In Ellard v Alliance Transport Technologies Ltd, the Employment Appeal Tribunal (EAT) considered again the vexed question of when the duty to collectively consult is triggered. The EAT confirmed that the duty arises when making redundancies has become a clear, even if provisional, intention within the following 90 days. A firm or final decision to make redundancies is not required. In an insolvency context, this means that a strategy of “sale if possible, closure if not” may be enough to trigger the duty, even if only a smaller number of employees are dismissed at the outset.
The law
Employers are required to collectively consult where they are proposing to dismiss 20 or more employees at one establishment within a period of 90 days or less. Failure to collectively consult risks a protective award of up to 180 days’ actual pay per affected employee. This amount doubled from 90 days’ actual pay in April 2026, so is now a significant incentive for employers to comply with this duty.
Identifying the point at which an employer is ‘proposing’ to dismiss employees is not straightforward. The leading case law on this point says that the duty to consult will not arise when it is merely ‘mooted as a possibility’ but only when it is ‘fixed as a clear, albeit provisional, intention’.
The facts
Alliance Transport Technologies Ltd (ATT) was the manufacturer of electronic and hybrid commercial vehicle parts and it employed around 51 employees. It encountered serious financial difficulties and on 2 May 2023, administrators were appointed. On the same day, 15 employees were dismissed as redundant. At that stage, there was one potential buyer, and the administrators explored a sale of the business. On 5 May 2023 this potential purchaser withdrew. Most of the remaining workforce was then dismissed, and the business moved towards winding up.
A number of employees brought claims for protective awards for a failure to collectively consult.
The decision
The tribunal held that the employees dismissed on 5 May were entitled to a protective award. The employees dismissed on 2 May were not, on the basis that there was no proposal at that point to dismiss 20 or more employees, as the administrators’ clear intention was to sell the business as a going concern.
Three employees who were dismissed on 2 May appealed this decision. The EAT allowed the appeal and emphasised the following points:
The correct question was whether ATT was proposing to dismiss 20 or more employees within a 90-day period. It was not correct for the tribunal to look solely for a fixed proposal at a point in time, being in this case 2 May. The statutory trigger is forward looking.
The consultation threshold may be met where there is a clear but conditional plan, even if dependent on events (such as a potential sale). The EAT acknowledges that this may involve making decisions about the need to consult when not all information is available and where there are uncertainties or contingencies still in play which will affect the ultimate decisions regarding redundancies.
Commercial reality is relevant - by 2 May 2023, no formal offers had been received, only one potential purchaser remained, and closure was the likely outcome if a sale failed. This amounted to a clear, albeit provisional, intention to close the business, which would inevitably involve more than 20 redundancies.
The mere possibility of a sale is not necessarily sufficient to prevent the duty arising. The realistic likelihood of the sale going ahead was highly relevant: where the chance of that is remote, redundancies may already be “proposed”.
The EAT held that the collective consultation duty had already been triggered on 2 May 2023 and awarded the claimants, who were dismissed on that day, a protective award.
Implications for employers
This is an important reminder, particularly for employers facing financial distress or restructuring, that the trigger point for collective consultation is earlier than many assume. If there is a clear provisional plan that could lead to 20+ redundancies in a 90 day period, the duty may already have arisen. “Sale if possible, closure if not” can therefore trigger consultation.
Employment Rights Act 2025 – changes to the threshold for collective consultation
In 2027, under the Employment Rights Act 2025, the threshold for collective consultation is due to change. Under these new rules, the obligation to collectively consult over redundancies will be triggered where an employer is proposing to dismiss as redundant within a period of 90 days or less either:
- 20 or more employees at one establishment, or
- At least the “threshold number of employees”
We don’t yet know what the threshold number of employees will be – we await regulations for this detail. However, we do know that this additional test will capture employers with redundancies across various establishments.
See ERA bitesize webinars – key actions for employers to download our ERA 2025 guide for key action points and register for our webinar series and access previous recordings.
