News & Events

Collective consultation: the trigger point, special circumstances and the protective award

Submitted By Firm: Addleshaw Goddard

Contact(s): Michael Leftley, Sarah Harrop

Author(s):

Amanda Steadman

Date Published: 10/6/2015

Article Type:

Share This:

The EAT has upheld a decision that collective redundancy consultation was triggered where an employer decided to close a school subject to an improvement in pupil numbers. Although the decision was subject to the proviso regarding pupil numbers, the duty to consult had been triggered. The EAT also upheld the decision that special circumstances did not apply to prevent collective consultation. The special circumstances defence requires a contemporaneous assessment of events and relevant circumstances and cannot be identified in hindsight. Here, the employer was ignorant of the law and had recklessly failed to obtain legal advice about the proposed closure of the school. The maximum protective award of 90 days was upheld (E Ivor Hughes Educational Foundation v Morris and others).

Background

Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) requires employers who are proposing 20 or more redundancies within a 90-day period to collectively consult on the proposal with representatives of the employees.

However, the trigger point for consultation is a vexed issue, which has resulted in conflicting case authorities. Does the obligation arise when the employer: (i) proposes to make a strategic business or operational decision that will foreseeably lead to collective redundancies; or (ii) has taken the strategic decision and is proposing to make collective redundancies? If it is the former, then the scope of the consultation is widened and the employer would be obliged to begin consultation at an earlier stage i.e. before a decision was taken which meant that the redundancies were inevitable. The case law has not yet resolved this uncertainty.

Where an employer fails to meet its obligation to collectively consult it may be able to rely on the "special circumstances" defence. This applies where there are special circumstances which meant it was not reasonably practicable for the employer to comply with the obligation to collectively consult.

Where there is a breach of the duty to collectively consult, an Employment Tribunal may make a "protective award" in respect of the affected employees of up to 90 days' actual pay. The protective award is punitive and the length of the award should reflect the seriousness of the employer's default. In situations where there has been no consultation at all then it is appropriate to start with maximum award and then consider whether there are any mitigating circumstances which justify a reduction.

Facts

The employer was a charity (the Foundation) which ran a number of private schools and nursery schools. This case concerned the closure of one of its schools (the School). Pupil numbers at the School had declined by approximately 22% between 2007 and 2013. The projected figures for the 2013 / 2014 academic year were uncertain but it was thought likely that they would continue to decline, which would result in a deficit of between £130,000 to £250,000.

On 27 February 2013 a meeting of the School's governing body was held (First Meeting), at which the Headteacher discussed the declining school numbers and the options for keeping the school open. A second meeting of the governing body was held on 25 April 2013 (Second Meeting). At the Second Meeting it was confirmed that pupil numbers for the 2013 / 2014 academic year were lower than anticipated, resulting in a deficit of about £250,000. It was, therefore, decided that the School would close at the end of the 2013 summer term.

No collective consultation was undertaken by the Foundation at any point. The governing body had no knowledge of the obligation to do so and did not seek legal advice about the closure of the School. Instead, the staff (in excess of 20) were given notice of dismissal on 29 April 2013 (the end of the Spring term). As staff were entitled to one term's notice, this meant that the notice would expire on 31 August 2013.

Twenty four employees brought Employment Tribunal (ET) claims for breach of the duty to collectively consult.

ET decision

Trigger point

The ET held that the duty to collectively consult was triggered at the First Meeting when it was decided that the School would close unless pupil numbers could be improved, which was said to be unlikely. In the ET's view, this was more than just discussion of a possibility (which would not trigger consultation) but constituted a clear, albeit provisional, intention and a strategic decision compelling the Foundation to contemplate or plan for collective redundancies. Whichever approach to the trigger point was taken, this amounted to a proposal to make redundancies.

Special circumstances defence

The Foundation submitted that if they had commenced consultation at the First Meeting the information could have leaked. This would have led to parents removing their children and would have worsened the School's position. The ET rejected this argument and said the Foundation could have dealt with this risk by notifying staff that the proposal was confidential and any breach would amount to gross misconduct. In any event, this could not amount to special circumstances since the same would apply to very many proposals to close down a business. In other words, these were standard not special circumstances.

The ET also rejected the Foundation's argument that it was not reasonably practicable to consult after the First Meeting as waiting until April 2013 offered the best possible chance to save the School. This was not a special circumstance.

Finally, the ET rejected the Foundation's argument that it was not reasonably practicable to consult after the Second Meeting on the basis that they had to issue notice by the end of April to avoid having to provide further term's notice. The ET said that contractual obligations were not capable of amounting to special circumstances. Further, had the Foundation dealt with the matter competently, legal advice would have been taken and they would have ensured that consultation took place 30 days before the date on which they needed to give notice to avoid the additional term.

Protective award

The ET ordered a maximum 90-day protective award. This was on the basis that no collective consultation had been undertaken prior to dismissal and this represented a complete disregard of the statutory obligation to consult. The Foundation's ignorance of the law was a result of a "reckless failure" to take legal advice. There were no mitigating circumstances justifying a reduction in the length of the award.


EAT decision

The Foundation appealed to the EAT.

Trigger point

The Foundation argued that the obligation to consult only arose when the decision to close the School had been taken at the Second Meeting, and not when it was proposing to make a decision to close. They submitted that the ET had erred in finding that consultation had been triggered at the First Meeting since there was no evidence that the governing body had decided to close the School on that date.

The EAT held that the ET had been entitled to find that the governing body had decided at the First Meeting that the School would close unless pupil numbers improved. At the First Meeting the Headteacher admitted that the school had reached the stage where it was no longer viable. The EAT noted the different approaches to the trigger point issue, but agreed with the ET that the position at the First Meeting was capable of satisfying either approach. There was both a "fixed, clear, albeit provisional intention" and a "strategic decision…compelling the employer to contemplate or plan for collective redundancies". Accordingly, the EAT did not need to decide which one applied.

Special circumstances defence

The EAT held that the special circumstances defence requires a contemporaneous assessment of events and relevant circumstances. Circumstances identified in hindsight cannot be special circumstances. Here, the Foundation was simply not aware that it had to collectively consult and this was the reason for the breach - not because there were special circumstances which meant that it was not reasonably practicable to do so.

Protective award

The Foundation argued that the ET had failed to consider mitigating factors, including that employees suffered no actual losses. The EAT rejected this argument noting that the award is not intended to compensate for loss, but is punitive. They also decided that the ET had given adequate consideration to other mitigating factors including that the breach was not deliberate but due to ignorance of law. However, the EAT agreed that this ignorance arose from the failure to obtain legal advice.

Comment

Consultation was triggered at the First Meeting on the basis that the decision taken at that point satisfied both approaches to the trigger point. Unfortunately, this meant that the EAT did not have to grapple with which approach should be preferred and so the confusion remains. The Court of Appeal is due to consider the trigger point issue again in the case of USA v Nolan. For more information on this case you can read our report here. However, the decision does demonstrate that a decision which is not final, but subject to conditions, may be sufficient to trigger consultation.

The decision also helpfully clarifies how the special circumstances defence works. The focus will be on the facts and circumstances at the relevant time. Circumstances identified in hindsight will not come to an employer's rescue. Similarly, ignorance of the law will not assist an employer in reducing the penalty for breach. Employers considering large scale redundancies should be careful to obtain legal advice on the extent of their obligations in advance of giving notices to terminate.

E Ivor Hughes Educational Foundation v Morris and others

 

Find a Member

View or print a complete ELA member list »

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

Stephen HirschfeldAs an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld
Partner 

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel

Sanmina-SCI

Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.

Starwood

We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel