Collective Redundancy Consultation – The Scope of the Legislation

June 9, 2014

Collective Redundancy Consultation – The Scope of the Legislation

In a long-running case concerning an employer's obligations to consult with employee representatives when making collective redundancies (United States of America v Nolan), the Court of Appeal sought guidance from the Court of Justice of the European (CJEU) as to the exact point at which this obligation arises under Directive 98/59/EC, the Collective Redundancies Directive. However, after much legal discussion, the question remains unanswered.

Clarification was sought because the Directive provides that an employer should begin consultations when 'contemplating' making collective redundancies, whereas this duty is given effect in domestic law – under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) – as being a duty to consult when an employer 'proposes to dismiss' employees as redundant.

In this case, the question arose after some 200 civilian employees were dismissed by way of redundancy following a decision by the Secretary of the US Army to close a US Army watercraft repair facility at Hythe in Hampshire. One of the employees, Christine Nolan, brought a claim on behalf of the redundant employees for compensation by way of a 'protective award' under TULRCA on the ground that the USA had failed to consult with representatives of the civilian workforce in accordance with its obligations under Section 188. She argued that the consultation period was far less than the 90-day period required and, in particular, that there had been a failure to consult before, and about, taking the operational decision to close the base.

The Employment Tribunal (ET) relied on the decision in UK Coal Mining Ltd. v National Union of Mineworkers that where closure and dismissals are inextricably linked, the duty to consult over the reasons for the closure arises. As no meaningful consultation over the closure of the base, and the redundancies this would involve, had taken place, the ET awarded Mrs Nolan a 30-day protective award. At the remedy hearing, however, the USA sought, for the first time, to invoke state immunity, but its claim was refused as it had already submitted to the jurisdiction. It was common ground, however, that had its claim been made at the outset, it would have succeeded. Nor had it invoked the 'special circumstances' defence in TULRCA Section 188(7).

The USA appealed to the Employment Appeal Tribunal (EAT), arguing that the obligations imposed by Section 188 should be read as excluding any obligation by an employer which is a sovereign state to consult about a decision made iure imperii (i.e. the public acts of the government of a state), but the EAT rejected its submissions.

The USA appealed the point to the Court of Appeal, which also rejected its argument. It also appealed on the ground that the more recent judgment of the CJEU in a Swedish case (Akavan Erityisalojen Keskusliitto Alek RY and Others v Fujitsu Siemens Computers) is authority for the proposition that the consultation obligation only arises at the later stage when the decision to close down the workplace has been made and the intention to make the employees redundant has been formed.

The Court of Appeal decided to refer the matter to the CJEU. However, the hoped-for clarification was not forthcoming as, although TULRCA does not exclude workers employed by public administrative bodies or by establishments governed by public law, the Directive does expressly provide for them to be excluded from its scope. Accordingly, the CJEU held that the dismissal of staff at a military base did not fall within the scope of the Directive, irrespective of whether or not the base belongs to a non-member state, and declined to rule on the matter as it did not have jurisdiction to do so.

In the light of the CJEU's ruling, the appeal was listed for a further hearing at the Court of Appeal.

The Court rejected the USA's contention that there was nothing to indicate that Parliament had intended to go beyond the scope of the underlying Directive and that, in order to conform with EU law, Section 188 of TULRCA should be construed as not applying to the 'non-economic exercise of public powers by a sovereign state'. In the Court's view, Section 188 did apply. It was clear from considering the actual terms of the legislation as drafted that it was intended to provide an exclusion for Crown employment but that all other public bodies should fall within its scope. In this case, the USA could have claimed state immunity or advanced the 'special circumstances' defence, but it had not.

As regards the question that had been referred to the CJEU – i.e. the point at which the obligation to consult arises – this will be dealt with by the Court of Appeal at a further hearing, unless the parties can reach a compromise.