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Collective consultation - Ignorance is definitely not a defence

The EAT recently considered the case of Ivor Hughes Educational Foundation v Morris involving the collective redundancy consultation obligations.  By way of background, the Foundation operated a number of schools including Peterborough and St Margaret’s School (‘the School’).  On 27 February 2013, a meeting of the governors was held at which a decision was made that unless pupil numbers increased (which was not likely) the School would need to close.  On 25 April 2013, the decision was made that the School would close.  All staff were entitled to a term’s notice and so in order to save money, the governor’s gave the staff notice on 29 April 2013 (to save themselves the cost of the autumn term’s wages) and their employment terminated on 31 August 2013.  No consultation with staff was undertaken prior to the decision to dismiss.  Indeed, it appears that the governors did not know that they had a legal obligation to consult and did not seek legal advice. 

The 24 affected members of staff brought a successful claim for a protective award in the Tribunal – with each claimant being awarded the maximum compensation of 90 days’ pay.  The employer appealed.  The EAT considered a number of issues including 1) at what point were the consultation obligations triggered; and 2) whether there were any special circumstances which made it impracticable for the employer to consult; and 3) should the Tribunal have had regard to the fact that the Claimants suffered no loss when assessing the protective award.

In relation to the first issue, the employer argued that the consultation obligation did not arise until the decision was made to actually close the School in April. Under s.188 of the Trade Unions and Labour Relations (Consolidation) Act 1992 where an employer is ‘proposing to dismiss as redundant 20 or more employees’ at one establishment within a period of 90 days or less, he must consult.  There has been considerable case law in relation to the question of at what point the obligation is triggered and the EAT’s judgment provides a useful summary.  The EAT in this case disagreed with the employer and accepted the Tribunal’s view: that the obligation to consult arose on 27 February 2013 as the decision made on this date was either ‘a fixed, clear albeit provisional intention to close the School’ (satisfying the test in UK Coal) or ‘amounted to a strategic decision on changes compelling the employer to contemplate or plan for collective redundancies’ (satisfying the test in Akavan).  As the EAT concluded that the governors’ decision satisfied both tests, it did not need to express a final conclusion on which test applies. 

In relation to the ‘special circumstances’ issue the employer’s arguments included: 1) if it had consulted, this would have sealed the fate of the School as the possibility of closure would have leaked and parents would have removed their children from the School anyway; and 2) waiting until April to consult would have given the School the best chance to save itself.  The EAT recognised that there was an ‘artificiality’ in the arguments as the reason the School did not consult was because it did not know it was under an obligation to do so.  The employer’s submissions were therefore based on a hypothetical proposition that if it had thought about the matter it would not have consulted for the reasons put forward.  The EAT concluded that s.188(7) TULRCA and the special circumstances exception requires an historic assessment of the circumstances at the time the consultation should have occurred.  It is not concerned with any circumstances that an employer might identify in hindsight and as such the School’s reasons could not be deemed ‘special circumstances’.

In terms of the length of the protective award, the EAT repeated the principles set out in the Suzi Radin v GMB case and reiterated that the protective award is meant to be a punitive measure – assessing the employer’s failure to comply.  Where an employer has failed to conduct any consultation, the starting point is the maximum award.  The EAT concluded that the fact that the employees had not suffered any actual loss is not a mitigating factor which might justify a reduction in the award.  The lack of consultation was presumed to result from ‘ignorance because of a reckless failure to consult legal experts’ and it was acknowledged that the employer had not deliberately breached its obligations.  That being said, the EAT accepted that the Tribunal had applied the correct considerations when making the award and the appeal on this point was dismissed.          

This case provides a useful reminder to employers that when making strategic business decisions, they need to be conscious of the potential impact of those decisions on the workforce.  Collective consultation should be commenced at the earliest possible stage (not least because employees might provide useful suggestions that might prevent or reduce the number of redundancies) and not left until the final moment when the decisions are already set in stone.  In addition, the case serves as a warning to employers not to ignore the obligations as the financial penalties can be high.

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