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Duty to consult in collective redundancies remains a mystery

Employment analysis: In cases of collective
redundancy, when does the duty to consult first arise? Discussing the Supreme
Court’s judgment in USA v Nolan, David Reade QC points
out that this most important issue remains undecided in this interview for Lexis PSL. 

This interview was first published by Lexis PSL in November 2015.

Original news

United States of America v Nolan [2015] UKSC 63,[2015] All ER (D) 183 (Oct)

The respondent employee had successfully issued
proceedings in the UK seeking a protective award after she had been made
redundant the day after the closure of the US military base in the UK. The
Supreme Court dismissed the US’s appeal, ruling, among other things, that
amendments to the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A 1992) by the Collective Redundancies and Transfer of
Undertakings (Protection of Employment) (Amendment) Regulations 1995,SI 1995/2587, which required employee representatives to be
designated for consultation purposes in all situations covered by TULR(C)A 1992, were not ultra vires. The Collective
Redundancies Directive 98/59/EC left it open to member states to apply
or introduce even more favourable laws, regulations or administrative
provisions than those it required.

Briefly what was the background to this case?

The case concerns the decision of the US Government
to close a naval site in Hampshire. Such is the longevity of the case that the
decision was taken in 2006. Ms Nolan, a civilian employee, was made redundant
as a consequence of the decision. She brought proceedings before the employment
tribunal asserting that there had been a breach of provisions of TULR(C)A 1992, s 188 which require consultation on
collective redundancies—those being more than 20 redundancies at an
establishment within a 90-day period. There could at that point have been a
short answer to the claim—the US could have relied on state immunity and
disputed the jurisdiction of the tribunal. The US decided instead to enter the
fight and to argue that, on the law as it stood, there was no duty to consult
on the strategic decision to close the site—even though that would have
inevitable consequences for the workforce. As the case progressed, the
Employment Appeal Tribunal (EAT) decided the case of UK Coal Mining Ltd v National Union of Mineworkers (Northumberland
[2008] IRLR 4,[2007] All ER (D) 315 (Oct), in which I appeared for UK Coal.
The EAT held in that case that if a strategic decision had the inevitable
consequence that there would be redundancies then the duty to consult, which to
be genuine consultation must embrace the possibility of a change of heart on
the proposal, had to take place before the strategic decision was taken. On the
basis of the EAT decision in UK Coal the
employment tribunal held the US to be in breach of TULR(C)A 1992, s 188.

Enter then the Court of Justice in Akavan Erityisalojen Keskusliitto AEK ry and others v Fujitsu
Siemens Computers Oy
:C-44/08[2009] All ER (D) 69 (Sep). This case was also concerned with
the issue of when the duty to consult on collective redundancy first arises.
The Court of Justice were considering the underlying Collective Redundancies
Directive to which TULR(C)A 1992 gave effect. The judgment of the Court of
Justice is at best cryptic and, arguably, in part inherently contradictory. It
does, however, open the argument that the duty arises at a later stage than
that of the taking of the strategic decision and therefore that the decision in UK Coal was wrong—or, as I prefer to think of it, that I
was right.

Faced with that lack of clarity in the Court of
Justice decision it is therefore not surprising that when the Nolan case got to the Court of Appeal the court stated a
reference to the Court of Justice politely asking, in legal terms, what they
meant in Fujitsu. With a deft side-step the Court of Justice
declined to answer the questions, on the basis that the Collective Redundancies
Directive did not extend the consultation duty to workers employed by public
administrative bodies and that it did not therefore apply to the workers on the
site. Back the case went to the Court of Appeal.

What were the key issues before the Supreme Court?

Having initially chosen not to raise state
immunity, and now being unable to do so, the US sought to raise jurisdictional
arguments on what is now purely a question of domestic legislation. Firstly,
the US argued that the proper construction of TULR(C)A 1992 should limit its scope to that of the
Collective Redundancies Directive as defined by the Court of Justice—in other
words, that the duty to consult should not extend to public administrative
bodies. Secondly, that TULR(C)A 1992 should not be construed so as require
consultation over the decisions of a foreign state. Finally, it was argued that
if TULR(C)A 1992 did exceed the requirements of the
Collective Redundancies Directive then the Regulations, which had amended TULR(C)A 1992 and brought Ms Nolan within its scope, had
been ultra vires the European Communities Act 1972 (ECA 1972). That on the basis that the amendment caused TULR(C)A 1992 to be wider than the requirements of the
Collective Redundancies Directive.

What did the Supreme Court decide, and to what
extent does the judgment clarify the law in this area? Are there any grey areas
or unresolved issues remaining?

These arguments did not succeed before the Court of
Appeal and the most recent decision of the Supreme Court is the dismissal of
the US’s appeal. The Supreme Court rejected the construction arguments. The
ultra vires argument came close to succeeding, Lord Carnwath dissented on the
point. The majority of the Supreme Court held that while it was possible for
the extension of domestic legislation, into what was expressly excluded under a
Directive, to be ultra vires the powers under ECA 1972 that was not the case if the extension was, as
here, achieved by primary and not secondary legislation.

The case now goes back to the Court of Appeal
where, without the benefit of the further wisdom of the Court of Justice, the
court will have to decide what the Court of Justice meant in Fujitsu.

Thus the most important issue in the case remains
undecided: When, in cases of collective redundancy, does the duty to consult
first arise? Even if the Court of Appeal decides this question it will remain
open to doubt until the Court of Justice finally determines an admissible
reference on the point. There appears to be no imminent prospect of that.

This is an unhappy place for the law to be left.
That is particularly the case in the light of recent events. In the past few
months, prosecutions have been brought in connection with the failure to
timeously serve HR1 forms on the Secretary of State. There is a statutory
obligation do so in cases of collective redundancy. The cases have been brought
against directors and an administrator in connection with two companies where
there were collective redundancies. While the facts of those cases are quite
distinct it remains the case that the duty to file the HR1 is itself triggered
by the duty to consult. It therefore appears to be deeply unsatisfactory that directors
and or administrators may be at risk of criminal proceedings for the failure to
comply with a duty over which there is such legal uncertainty.

What should practitioners take from this case?

In practical terms it must be sensible to play safe
and assume thatUK Coalremains good law. Thus
to advise companies to commence consultation, and serve a HR1, before a
strategic decision is finally taken if the consequences of that strategic
decision would inevitably be that 20 or more redundancies will occur within a
90-day period at any affected establishments. That is unless you are a foreign
state, in which case maybe the state immunity argument might now look

David Reade QC is recognised as one of the
country’s leading Silks in commercial litigation and employment law. He has
appeared in many leading authorities. David was counsel for UK Coal in UK Coal
v NUM and for the employer, Bluebird Bid Co Ltd, in the ‘Woolworths’ litigation
on collective redundancy before the Court of Justice.

Interviewed by Kate Beaumont.

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