The Employment Appeal Tribunal (EAT) has held that an obligation to collectively consult about proposed redundancies is triggered when an employer makes a provisional decision to close its workplace, even if the final decision is not made until later. Howes Percival comments on Employment Appeal Tribunal ruling.
Graham Irons, Partner in the Employment Law team comments: “This is an important reminder for employers as if they fail to carry out the collective consultation process correctly they can be liable to pay a protective pay award of up to 90 days' uncapped pay for each employee. Employers need to be alive to proposed changes in their business, even if they have not been finalised, so that they can start collective consultation at the correct time.” This is a reminder for employers that the duty to collectively consult arises before a final decision has been made to make employees redundant. If you have provisionally decided to close or restructure the whole or part of your business, then you may need to start a collective consultation process (even if alternatives are still being considered) if you are proposing to dismiss 20 or more employees.
It will be important for employers to be aware of any management discussions surrounding changes to the business, as if there are clear plans to close or restructure the business if certain targets are not met in the future then this can be enough to trigger the duty to collectively consult, even if a final decision has not been made. In E Ivor Hughes Educational Foundation v Morris, the School decided at a governors meeting on 27 February 2013 that it would have to close at the end of the summer term, if the number of pupils had not increased by April, as the School would be operating at a large deficit. It was acknowledged that it was unlikely that numbers would increase.
On 25 April 2013 the School made the final decision to close, once pupil numbers for the academic year 2013/2014 were known. The School did not collectively consult with the 24 staff prior to making them redundant. The EAT held that the School's decision in February 2013 was “either a fixed clear albeit provisional intention to close the School or amounted to a strategic decision on changes compelling the employer to contemplate or plan for collective redundancies”. The EAT held that this meant that the duty to consult arose on that date, not later in April. The School tried to argue that there was a need to keep the school closure a secret for fear of confidence in the school being lost, but this argument was rejected by the EAT and they held that no special circumstances existed which made it impracticable to consult.