Consultation on redundancies and business transfers

In the case of employees who both elect employee representatives and are of a description in respect of which a union is recognised, the employer may choose whether to consult the elected representatives or representatives of the union (s.188(1B) of the TULR(C)A and reg. 10(2A) of the Transfer Regulations).

Non-statutory guidance on these provisions issued by the Department of Trade and Industry (the DTI)² advises that an employer is not bound to consult or inform a recognised union, but if it does not it must consult elected representatives (paragraph 6). Obviously, the converse is true, and where there is only a recognised trade union (and the employer chooses not to consult through elected representatives), it must be informed or consulted. Where an employer does not recognise a union in respect of a particular category of employees, it may only consult through elected representatives in respect of those employees. The flexibility inherent in the new provisions means that an employer may consult a recognised trade union for one group of employees and elected representatives for another.

Where a union is recognised in respect of a category of employees, it may be the appropriate representative whether or not the particular employees within that group who are threatened by redundancy or affected by a business transfer are union members (Northern Ireland Hotel & Catering College v NATFHE).

Employee representatives

"Employee representatives" are, in relation to the redundancy provisions, either:

Under the Transfer Regulations, employee representatives are either:

All elected employee representatives must be employed by the employer at the time they are elected. Such representatives may be elected under "ad hoc" procedures, as and when collective redundancies are proposed or business transfers are in prospect, or under standing arrangements which may or may not relate specifically to redundancy or transfer situations. A representative might, for example, be an elected member of an existing works or staff council or joint consultative committee, provided consultation for these purposes is "appropriate". According to the DTI guidance, it would not, for example, be sufficient to consult members of a committee specifically established to consider the operation of a staff canteen about redundancies amongst sales staff. But, it says, it might well be appropriate to consult a committee which is regularly informed or consulted more generally about the employer's financial position and personnel matters (paragraph 9).

Invitation to elect

In the DTI's view, where an employer chooses to consult through elected representatives, it must take steps to ensure that representatives are elected in proper time for consultation to be undertaken. But since there is no requirement for permanent representation, it believes that "it will be sufficient for an employer to invite the employees to elect representatives as and when required" (paragraph 8 of DTI guidance). If the employer does this, it must ensure that the requirements of s.188(7A) or reg. 10(8) are complied with.

Thus where, in a redundancy case, an employer has "invited" any of the employees who may be dismissed to elect employee representatives, and that invitation was issued "long enough" before the time when consultation is generally required to begin to allow them to elect representatives by that time, the employer will be treated as complying with the requirements of s.188 in relation to those employees if it complies with those requirements as soon as is reasonably practicable after the election of the representatives (s.188(7A)) of the TULR(C)A). A similarly worded provision applies if the employer invites any of the employees affected by a business transfer to elect representatives long enough before it is required to give information under reg. 10(2) of the Transfer Regulations (reg. 10(8)).

Those provisions are, however, problematic. On the one hand, they seem to raise the possibility that an employer who does not recognise a union could have a cast-iron defence under the new provisions if relevant employees were invited to elect representatives early enough, but never actually did so. And if the word "invites" is meant to indicate, as the DTI seems to believe, that employers must take steps to ensure that representatives are elected, this seems to leave the entire electoral process open to undue employer influence.

At the other extreme, the provisions might be interpreted as meaning that if, for example, an employer issues an invitation in good faith and sets up a ballot, it will automatically be in technical breach of its obligations under s.188 of TULR(C)A or reg. 10 of the Transfer Regulations if no employee representatives are actually elected, and thus open to tribunal complaints from individual employees. What, for example, if no employees are willing to come forward as candidates? Would industrial tribunals regard this as a "special circumstance" potentially excusing the employer from compliance with its duties? (On the "special circumstances" defence, see below.)

If an employer does recognise a union, however, it would appear that representatives of that union would remain the appropriate representatives in the absence of the actual election of other representatives. In these circumstances, we do not believe that the employer would be able to argue that it was choosing to consult elected representatives merely by issuing an invitation.

Balloting requirements?

The uncertainties surrounding the provisions on employee representatives are compounded by the complete absence of any minimum statutory requirements or guidelines on the appropriate method for electing representatives and conducting ballots.

Once again, all we have is the somewhat scanty and extra-legal guidance from the DTI. It confirms that the legislation does not specify how many representatives must be elected or the process by which they are to be chosen. But, it says, to be certain that proper consultation has taken place an employer "will wish to consider" such matters as whether:

Trade union representatives

A trade union representative is an "official or other person authorised by the trade union to carry on collective bargaining" with the employer in question (s.196(2) of the TULR(C)A; reg. 2(3) of the Transfer Regulations). An "official" is either an "officer of the union or of a branch or section of the union" or "a person elected or appointed in accordance with the rules of the union to be a representative of its members or of some of them" (s.119 of the TULR(C)A). This includes those elected or appointed as lay workplace representatives.

In General and Municipal Workers Union v Wailes Dove Bitumastic, an industrial tribunal held that a lay "accredited shop steward" had been properly informed and consulted under s.188. That individual had either express or implied authority (from the union) to carry on collective bargaining with the employer. The union's full-time regional organiser, by contrast, had no such authority and could not expect or demand to be consulted. On the other hand, in National Association of Theatrical, Television and Kine Employees v Rank Leisure Ltd, a tribunal found that an employee union member who had acted as an "ad hoc representative" for other members of staff was not a union representative for the purposes of the Transfer Regulations. He did not negotiate for the union, he was not authorised to negotiate for the union and would not have been allowed to negotiate for it. Negotiation was an essential part of the definition of collective bargaining (see box at left), and the employee's functions fell far short of this.

Accommodation and facilities

An employer must allow all appropriate representatives (that is, both elected employee representatives and/or union representatives) to have access to the employees whom it proposed to dismiss as redundant or who are affected by a business transfer, and must afford those representatives "such accommodation and other facilities as may be appropriate". The DTI guidance gives the use of a telephone as an example of "other facilities", and these would also presumably include the provision of stationery and access to photocopying. "Access" to employees would in our view seem to imply not only physical access, but, for example, communication through the employer's internal mail system (especially where employees are dispersed over a wide area). As the DTI notes, "what is appropriate will vary according to the circumstances" (paragraph 17).

Protection for representatives

Elected employee representatives, former elected representatives and prospective representatives have certain rights and protections analogous to those enjoyed by trade union representatives. These are:

Adequacy of new scheme?

It must be open to doubt whether these new consultation provisions comply with the requirements of the EC Directives. They clearly reflect the Government's view that "effective and ad hoc arrangements" are acceptable. Whilst there is some support for this position in Advocate-General Van Gerven's advisory Opinion to the ECJ in Commission v UK, the ECJ itself made it clear that employers must not be able to "frustrate" the protection provided by the Directives. Member States must, it said, take "all measures necessary" to ensure that workers are informed, consulted "and in a position to intervene" through their representatives in the event of collective redundancies, and that employees "are informed and consulted through their representatives" in the event of the transfer of an undertaking.

The Trades Union Congress (TUC) believes that it is unacceptable that employers should be able to bypass representatives of recognised unions and "undertake sham consultations with some ad hoc group. The consultation process is entirely under the control of the employer, which weakens the effectiveness and credibility of any consultation. It is the employer who decides whether or not to consult recognised unions. If elections are to be held, then only the employer can trigger the election process. The arrangements for the election are also a matter for the employer. There are no guarantees of independence for any representatives elected by the employees and no provision of any resources to enable representatives to carry out the job for which they have been elected."³

And, in the House of Lords' debate on the new provisions⁴, Lord Wedderburn of Charlton observed that the arrangements chosen by the Government do not appear to comply with the elementary principles that employees' representatives should be freely chosen without interference or constraint, should be independent of employer control, and should be chosen by electoral procedures that are free and fair. Indeed, it is arguable that to ensure meaningful consultation "with a view to reaching [or seeking] agreement", representatives should where possible have a degree of continuity, as well as necessary resources and training.

The provisions on designating worker representatives in the Directives have thus far been held to be insufficiently precise and unconditional to be directly enforceable by an individual employee in domestic legal proceedings against a state employer (Griffin and others v South West Water Services Ltd). However, three trade unions have been granted judicial review to challenge the validity of the Amendment Regulations, on the grounds that they breach the Directives in a number of respects⁵. The actions will begin within the next month or so, and the arguments to be used on the present point broadly reflect those just outlined.

Collective redundancies

The duty to consult "appropriate representatives" over collective redundancies now arises when an employer is "proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less" (s.188(1) of the TULR(C)A).

There is a significantly wider definition of "redundancy" for these purposes than that which applies in respect of individual redundancy payments (see box). In the same box, we consider the "employees" covered by s.188 and the meaning of "dismissal". The term "one establishment", together with the calculation of the numbers of proposed dismissals, are covered in the box. Employers are also under a duty to inform the Secretary of State for Trade and Industry of impending collective redundancies (see box).

Note: The 20-employee threshold on the duty to consult is also being challenged in the abovementioned judicial review proceedings

"Proposing to dismiss"

According to the EAT in Association of Patternmakers & Allied Craftsmen v Kirvin Ltd, "proposing to dismiss" connotes a state of mind "directed to a planned or proposed course of events". The employer must have formed some view as to how many employees are to be dismissed, when that is to take place and how it is to be arranged: "This goes beyond the mere contemplation of a possible event." A proposal to dismiss means, at most, a proposal to give notice of redundancy, not the bringing into effect of that notice by its expiry. It does not refer to what has already been done, and it follows that the duty to consult must arise before redundancy notices are served on individual employees (National Union of Teachers v Avon County Council). A "proposal" to dismiss made by an insolvency practitioner (including administrator(s), receivers or liquidators of an insolvent employer) is regarded as the proposal of the employer for these purposes, and therefore subject to the normal consultation requirements (Re Hartlebury Printers Ltd (and others) in Liquidation).

More recently, in Hough and others v Leyland DAF Ltd, the EAT observed that s.188 "contemplates that matters should have reached a stage where a specific proposal has been formulated and that this stage is a later stage than the diagnosis of a problem and the appreciation that at least one way of dealing with it would be by declaring redundancies". In that case, the EAT upheld an industrial tribunal's conclusion that such a proposal had been formulated when a company's security manager made a firm recommendation that its security function should be contracted out, and was given the go-ahead to finalise arrangements with the security firm best able to meet the company's requirements. Mr Justice Knox nevertheless doubted whether it would be helpful to try and analyse conceptually the precise stage that an employer must have reached to be proposing redundancies under s.188, because that provision has to cover "a large multiplicity of possible situations which would be susceptible of very widely differing types of treatment".

On the other hand, unless or until some proposal is formulated by the employer (or by receivers and administrators), no duty to consult arises. A proposal to dismiss employees as redundant must, therefore, at least be "in the mind of the employer" for s.188 to bite (USDAW v Leancut Bacon Ltd). For example, in Re Hartlebury Printers, Mr Justice Morritt concluded that redundancies had occurred as a result of a court's decision to order that the company be wound up, and not from any "proposal" of the company's administrators. The fact that one or more of the administrators might have recognised the "possibility" of redundancies, if the court did not accept their suggestion that the administration should continue, was not sufficient to give rise to an obligation to consult.

Compliance with Directive?

It is unclear whether s.188(1) complies with the requirements of the Collective Redundancies Directive. Article 2(1) of the Directive states that the duty to consult arises when the employer is "contemplating" collective redundancies.

In R v British Coal Corporation and Secretary of State for Trade and Industry ex parte Vardy and others, Lord Justice Glidewell commented that the verb "contemplate" in the Directive refers to consultation "at an early stage when the employer is first envisaging the possibility that he may have to make employees redundant." In contrast, he said, the verb "proposes" in its ordinary usage relates to a state of mind which is much more certain and further along the decision-making process. It followed that s.188 applies only when the employer has decided that, whether because he has to close a plant or for some other reason, it is its intention, however reluctant, to make employees redundant.

It is thus arguable that the word "proposes" should be interpreted in the light of the apparently broader terms of the Directive. Glidewell LJ, however, thought that the two provisions were irreconcilable, while in the Hough case the EAT left open the question of whether the Directive requires consultation at an earlier stage than in the employer's decision-making process than s.188.

To add to the uncertainty, in Re Hartlebury, Morritt J concluded that the domestic provision is compatible with the Directive. He thought that "the range of mental states included within the word [contemplate] is wide. It would extend from merely 'thinking about' to 'having in view or expecting'. In the latter sense, but not the former, the word would equate with the verb 'propose'." But an employer proposing to dismiss as redundant cannot include one who is merely thinking about the possibility of redundancies. Thus, Morritt J said that he could not construe the word "proposing" to embrace the full range of possible meaning of the word "contemplating", "but I can construe 'contemplating' in a sense equivalent to 'proposing'".

This line of reasoning seems, however, somewhat partial and contrived, and conflicts with the robust and purposive approach which is increasingly applied to the interpretation of domestic law enacted to give effect to EC obligations. In addition, Glidewell LJ's comments in ex parte Vardy, that the words used in article 2(1) of the Directive and s.188(1) of the TULR(C)A were irreconcilable, were made before the 1993 TURERA amendments fundamentally altered the nature and context of the consultation required under domestic law. As a result, employers would in practice be best advised to consider consultation as soon as they conclude that redundancies are likely or necessary.

On the other hand, there is no implied obligation under the Directive to foresee collective redundancies. According to the ECJ, it does not "stipulate the circumstances in which the employer must contemplate collective redundancies and in no way affects [its] freedom to decide whether and when [it] must formulate plans for collective dismissals" (Dansk Metalarbejderforbund and Specialarbejderforbundet i Danmark v H Nielsen & Søn, Maskinfabrik A/S). Thus, as is the case under the domestic provisions, if employers genuinely and honestly do not reach the stage of contemplating or seriously considering redundancies, no duty to consult arises under the Directive.

Timing of consultation

Consultation with appropriate representatives must begin in "good time" and in any event:

before the first of the dismissals takes effect (s.188(1A) of the TULR(C)A).

The requisite periods for consultation are to be calculated by reference to the date on which the first dismissal proposed by the employer would take effect, or, in other words, the proposed date of the first dismissal, and not the actual date of the first dismissal. In TGWU v R A Lister & Co Ltd, the EAT said that this construction is necessary in order to ensure that employers are in a position to know at the stage when proposals are formulated whether they have complied with the statutory consultation periods. Much may happen during consultation. New ideas may emerge to avoid or minimise the threat of redundancy (or dismissal as a result of reorganisation); fewer employees may need to be involved; the descriptions of the employees involved may alter; other proposed details may change as a result of voluntary redundancies; and employees may wish to leave early. The EAT felt that any of these factors could seriously displace the proposals initially made by the employer, and it could well be in best interests of individual employees to allow different people to leave at different times.

The need to consult in "good time" before the first of the proposed dismissals is an overriding requirement, subject to the minimum periods laid down. This phrase was introduced by the Amendment Regulations in place of a requirement for consultation at the "earliest opportunity". In the Government's view⁶, the new formulation is "more realistic", and more accurately reflects the terms of the Directive (see article 2(1)). A sceptic might be tempted to conclude that "more realistic" means less onerous for employers!

Disclosure of written information

For the purposes of consultation under the TULR(C)A, employers are required to disclose the following information in writing to appropriate representatives:

This information must be disclosed by being "given to each of the appropriate representatives by being delivered to them", or sent by post to an address notified by them to the employer, or, in the case of union representatives, sent by post to the union at the address of its head or main office (s.188(5)). If the employer chooses the first of these options, the information must be delivered to appropriate representatives personally, and in written form. Disclosure by telephone is thus insufficient (TGWU v Nationwide Haulage Ltd). And although it appears that the information does not have to be provided in a single document, it must be disclosed and delivered in one of the ways specified. It is no defence for the employer to argue that the information was available, and could have been gleaned from the surrounding circumstances and other existing documents (Sovereign Distribution Services Ltd v TGWU).

Start of consultation

Proper consultation begins with the disclosure of the specified information. Appropriate representatives will not otherwise be in a position to make the "constructive proposals which are an essential feature" of the consultation process (General and Municipal Workers' Union (Managerial Administrative Technical and Supervisory Association Section) v British Uralite Ltd).

But the question of whether the information supplied by an employer is sufficient to trigger statutory consultation is a question of fact for industrial tribunals in the particular circumstances of a case. If the employer operates at a single location with a homogeneous workforce, the amount of detail required may be quite different from that which is necessary where the employer operates at a range of locations, with a staff covering a wide range of qualifications and abilities. Similarly, if information is made available over a period of time, it is a question of fact and circumstances at what point the information becomes sufficient to enable meaningful consultation to begin (GEC Ferranti (Defence Systems) Ltd v MSF).

For example, in the GEC Ferranti case, the employer furnished the union with a copy of the HR1 form which it had submitted to the Secretary of State (see box). This gave a broad indication of the total number of proposed redundancies divided into broad job categories. But it did not give any more precise information, and, in particular, did not say from which of the employer's divisions the redundancies would be found, or in what proportions. The EAT "had no hesitation" in concluding that the disclosure of that information was "not adequate" (MSF v GEC Ferranti (Defence Systems) Ltd (No.2)). It went on to comment, however, that there is no rule that full and specific information under each of the heads listed in s.188(4) must be provided before consultation can begin. The six headings listed in that provision are not necessarily of equal importance in every case, and cannot necessarily be treated as separate and distinct. This is because the information required under some of the headings may "very well" overlap.

Content of consultation

The consultation required by s.188 must include consultation about ways of:

Moreover, consultation must be undertaken by the employer "with a view to reaching agreement" with appropriate representatives (s.188(2)).

Even before these specific requirements were introduced by the TURERA, it was established that the purpose of s.188 "was the encouragement of proper efforts by the employer and unions jointly to seek ways of minimising the impact of a redundancy situation"(Amalgamated Society of Boilermakers, Shipwrights, Blacksmiths & Structural Workers v George Wimpey ME & C Ltd). Consultation had to be "meaningful" and not a "sham exercise". It followed that "consultation" which began after the date on which redundancy notices were issued to individual employees could not "possibly be regarded as satisfying the conditions" of s.188 (NUT v Avon County Council ). This was also true where redundancy notices were issued on the same day, or shortly after, representatives were informed of the need for redundancies (Sovereign Distribution Services Ltd v TGWU). There had to be sufficient time for meaningful consultation before notices of dismissal were sent out, and for representatives "to consider properly" the proposals being put to them" (TGWU v Ledbury Preserves (1928) Ltd). Issuing redundancy notices in "clear and unequivocal" terms did not invite consultation.

All of these propositions obviously still hold true. But it is clear that s.188(2) now envisages a "stronger" form of consultation. The process may now be expected, depending on the circumstances, to cover matters such as the re-allocation of work, the retraining and redeployment of employees, as well as other methods of avoiding dismissals or minimising the numbers involved. Similarly, in looking at ways of mitigating the impact of redundancies, consideration should probably be given, for example, to counselling for employees, and the provision of information on training and retraining opportunities elsewhere.

And while the employer's duty to consult "with a view to reaching agreement" does not impose a duty to bargain, or imply the joint regulation of the redundancy process, it clearly goes beyond merely listening and responding to representations made by appropriate representatives. Any such representations or counter-proposals should now be carefully considered in the course of a genuine attempt to reach some form of accommodation or understanding on the issues raised. This in turn indicates that employers must be even more reticent about issuing redundancy notices to individual employees during the course of consultation.

In R v British Coal Corporation ex parte Price and others, Lord Justice Glidewell suggested that, generally speaking, "fair" consultation means consultation at a point when proposals are still at a formative stage. This involves giving the person or body consulted a fair and proper opportunity to understand fully the matters about which it is being consulted, and to express its views on those matters. The consultor (for present purposes, the employer) must then consider the responses to the consultation properly, genuinely and conscientiously.

"Special circumstances" defence

An employer's duty to consult is qualified by the application of the "special circumstances" defence. By virtue of s.188(7) of the TULR(C)A, if in any case there are "special circumstances" which render it not reasonably practicable for the employer to comply with any of the statutory requirements on the timing, duration and substance of consultation, or with the disclosure of information provisions, it must take "all such steps towards compliance" with that requirement as are reasonably practicable in the circumstances (s.188(7)). If the employer seeks to rely on this defence in any industrial tribunal proceedings, it bears the burden of proving both the existence of special circumstances, and that it took the necessary steps towards compliance (s.189(6)).

Where the decision leading to proposed dismissals is taken by a person controlling the employer (directly or indirectly), a failure on the part of that person to provide information to the employer cannot constitute special circumstances for these purposes (s.188(7)).

"Special circumstances" are "something out of the ordinary, something uncommon" (Bakers' Union v Clarks of Hove Ltd). Thus, it has been held that "rumours and uncertainty are nothing out of the ordinary when it becomes known that employers are proposing redundancies; indeed, it may be the case that throughout the statutory consultation period there will inevitably be continuing uncertainty with consequent effects on morale until a settlement is achieved. It is a usual rather than a special circumstance" (GMWU v British Uralite, above). Indeed, in the light of the many legislative changes considered in this feature, employers must be warned that the fact that legislation is "novel and recently introduced", and that they may consequently be ignorant of its provisions, is not a special circumstance! (See Amalgamated Society of Boilermakers, Shipwrights, Blacksmiths & Structural Workers v George Wimpey ME & C Ltd; UC ATT v H Rooke & Son Ltd.)

Insolvency not in itself "special"

More generally, neither the insolvency of an enterprise, nor the fact that it is in administration or receivership, are in themselves special circumstances (Re Hartlebury). In the Clarks of Hove case, the Court of Appeal said that the mere fact of insolvency was "neither here nor there. It may be a special circumstance, it may not be a special circumstance. It will depend entirely on the cause of the insolvency whether the circumstances can be described as special or not. If, for example, sudden disaster strikes a company, making it necessary to close the concern, then plainly, that would be a matter which was capable of being a special circumstance; and that is so, whether the disaster is physical or financial. If the insolvency, however, was merely due to a gradual run-down of the company, as it was in this case, then those are facts on which the industrial tribunal can come to the conclusion that the circumstances were not special."

In similar vein, the EAT in GMB v Rankin and Harrison recently concluded that "the shedding of employees in order to make the sale of a business more attractive is not something special to a particular case, but is a common incident in any form of receivership or insolvency. Similarly, the facts that the business could not be sold and that there were no orders seem to us to be common incidents of insolvencies, not special circumstances in the required sense."

Other cases, however, have purported to follow the dicta in Clarks of Hove whilst apparently allowing companies with financial difficulties greater leeway. In Hamish Armour (receiver of Barry Staines Ltd) v Association of Scientific, Technical and Managerial Staffs, for example, the EAT concluded that an application for a government loan by a company which had already received substantial financial help from that source, and which reasonably assumed that the loan would be granted, could be a special circumstance making it not reasonably practicable to issue the formal written details required by s.188(4) until the outcome of the application was known.

Similarly, in USDAW v Leancut Bacon Ltd, the company's half-yearly accounts painted such a poor picture that the prospective purchaser panicked and pulled out of the proposed sale, whereupon the bank immediately withdrew the company's credit facilities. Influenced more by the bank's sudden withdrawal of funds than by the gradual financial deterioration which preceded it, the EAT upheld the tribunal's decision that these circumstances were special. And, whilst employers cannot "shut [their] eyes to the obvious", it seems that it can be a special circumstance if it is proved that the employer continued to trade in the face of adverse economic pointers "in the genuine but nonetheless reasonable expectation" that redundancies would be avoided (Association of Patternmakers & Allied Craftsmen v Kirvin Ltd).

All reasonably practicable steps

Even if there are special circumstances, the employer must still take such steps towards compliance with the consultation requirements as are reasonably practicable in the circumstances. For example, in Hamish Armour (above), the EAT further held that, although it was not possible for the company to have consulted with the union within the statutory time limits, "a substantial measure of consultation could have occurred before the redundancies were declared". The serious position of the company, the importance of the loan being applied for, and the inevitable consequences of refusal were matters which could and should have been disclosed to responsible representatives, even if only on a confidential basis, at the latest when the decision to ask for the loan was made, said the tribunal.

Complaint to industrial tribunal

Where an employer fails to comply with any requirement of s.188, a complaint may be presented to an industrial tribunal on that ground:

According to the DTI guidance on the revised consultation provisions², a complaint may be made by an individual employee where there is neither a recognised trade union nor an elected representative. It would thus seem that if either of these exists in relation to the threatened employees, they will be the proper parties to bring a complaint. The individual employee does not appear to have a residual right to complain to a tribunal if a trade union and/or a properly elected employee representative fails to act.

Complaints must be presented:

Remedies

If the tribunal finds the complaint to be well founded it must make a declaration to that effect, and it may make a "protective award" (s.189(2)). A protective award is an award in respect of one or more employees who has been dismissed, or whom it is proposed to dismiss, as redundant, and in respect of whose dismissal or proposed dismissal the employer has failed to comply with a requirement of s.188, ordering the employer to "pay remuneration" to those employees for a "protected period".

The "protected period" begins with "the date on which the first of the dismissals to which the complaint relates takes effect", or the date of the tribunal award, whichever is the earlier (s.189(4). The first of these dates means the date on which the first dismissal takes effect, or would take effect, in accordance with the employer's proposals, and not the date of the first actual dismissal (see E Green & Sons (Castings) Ltd and others v Association of Scientific, Technical and Managerial Staffs and another; Transport and General Workers' Union v Ledbury Preserves (1928) Ltd (No.2)). Accordingly, it is the same as the date used to calculate back the requisite statutory consultation period under s.188(1A) of the Act.

Length of protected period

In any given case, the protected period will be of such length as the tribunal determines to be "just and equitable in all the circumstances having regard to the seriousness of the employer's default" in complying with any requirement of s.188, subject to a maximum of:

The employee's entitlement under a protective award is an actual "week's pay" for each week of the protected period, and remuneration in respect of a period of less than a week is calculated by reducing proportionately the amount of a week's pay (s.190(2)). A "week's pay" is calculated in accordance with Schedule 14 of the EP(C)A). The calculation date of a week's pay for these purposes is the date of the tribunal award, or, if the employee was dismissed before that date, the calculation date for computing the amount of a statutory redundancy payment in relation to that dismissal (whether or not the employee concerned is entitled to any such payment) - s.190(5) of the TULR(C)A).

If an employee who is the subject of a protective award dies during the protected period, the award has effect as if the protected period ended on his or her death (s.190(6)). The protected period is not, however, curtailed by a court order that the employing company should be wound-up (AEEU and GMB v Clydesdale Group plc (in receivership)).

Award is "compensatory"

A protective award is a discretionary remedy, and its purpose is to compensate employees for loss of days of consultation. An award may thus be made irrespective of whether individual employees have suffered financial loss. In addition, whilst industrial tribunals must take account of the seriousness of an employer's default in failing to comply with s.188, the award is not intended to "penalise" employers.

In Spillers-French (Holdings) Ltd v Union of Shop, Distributive and Allied Workers, Mr Justice Slynn stated that "the question which has to be looked at is not the loss or potential loss of actual remuneration during the relevant period by the particular employee. It is to consider the loss of days of consultation which have occurred. The tribunal will have to consider, how serious was the breach on the part of the employer? It may be that the employer has done everything that [it] can possibly do to ensure that [its] employees are found other employment. If that happens, a tribunal may well take the view that either there should be no award or, if there is an award, it should be nominal."

Earlier in the same judgment, he observed that there "can be defaults of different gravity". If, for example, all the information required to be disclosed under s.188(4) was given to appropriate representatives orally, "a tribunal would not take a very serious view of that as a failure to comply with a requirement. On the other hand, failure to give reasons at all, or a failure to include one of the matters specified in [s.188(4)] might be more serious. A failure to consult at all, or consultation only at the last minute, might be taken to be even more serious."

In a simple case in which the length of consultation is the only critical factor to be taken into account, and the employer dismisses employees "with no consultation and with immediate effect", the appropriate protected period is likely be the statutory maximum (ie either 30 or 90 days depending on the number of redundancies proposed). If, on the other hand, the employer complies with the statutory requirements one day late and allows only, for example, 29 or 89 days of consultation, the protected period might itself be only one day (E Green & Sons v ASTMS, above). Tribunals will thus be likely to give an employer credit for any proper and meaningful consultation which actually takes place. In other cases, tribunals may legitimately consider whether the employer's failure, for example, to provide full information at the start of the consultation process, materially affected or prejudiced the substance of the ensuing discussions between the parties (MSF v GEC Ferranti (No. 2)).

Exclusion from protective award

Employees may be disentitled from receiving the whole or part of a protective award in a number of circumstances.

Enforcement by employee

An individual employee may complain to an industrial tribunal on the ground that he or she is an employee of a description to which a protective award relates, and that the employer has failed, wholly or in part, to pay him or her the remuneration due under that award. Such a complaint must be made within three months of the last of the days on which it is claimed that the employer failed to pay remuneration (or, if it was not reasonably practicable to complain in that time, such further period as the tribunal considers reasonable). If the tribunal finds the complaint to be well founded it must order the employer to pay the amount due (s.192 of the TULR(C)A).

Business transfers

In contrast to the redundancy consultation provisions, the primary duty under the Transfer Regulations relates to the provision of information. The duty to consult in this context is distinct and more limited in ambit.

The duty to inform

Regulation 10 states that "long enough" before a relevant transfer to enable the employer of any affected employees to consult all the persons who are appropriate representatives of any of those affected employees, the employer must inform those representatives of:

Must be "relevant transfer"

There must be a "relevant transfer" in prospect (see reg. 3). This does not, for example, include the sale of a business by transfer of shares. In such a case, there is no change in the legal identity of the person responsible for employing employees (see, for example, Transport and General Workers' Union v BICC Bryce Capacitators Ltd). On the other hand, the fact that the relevant transfer does not ultimately take place does not negate the employers' primary duties under these provisions. It has been said that the Regulations "are clearly designed to deal with consultation before any transfer has taken place and to give [appropriate representatives] the right to complain if they are not informed or consulted about the proposed transfer." The Regulations say nothing as to when the complaint can be presented and industrial common sense dictates that an actual transfer is not an essential part of bringing a complaint (Banking Insurance and Finance Union v Barclays Bank plc and others, and see further below).

Affected employees

"Affected employees" are any employees of the transferor or transferee (whether or not they are employed in the part of the undertaking to be transferred) "who may be affected by the transfer or measures taken in connection with it" (reg. 10(1)). In contrast to the amended redundancy consultation provisions, only a single employee needs to be affected to trigger the employer's obligations. The duty to inform is therefore potentially very wide-ranging, and relates to any employees of either employer who may be affected either directly or indirectly by the fact of the transfer or any of its consequential effects. "Measures taken in connection" with the transfer includes any "action, step or arrangement" by the employers which may affect their employees (Institution of Professional Civil Servants and others v Secretary of State for Defence).

Whilst the employees most likely to be affected are those of the transferor, the transferee must assess any possible impact on its own employees. For example, if the working arrangements or conditions of any of the transferee's employees may be affected by its acquisition of another undertaking, it must provide the requisite information to "appropriate representatives" of those employees.

Note: An "employee" is extremely broadly defined for these purposes as "any individual who works for another person whether under a contract of service or apprenticeship or otherwise, but does not include anyone who provides services under a contract for services" (reg. 2(1))

Measures "envisaged"

The word "envisages" - in relation to the duty to disclose information about measures which the employer envisages that it will take in connection with the transfer (and the transferor's duty to disclose information about the measures envisaged by the transferee) - means simply "visualises" or "foresees". But reference to the measures which "will" rather than "may" be taken is "apt to exclude mere hopes or possibilities... it is not enough that there should be some possibility in contemplation; the [employer] must have formulated some definite plan or proposal which it has in mind to implement..." And whilst the term "measures" is "a word of the widest import", it is clear that, for example, staffing projections are not in themselves measures, although positive steps to achieve planned reductions in staffing levels otherwise than through natural wastage would be (IPCS v Secretary of State for Defence).

The transferee must give the transferor "such information at such time" as will enable the transferor to perform its duty to inform those employees who are to be transferred about the measures envisaged by the transferee (reg. 10(3)). It is implicit in the Regulations that this information must be provided in a form which enables the transferor to perform that duty, and the transferee is not entitled to supply it under cover of commercial confidentiality so as to prevent performance (IPCS v Secretary of State for Defence). There is, however, no implied obligation on the transferee (or the transferor) to envisage any measures which it will take, or to envisage any measures at any particular time (IPCS v Secretary of State for Defence).

Form of disclosure

The information which is to be given to appropriate representatives must be given to each of them by being delivered to them, or sent by post to an address notified by them to the employer, or, (in the case of union representatives) sent by post to the union at the address of its head or main office (reg. 10(4)). Although it is not expressly stated in the Regulations, it seems that the information should be given or delivered in writing or documentary form. It is not sufficient that representatives should pick up the information "informally" (National Association of Theatrical Television and Kine Employees v Rank Leisure Ltd). On the other hand, representatives cannot "dictate the form in which the information is provided", and cannot demand to see original documents or copies of them. The employer is clearly entitled to extract the required information from those documents (IPCS v Secretary of State for Defence).

Timing of disclosure

As noted above, the information must be provided "long enough" before a relevant transfer to enable the employer to "consult" appropriate representatives (reg. 10(2)). In contrast to the redundancy consultation provisions, there is no fixed minimum timescale for the provision of information on business transfers. In IPCS v Secretary of State for Defence, however, reference was made to the need to allow sufficient time "for full and effective consultation". And in the Rank Leisure case, an industrial tribunal found that the provision of information only three days before a transfer was completed was insufficient.

It is nevertheless unclear exactly what consultation this provision refers to. There is no explicit link to the more narrowly formulated duty to consult, which arises in respect of measures which the employer envisages that it will take (see reg. 10(5)). In IPCS v Secretary of State for Defence, Mr Justice Morritt offered the opinion that the consultation referred to in the opening words of reg. 10(2) is therefore "voluntary consultation", which representatives may seek on any topic once they have the requisite information, but which the employer is not compelled to grant if it chooses not to do so. This means that an employer may on occasion be under an obligation to provide information "long enough" before a transfer to enable consultation, even though such consultation may never in fact take place!

The duty to consult

The statutory duty to consult arises only where the employer envisages that it will, in connection with the transfer, be "taking measures" in relation to any of the affected employees. In these circumstances, it must "consult" the appropriate representatives of those employees "with a view to seeking their agreement to measures to be taken" (reg. 10(5) of the Transfer Regulations). In the course of those consultations, the employer must consider any representations made by the appropriate representatives and reply to them. If it rejects any those representations, it must give its reasons for doing so (reg. 10(6)).

We have already discussed the meaning of the terms "measures", "envisages" and "will" (see above), and have explored the content of consultation "with a view to reaching agreement" under the redundancy consultation provisions. It should be noted that reg. 10(5), in contrast, refers to "seeking" representatives' agreement. Notwithstanding this minor difference in wording, it seems that employers are again required to enter into consultation with an open mind which is receptive to representative's views and proposals, in the context of a genuine attempt to reach an accommodation on the issues raised.

Special circumstances

The employer may take advantage of a "special circumstances" defence, which mirrors that available under the redundancy provisions (see above). Thus, where there are special circumstances which render it not reasonably practicable for the employer to comply with any duty imposed by reg. 10, it must take all such steps towards performing that duty as are reasonably practicable in the circumstances (reg. 10(7)). Again, in any industrial tribunal proceedings, the employer has to show both that special circumstances existed and that it took all the necessary steps towards compliance (reg. 11(2)).

All of the matters considered in relation to special circumstances in redundancy cases should be taken into account, and in particular the requirement that special circumstances are generally "sudden" and "unforeseen". This is unlikely, for example, to include the employers' desire merely to preserve confidentiality in the context of a transfer or tendering process (NATFHE v Hereford & Worcester Council and another). On the other hand, one industrial tribunal accepted that the fact that a transfer had to be completed with "great speed" if it was not to fall through - and that this eventuality would have been to the detriment of both the transferor and its employees -was an "unusual" and, therefore, a special, circumstance for these purposes (NATTKE v Rank Leisure).

Remedies

The remedies for a breach of the information and consultation requirements in the Transfer Regulations have a similar structure to those for non-compliance with s.188 of the TULR(C)A.

Where an employer fails to comply with any requirement of reg. 10, a complaint may be presented to an industrial tribunal on that ground:

A complaint must be made within three months, beginning with the date on which the relevant transfer is completed (reg. 11(8)(a)). This time limit does not preclude a complaint before a relevant transfer occurs. In South Durham Health Authority v Unison, the EAT held that reg. 11(8) only specifies an "end date" for making a complaint. It does not specify a "start date" or prohibit a tribunal from hearing a complaint before a particular date. Complaints may legitimately be made when the employer's duty to inform or consult under reg. 10 should be performed - that is, before the transfer.

Where it is alleged that a transferor failed to disclose information about the measures envisaged by the transferee, the transferor may give the transferee notice that it intends to show that the reason for its failure was the transferee's failure to supply the requisite information at the requisite time in accordance with reg. 10(3). The giving of that notice makes the transferee a party to the proceedings.

"Appropriate" compensation

If the tribunal finds a complaint to be well founded, it must make a declaration to that effect and may order the employer to pay "appropriate compensation to such descriptions of affected employees as may be specified in the award". If the transferee has been joined to the proceedings and the transferor shows that its breach of duty was due to the transferee's failure, the tribunal may order the transferee to pay all or part of the compensation in respect of specified affected employees (reg. 11(4)).

"Appropriate compensation" is such a sum, not exceeding four weeks' pay, for each of the specified employees as the tribunal considers just and equitable having regard to the seriousness of the employer's failure to comply with its duties (reg. 11(11)). (On the calculation of a "week's pay" for these purposes, see reg. 11(12) and p.10 above. The calculation date here is the same as that discussed above where an employee is dismissed by reason of redundancy (within the limited meaning of s.81 of the EP(C)A). It is the effective date of termination for employees dismissed for any other reason, and the date of transfer in all other cases.)

Enforcement by employee

Once again, the payment of compensation is ultimately enforced by individual employees. An employee may thus complain to an industrial tribunal on the ground that he or she is an employee of a description to which a tribunal order for compensation relates, and that the transferor or transferee has failed, wholly or in part, to pay him or her the compensation due under the order (reg. 11(5)). Such a complaint must be made within three months of the date of the tribunal's order (or, if the tribunal is satisfied that it was not reasonably practicable to complain in that time, such further period as the tribunal considers reasonable) - reg. 11(8)(b). If the tribunal finds the complaint to be well founded it must order the employer to pay the amount due (reg. 11(6)).

Overlap with redundancies

If a party to a relevant transfer proposes collective redundancies (as defined above), it may be under a concurrent duty to consult appropriate representatives under s.188 of the TULR(C)A. The following points are noteworthy:

The new consultation requirements - main points to note

-90 days before the first of the dismissals is due to take effect where the employer is proposing to dismiss 100 or more employees at one establishment within a period of 90 days or less; and

-30 days before the first dismissal takes effect in other cases (that is, where the employer proposes to dismiss at least 20, but less than 100 employees, at one establishment within 90 days or less).

Independent trade unions recognised by employers

Redundancy consultation: basic definitions (1)

In anticipation of that judgment, the definition of "redundancy" in the domestic consultation provisions was amended. It now covers a "dismissal for a reason not related to the individual [employee] concerned or for a number of reasons all of which are not so related" (s.195(1) TULR(C)A). Employers are therefore now under an obligation to inform and consult wherever collective dismissals result, for example, from proposals to reorganise or restructure undertakings, or to reallocate job duties, even though there are no redundancies as traditionally defined. But note that, in contrast to the Directive, the modified TULR(C)A definition requires all the reasons for dismissal to be unrelated to the individual employee.

Redundancy consultation: basic definitions (2)

Dismissals at "one establishment"

The employer's duties under s.188 arise in respect of dismissals proposed at "one establishment". There is no definition of this term in the TULR(C)A⁷. A range of factors have been identified by domestic courts and tribunals as being relevant, including: whether the employer has exclusive occupation of the premises; the degree of permanence of the workplace; and the extent to which work is organised and administered on or from the premises in question. Ultimately, the issue is a question of fact for the tribunal. Two examples:

Identity of employer

The duties under s.188 apply, however, to a single "employer". It is only when the identity of each employer and its employees has been identified that the size of the establishment falls to be considered. The correct mechanism for identifying the relevant parties is the contract of employment. Courts and tribunals generally refuse in this context to "pierce the veil" of corporate groups in order to look at the economic reality of redundancy decisions. This means, for example, that even if several closely associated employers operate from the same geographical site, their redundancy proposals will be treated separately for the purposes of determining their respective obligations to inform and consult (see E Green & Sons (Castings) Ltd v Association of Scientific, Technical and Managerial Staffs and another).

Determining numbers involved

In determining the number of employees which an employer is proposing to dismiss within the specified period (that is, 90 days), no account is to be taken of employees in respect of whose proposed dismissals consultation has already begun (s.188(3)).Tribunals are, however, wary of "salami-slicing", whereby employers may attempt artificially to stagger dismissals so that each batch falls below the relevant statutory thresholds. Section 188(3) consequently applies only to genuinely separate and distinct proposals for redundancy.

Duty to notify Secretary of State⁸

¹SI No.2587.

²"Revised arrangements for consultation about redundancies and business transfers", guidance issued by the DTI, October 1995.

³"Your voice at work - TUC proposals for rights to representation at work", July 1995.

⁴24.10.95, Hansard (HL) cols.1090-1093.

⁵GMB press release, 8.12.95.

⁶DTI press release, 5.10.95.

⁷Note, however, that the ECJ has recently held that the term "establishment" in the Collective Redundancies Directive means, depending on the circumstances, "the unit to which the workers to be made redundant are assigned to carry out their duties. It is not essential, in order for there to be an 'establishment', for the unit in question to be endowed with a management which can independently effect collective redundancies" (Rockfon A/S v Specialarbejderforbundet i Danmark).

⁸The provisions summarised in this box apply to redundancies which take effect on or after 1 March 1996. Where redundancies are due to take effect before that date, the pre-existing provisions apply. These are identical in all respects, except that an employer must give the Secretary of State 30 days' notice where it proposes to dismiss 10 or more employees as redundant within a period of 30 days, and the references to "appropriate representatives" should be read as if they refer to representatives of independent trade unions recognised by the employer.

CASE LIST

AEEU and GMB v Clydesdale Group plc (in receivership) [1995] IRLR 527

Amalgamated Society of Boilermakers, Shipwrights, Blacksmiths & Structural Workers v George Wimpey ME & C Ltd [1977] IRLR 95

Angus Jowett & Co (in liquidation) v NUTGW [1985] IRLR 326

Association of Patternmakers & Allied Craftsmen v Kirvin Ltd [1978] IRLR 318

Bakers' Union v Clarks of Hove Ltd [1978] IRLR 366 (CA); [1977] IRLR 264 (EAT) and 167 (IT)

Banking Insurance and Finance Union v Barclays Bank plc and others [1987] ICR 495

Barratt Developments (Bradford) Ltd v UCATT [1977] IRLR 403

Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland [1994] IRLR 392 (case C-382/92) and 412 (case C-383/92)

Dansk Metalarbejderforbund and Specialarbejderforbundet i Danmark v H Nielsen & Søn, Maskinfabrik A/S [1986] 1 CMLR 91

GEC Ferranti (Defence Systems) Ltd v MSF [1993] IRLR 101

General and Municipal Workers' Union v Wailes Dove Bitumastic Ltd [1977] IRLR 45

General and Municipal Workers' Union (Managerial Administrative Technical and Supervisory Association Section) v British Uralite Ltd [1979] IRLR 409

GMB v Messrs Rankin and Harrison [1992] IRLR 514

E Green & Sons (Castings) Ltd and others v Association of Scientific, Technical and Managerial Staffs and another [1984] IRLR 135

Griffin and others v South West Water Services Ltd [1995] IRLR 15

Hamish Armour (receiver of Barry Staines Ltd) v Association of Scientific, Technical and Managerial Staffs [1979] IRLR 24

Hartlebury Printers Ltd and others (in liquidation), re [1992] ICR 559

Hough and others v Leyland DAF Ltd [1991] IRLR 194

Institution of Professional Civil Servants and others v Secretary of State for Defence) [1987] IRLR 373

MSF v GEC Ferranti (Defence Systems) Ltd (No.2) [1994] IRLR 113

NATFHE v Hereford & Worcester Council and another 9.5.94 COIT 35890/93

National Association of Theatrical, Television and Kine Employees v Rank Leisure Ltd 14.3.83 COIT 29431/82/LC

National Union of Gold, Silver & Allied Trades v Albury Brothers Ltd [1978] IRLR 504

National Union of Teachers v Avon County Council [1978] IRLR 55

Governing Body of the Northern Ireland Hotel & Catering College and another v NATFHE [1995] IRLR 83

R v British Coal Corporation and Secretary of State for Trade and Industry ex parte Price and others [1994] IRLR 72

R v British Coal Corporation and Secretary of State for Trade and Industry ex parte Vardy and others [1993] IRLR 104

Rockfon A/S v Specialarbejderforbundet i Danmark 7.12.95, case C-449/93

South Durham Health Authority v Unison [1995] IRLR 407

Sovereign Distribution Services Ltd v Transport and General Workers' Union [1989] IRLR 334

Spillers-French (Holdings) Ltd v Union of Shop, Distributive and Allied Workers [1979] IRLR 339

Transport and General Workers' Union v BICC Bryce Capacitators Ltd 29.4.85 COIT 33462/84

Transport and General Workers' Union v Ledbury Preserves (1928) Ltd [1985] IRLR 412

Transport and General Workers' Union v Ledbury Preserves (1928) Ltd (No.2) [1986] IRLR 492

Transport and General Workers' Union v Nationwide Haulage Ltd [1978] IRLR 143

Transport and General Workers' Union v R A Lister & Co Ltd 21.5.86 EAT 436/85

Union of Construction, Allied Trade & Technicians v H Rooke & Son Ltd [1978] IRLR 204

USDAW v Leancut Bacon Ltd (in liquidation) [1981] IRLR 295

USDAW v Sketchley Ltd [1981] IRLR 291