Collective redundancy consultation: when should it begin?
With a number of large-scale redundancies having taken place over recent months, consultant editor Darren Newman explains why we can expect challenges over the collective consultation process.
In the coming year, we can expect a wave of litigation relating to collective redundancy consultation. In both the public and private sectors, we have seen large-scale redundancies in relation to which the employer would have been obliged to consult "in good time" with employee representatives "with a view to reaching agreement" (s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992).
The litigation is to be expected because, despite the fact that the law on collective redundancy dates back to the 1970s, a number of unresolved issues in relation to the requirements for collective consultation remain. For example, we still do not have a clear idea of exactly when employers are supposed to start consulting, so even a diligent employer is at risk of a claim. This problem arises because s.188 is (rather loosely) based on the EU Collective Redundancies Directive (98/59/EC), art.2.1 of which requires consultation when the employer is "contemplating" redundancies.
That is an odd word to use in this context. An employer may, at any one time, be "contemplating" all sorts of things, none of which are actually going to happen. Section 188 sensibly avoids that language and instead requires consultation when the employer "is proposing" to make redundancies.
This difference in approach nevertheless causes a tension in the law, because s.188 must be interpreted so as to comply with the requirements of the Directive. However, when the European Court of Justice (ECJ) has been specifically asked to rule on when the duty to consult actually arises, its answers have been less than straightforward. In Akavan Erityisalojen Keskusliitto AEK Ry and others v Fujitsu Siemens Computers Oy [2009] IRLR 944 ECJ, the ECJ said that "the consultation procedure must be started by the employer once a strategic or commercial decision compelling him to contemplate or to plan for collective redundancies has been taken". If you feel none the wiser after reading that sentence, you are not alone; at the end of 2010, the Court of Appeal felt compelled to refer a further case to the ECJ to clarify the issue. At the time of writing, that case has just been heard by the ECJ.
In United States of America v Nolan [2011] IRLR 40 CA, Christine Nolan, who was employed on a US army base in Hampshire, complained that the decision to close the base, causing some 200 civilian redundancies, was taken without proper consultation. The base was closed in September 2006 and the US undertook a three-month consultation exercise starting in June of that year. However, the evidence was that the actual decision to close the base had been taken in March, so by the time the consultation started it was too late; a decision had already been reached. The Court of Appeal felt that a reference to the ECJ was necessary to clarify just when consultation had to start.
There is, of course, an air of unreality about a British civilian arguing that she and her colleagues should have a say in whether or not the US chooses to close an army base in Hampshire. Geo-political and strategic concerns are unlikely to yield to arguments about alternative employment and the local job market. Frankly, the US made an error in responding to the claim brought by Ms Nolan at all. It could have simply asserted sovereign immunity under the State Immunity Act 1978. However, having submitted to the jurisdiction of the tribunal, it could not back out when it became clear that the case was more complicated than it thought, so off to the ECJ it must go, and the outcome is, frankly, anybody's guess.
In many ways, however, looking at the issue of when consultation should start is the wrong approach. Surely the key question is whether or not the consultation is genuine and meaningful. If it is, the fact that it could perhaps have taken place earlier should not be a major concern, provided that there has been compliance with the timetable set out in the legislation. If the consultation is a sham, however, it really does not matter how early in the process it began.
One principle that is well established is that genuine consultation should take place when the decision that is being consulted on is still at a formative stage - that is to say, that no final decision has been taken and there is a genuine prospect that the consultation could result in the proposal being amended or dropped altogether. In my experience, the guilty secret of many elaborate and well-run consultation exercises is that the final decision has already been made. The employer may have changed its proposal to a certain extent over the course of the consultation exercise, but that flexibility was planned for from the start - there was never any prospect of the employer's plans being genuinely changed in a meaningful way.
Whatever the ECJ eventually says in Nolan - and I think we should prepare ourselves for the possibility that the ECJ will fail to give a straight answer to the question put to it - the fact will remain that employers cannot safely tick the consultation box by conducting a 90-day (or 30-day where fewer employees are involved) consultation exercise prior to the dismissals taking effect. The courts are entitled to probe the decision-making process itself to discover when and how the proposal to consider redundancies was formulated. Employers will have to show that the consultation took place before that proposal solidified into a decision. I would expect that issue to arise more than once in 2012 as the unions challenge some of the large-scale redundancies that we have seen in both the private and the public sector.