The European Advocate General has handed down an important opinion on when an employer's obligation to consult collectively about redundancies is triggered.
The Court of Appeal asked for a ruling on the question in the case of The United States of America v Nolan. The Advocate General's opinion is the first step of the process: the European Court must now consider the issue. Although it does not have to follow the Advocate General's opinion the Court does so in about 80% of cases.
The Advocate General said that an employer's consultation obligation is triggered when:
".a strategic or commercial decision which compels him to contemplate or plan for collective redundancies is made by a body or entity which controls the employer".
When an employer is "proposing" to dismiss as redundant 20 or more employees, at one establishment within 90 days or less, an employer has a legal duty to consult with the representatives of affected employees.
The consultations must begin "in good time" and in any event at least 90 or 30 days before the first dismissals take effect (depending upon the number of dismissals envisaged).
The consultation must include consideration about ways of avoiding the dismissals, reducing the number of employees to be dismissed and mitigating the consequences of the dismissals.
The relevant legislation in the UK is section 188 the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). This implements the European directive on collective redundancies 98/59/EEC (the Directive) and Courts and tribunals in the UK must interpret domestic law as far as possible in line with the purpose of the Directive.
The Directive imposes the obligation to consult collectively when an employer is "contemplating" collective redundancies which is arguably at an earlier stage in the process than the domestic legislation requires.
The case concerned civilian employees at a US military base in the UK. The US Army made the decision to close the base no later than 13 March 2006. This was reported in the British media on 21 April. On 24 April the commanding officer of the base called a meeting to apologise to the workforce for the way in which the news had been made public and to explain the decision to close the base. On 9 May the UK Government was formally notified that the base would be returned to them on 30 September 2006.
On 5 June the US authorities gave the employee representatives a memorandum stating that all 200 employees would be made redundant. Notice was given to the employees on 30 June 2006 with termination occurring on 29 or 30 September.
An Employment Tribunal held that the employer had failed to consult "in good time" and had failed to explain why consultations had not been started before the decision of 13 March or in any case on or after 24 April or, at the latest, by 9 May.
This decision was upheld by the Employment Appeal Tribunal, the USA appealed to the Court of Appeal which referred the following question to the European Court for a preliminary ruling:
"Does the employer's obligation to consult about collective redundancies, pursuant to [the Directive], arise i) when the employer is proposing, but has not yet made, a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancies; or ii) only when that decision has actually been made and he is proposing consequential redundancies?"
Advocate General's opinion
The Advocate General stressed that although consultation should not begin too late it was also important that it did not begin too prematurely as this could create heavier administrative burdens and lead to unnecessary uncertainty for employees about their job security.
Where there is a group of companies and the decision on collective redundancies is not made directly by the employing company itself but, for example, by a parent company, the obligation to consult is triggered when, "a strategic decision is taken which compels the employer to contemplate or plan for redundancies".
Consequently, the Advocate General rejected both of the alternatives in the Court of Appeal's reference: option i) would have been premature because no strategic or operational decision had been taken at that point. On the other hand, option ii) would have been too late had the strategic decision been taken without leaving the employer any time in which to contemplate collective redundancies.
In this case it appeared that consultation had been delayed for several weeks after the decision was made.
Slightly unhelpfully, the Advocate General also appeared to approve previous case law which held that a decision taken by a parent company which compels one of its subsidiaries to terminate the employment of its employees can only be taken after the conclusion of consultation by that subsidiary. This does not sit very easily with what the Advocate General was saying in relation to the present case.
If the European Court follows the Advocate General's opinion it should provide helpful clarification that employers do not have to consult before taking the actual business decision which may then require redundancies to be made.
However, it is clear that as soon as a "strategic decision" is taken the obligation to consult is triggered and employers can not afford to drag their feet before starting consultation.
There is bound to be arguments around exactly what a "strategic or commercial decision" is and whether or not it "compels" redundancies to be contemplated by an employer.
It is important to remember that the underlying purpose of consultation under the Directive is to look at ways of avoiding the redundancies or at least mitigating their consequences so, to be meaningful the process must begin while this is still a possibility.
Therefore, any decisions taken by parent companies which could lead to redundancies should not be presented as a fait accompli and should be made clearly provisional upon the completion of collective consultation with potentially affected employees and their representatives.