Oxford University Press 2012)149.
6Evans and Others v Permacell Finesse Limited  EAT 0350/07
7Emir A, Selwyn's Law of Employment (17th edn, Oxford University Press 2012) 525.
8TULRCA 1992, Section 188(2).
9Hereinafter, the Directive.
10MSF v Refuge Assurance plc  ICR 1365.
11Collective Redundancies Directive (98/59/EC), Art 2(2).
12Neilson S, 'The extent of the obligation to consult about the reason for redundancies' (2007) 82 Employment Law Bulletin 7, 7.
13UK Coal Mining Ltd v National Union of Mineworkers (Northumberland Area)  I.C.R. 163 (EAT).
15Junk v Woolfgang Kuhnel  ECJ C-188/03.