redundancy – what’s the reason?

The Employment Appeal Tribunal has reversed previous binding case law in the recent decision of UK Coal Mining Limited v National Union of Mineworkers (Northumberland Area) and The British Association of Colliery Management by stating that there is a duty for employers to consult on the reasons for making redundancies. This had been an area in which Tribunals have been reluctant to interfere to date as the conventional wisdom has long been that the decision whether to declare redundancies is within the absolute discretion of the employer.

The case concerned the closing of the Ellington Colliery in Northumberland resulting in over 100 employees being made redundant. No reasons for the closure of the Colliery were given to employees in consultation. The Employment Tribunal made maximum protective awards for failure to consult properly.  The employers appealed on the basis that the Tribunal had failed to take into account the extent and nature of the consultation which had actually occurred.  The two trade union respondents cross appealed the view expressed by the Tribunal that there was no obligation to consult over the reason for the closure itself, a decision it was forced to take due to the earlier binding authority and it is the outcome of this cross appeal which makes this decision important.

The EAT decided that it should take heed of changes in the statutory provisions and in developments in European case law which states that consultations relating to redundancy should occur when the redundancies are “contemplated” as opposed to the view adopted by English law that consultation should occur when the redundancies are “proposed”. This may appear to be a subtle distinction but the “proposal” of redundancies certainly occurs after they are “contemplated” and at a time when the final decision as to whether they will occur or not has probably taken place. The European Court has found this to be unacceptable, as it considers that consultation should occur before a final decision has been reached.

The decision reached by the EAT is that where the obligation to consult over avoiding the proposed redundancies inevitably involves engaging with the reasons for the dismissals,  a requirement will arise to consult over the reasons for the closure.

Protecting your business – how this affects you.

It is important for employers to consult with the relevant unions or elected employee representatives at the earliest opportunity, involving them as much as possible in decision making and consultations. The emphasis on early involvement has further increased as a result of this decision and the importance of following correct consultation procedures cannot be underestimated. Under the terms of the Trade Union and Labour Relations (Consolidation) Act 1992, the consequences of failing to provide adequate consultation may include the award of a “protective award” of up to 90 days’ actual pay per employee. This is additional to any wages received as it is not based on individual financial loss.