30th November 2010
Case Update: United States of America v Nolan [2010] EWCA Civ 1223
The Court of Appeal has asked the European Court of Justice for clarification on the trigger point for collective redundancy consultation. In light of unclear case law on the point, they felt that they needed to seek clarification and hinted that employers needed to better understand the nature of their obligation to consult with employee representatives.
The facts of this case centred on a decision in March 2006 to close a US Army base in Hampshire. On 24 April 2006 the civilian workforce was informed that the base would close at the end of September. On 5 June the employee's representatives were informed that a final decision would not be made until 30 June. On that day, the USA gave around 200 employees notice that they would be dismissed on 29 and 30 September.
The discussion in the case revolved around the precise timing of when the obligation to consult is triggered. Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992, which governs collective redundancy consultation, states that "where an employer is proposing to dismiss as redundant, 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals." The consultation period must be at least 90 days where 100 or more dismissals are proposed.
Mrs Nolan was an employee at the base and brought proceedings against the USA in the Southampton Employment Tribunal. She claimed compensation by way of a protective award on the basis that the USA had failed in its collective consultation obligations because it started its consultation too late. She was successful and the USA appealed to the EAT. They also made an adverse finding against the USA and so it took the case to the Court of Appeal.
In the Court of Appeal, the USA referred to Fujitsu (2009), an ECJ case. They argued that Fujitsu supported the conclusion that the obligation is not triggered by a proposal to make a strategic or commercial decision that will lead to redundancies (e.g. the decision to close a site). Instead it only arises later on when that strategic business decision has actually been made. The Court of Appeal struggled to determine whether this argument was correct. If it was correct then it would mean that the legal argument on which the ET and EAT had based their decisions in the Nolan case would need to be overturned.
The timing is crucially important in order to find the right balance between the interests of employers and employee representatives. On the one hand, the obligation to hold consultations before a decision has been made could restrict employers' flexibility when making restructuring decisions. It could also cause unnecessary uncertainty about job security. Conversely, if a decision has already been made then the consultation process may not involve any examination of the alternatives to redundancy which would adversely affect employees and their representatives.
The Court decided to seek further guidance from the ECJ. This can be a lengthy process and we might not hear back from the ECJ for a year or more. We will keep you updated.
Joe McMorrow
Pinsent Masons LLP
Joe.McMorrow@pinsentmasons.com
