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Collective redundancy consultation: employment update

05 November 2007

In a complete volte face to its previous decisions, the Employment Appeal Tribunal (EAT) has decreed that employers making more than 20 employees redundant are under a duty to consult on the business reason(s) for making redundancies.

Previously, the Court of Appeal had stated that the obligation "is not so much to consult with the unions on whether there should be redundancies but rather to consult on how to carry out any redundancy programme which management deems necessary". In other words, employers did not need to consult employee representatives about its reasons for making redundancies in the first place.

Although the Court of Appeal gave its judgment in 1993, its ruling had been followed by Employment Tribunals and the EAT until now, when it was challenged in the case of Coal Mining Ltd v National Union of Mineworkers (NUM). In that case, the NUM argued that changes made back in 1995 to the statutory wording of section 188 of Trade Union Labour Relations Consultation Act meant that the Court of Appeal guidance was wrong. It found that the "new" obligation to consult over the avoidance of dismissals significantly widened the scope of the consultation obligations and extended it to consulting about the reasons for the closure itself.

Companies considering closing a place of work will need to bear this in mind when planning their consultation process as the delays and costs resulting from this decision could be significant. Furthermore, it may mean consultation taking place earlier, as it is likely that consultation should be undertaken before the decision to close is taken. While the EAT acknowledged that it will be the proposed dismissals that are the subject of consultation not the closure itself, in most cases it will be difficult to divorce the two.