When does the obligation to consult collectively arise?

In the case of E Ivor Hughes Educational Foundation v Morris, the Employment Appeal Tribunal (“EAT”) has held that a conditional decision to make (more than 20) redundancies if the situation of a business did not improve triggered the obligation to consult collectively under Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). This raises some difficult issues for employers.

Background

Employers’ obligations in relation to collective consultation are set out in TULRCA. Under TULRCA, employers must collectively consult if they are “proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less” (emphasis added). If the obligation is triggered, the employer must consult with all affected employees for a set period before dismissals can take effect.

If consultation is not carried out (or if inadequate consultation is carried out) the employer is liable to pay a protective award of up to 90 days’ gross salary to each affected employee. A total failure to consult will generally lead to the maximum award being made. 
 
Facts

In E Ivor Hughes Educational Foundation v Morris, the Respondent ran a number of schools, including the school at which the Claimants worked.

In February 2013, a decision was taken to close the school if pupil numbers did not improve for the next academic year. They did not. A firm decision to close the school was made in April 2013, ultimately leading to the redundancies of all of the 24 staff.  No consultation was carried out.

In the ensuing litigation, the question arose as to when the obligation to consult collectively had been triggered, looking at the point at which dismissals could be said to have been ‘proposed’.

Decision

Reflecting tests set out in earlier case law, the EAT held that the decision made in February 2013 amounted to either a “fixed, clear, albeit provisional, intention” to make redundancies or “a strategic decision on changes compelling the employer to contemplate or plan for collective redundancies”. On either analysis, the obligation to collectively consult arose in February 2013 when closure of the school was still provisional and not in April 2013, when it became a certainty.

As no consultation had been carried out, the employees were all awarded the maximum protective award.

Implications

This decision emphasises that employers need to be mindful of the fact that the obligation to consult collectively will arise at a stage where strategic discussions are still ongoing, even if no firm decision to make redundancies has been taken. This makes sense – what is the point in consulting with employees if they cannot influence the outcome? However, it also raises a number of awkward issues for employers, as starting consultation over redundancies will inevitably have the effect of further de-stabilising an already tottering business.

It is worth noting that the EAT was not called upon to decide which of the two tests detailed above was the correct one, as it was clear that the outcome would have been the same either way. If subsequent cases find that the obligation to consult arises when there is “a strategic decision on changes compelling the employer to contemplate or plan for collective redundancies”, then consultation will arguably be triggered at an earlier point than if there needs to be a “fixed, clear, albeit provisional, intention” to make redundancies.

Ultimately, employers will need to weigh up the commercial risks of starting consultation around redundancies against the potential costs of protective awards. They should bear in mind that the maximum protective award was made in this case partly because no consultation was carried out at all, and that this cost is likely to be lessened if a proper consultation process is carried out further down the line, albeit that it may technically have been started too late.

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