United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR PETER EDWARDS (of Counsel) Instructed by: Messrs Rowley Ashworth Solicitors No 1 Snow Hill Plaza St Chad's Queensway Birmingham B4 6JG
For the Respondent	MR OLIVER SEGAL (of Counsel) Instructed by: Messrs Cobbetts Solicitors One Colmore Square Birmingham B4 6AJ

SUMMARY

Redundancy

An employment tribunal in exercising discretion under s189 Trade Union and Labour Relations (Consolidation) Act 1992 in respect of breaches of s188 is entitled and obliged in assessing the seriousness of the breach to take into account its nature and the mitigating circumstances, including any steps taken by the employer before the proposals were crystallised in relation to keeping the employees informed or consulted (Susie Radin considered). In any event the Employment Tribunal had a wide discretion with which the Employment Appeal Tribunal would not interfere.


 


THE HONOURABLE MR JUSTICE BURTON (PRESIDENT)

1. This has been the hearing of an appeal by the Claimant, Amicus, against the unanimous Decision of the Employment Tribunal at Birmingham, after hearings on 29 October and
   12 November 2004, in Reasons sent to the parties on 15 December 2004, ordering the Respondent (in administration), GBS Tooling Limited, to make a protective award of 70 days, beginning on 20 February 2004, and consequently to pay, in respect of that protected period, compensation to all hourly-paid shop floor employees of the Respondent, who were members of Amicus and who were dismissed by the Respondent on 20 or 27 February 2004.
2. There was no appeal by the Respondent (in administration) against that Order. It is the Claimant which appeals, on the basis that rather than 70 days, a 90 day period should have been awarded by the Tribunal.
3. The relevant statutory background is set out in the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA") at ss188 and 189. The duty of the employer to consult representatives is described as follows:

"188 (1) 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 all the persons who are appropriate representatives of any of the employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals."

The following subsections provide as follows:

"(1A) The consultation shall begin in good time and in any event—

(a) where the employer is proposing to dismiss 100 or more employees as mentioned in subsection (1), at least 90 days, and

(b) otherwise, at least 30 days,

before the first of the dismissals takes effect."

We interpose, in this case it was not 100 or more employees and so the 30 day period was the relevant period. The definition is given in s188(1B) of what the appropriate representatives were. We do not need to worry about that provision.

" (2) The consultation shall include consultation about ways of –

(a) avoiding the dismissals,

(b) reducing the numbers of employees to be dismissed, and

(c) mitigating the consequences of the dismissals,

and shall be undertaken by the employer with a view to reaching agreement with the appropriate representatives.

(3) …

(4) For the purposes of the consultation the employer shall disclose in writing to the appropriate representatives –

(a) the reasons for his proposals,

(b) the numbers and descriptions of employees whom it is proposed to dismiss as redundant,

(c) the total number of employees of any such description employed by the employer at the establishment in question,

(d) the proposed method of selecting the employees who may be dismissed,

(e) the proposed method of carrying out the dismissals, with due regard to any agreed procedure, including the period over which the dismissals are to take effect and

(f) the proposed method of calculating the amount of any redundancy payments to be made… to employees who may be dismissed."

4. The unfortunate circumstances of this case are that the Respondent Company, which operated from premises in Coventry, ran a business of the manufacture and supply of aluminium pressings to the automotive industry, and had two major customers, which accounted for approximately 70% of its business; and in September and December 2003 notices were severally given by each of those two customers that they were intending to transfer their business overseas. That was an immediate concern to the Respondent, who saw the very real possibility that, if the customers could not be persuaded to change their minds, the business would almost certainly fold, and of course employees would be made redundant as a result.
5. Paragraph 7 of the Tribunal's Decision records that there was a meeting on
   17 December 2003 between the Respondent and two shop stewards of Amicus, when a comprehensive report was given to the Union about the problems facing the Respondent Company, and various cost-cutting measures were mentioned. Mr Lawson apparently stated that if there was no additional work it could affect the number of employees. The employees were asked to take a pay-cut, but in response to a question from the Amicus Regional Officer, who was also present at the meeting, Mr Robinson, Mr Lawson said there would be no redundancies if they refused.
6. Paragraph 8 records that, worried by the intimation as to the moving overseas of the customers' production, and the position revealed by management accounts, the respondent instructed insolvency practitioners to give advice; and it appears their advice certainly, and perhaps not surprisingly, indicated that, without support from its existing sources of finance, if the customers did indeed withdraw their business, the Respondent Company would be insolvent.
7. Further consideration was given following the Christmas shut-down and further meetings with the two customers, and it became clearer by 20 January that again unless some alternative could be found, the Respondent Company would have to be put into administration. At that stage the Company had orders on its books which would take between eight and twelve weeks to fulfil. There was therefore another meeting with a representative of Amicus on
   23 January, which was attended on this occasion not only by representatives of the Respondent, but also by two representatives of the Insolvency Practitioners. The notes of that meeting, which are set out, in terms, by the Tribunal, and accepted as accurate by it, record the fullness of the information that was given to the Trade Union, and the reality of the problem which was thereby disclosed. The advice by the Insolvency Practitioners was that the Respondent was insolvent and could not continue to trade forward without entering some form of formal insolvency proceedings; the fact was disclosed that there had been a petition filed for an administration order, and that the objectives of the administrators would be for them to trade the business, with a view to achieving a sale of the business to a third party. In the light of a question from Mr McDermott, the representative of Amicus, to Mr Money, the licensed Insolvency Practitioner, as to whether jobs were secure, he indicated that there was no guarantee that the administrators would be able to make a disposal, and indeed that the odds were against achieving a sale. On the question as to whether there would be any redundancies, Mr Money replied that there would be no redundancies on that day, and he did not anticipate that there would be any in the immediate future, and that redundancies would be made only for economic reasons. There was a further meeting on that day between four representatives of the Insolvency Practitioners and the employees of the Respondent, and the information was largely repeated.
8. An administration order was made on 26 January, and it was still anticipated that there was six to eight weeks' worth of business on the books of the Respondent, and that continued trading would allow an orderly run-off of the business, and give an opportunity for investigating a sale of the business as a going concern. A letter was sent to every employee on
   6 February, giving formal details of the administration, and giving no assurances as to the
   long-term prospect for the Respondent, but indicating the intention to keep the business as a going concern for as long as possible.
9. The finding of the Tribunal in paragraph 14 of its judgment is as follows:

"Between 26 January and 20 February 2004 there were probably three meetings between Amicus and Insolvency Practitioner's representatives. Mr Money told the tribunal that the questions put to him were along the line of "when" rather than "if" employees were likely to be made redundant, and the tribunal is satisfied that during this period nothing was said to Amicus representatives which would reasonably lead them to believe that continued employment of their members was other than precarious and short-term in the absence of new work or a business sale – neither of which were indicated as either likely or even in prospect. Also during this period, employees who asked for time off in order to attend interviews for other jobs, had their requests granted."

There was then a meeting on 13 February with employees, when Mr Money told them that there were to be some redundancies and some lay-offs, and, in view of the uncertainty, if any employees came forward and requested redundancy it would be considered and there would be further discussions.

10. On 19 February, there was notification that the orders from the surviving customer were being withdrawn completely and production would therefore have to cease forthwith. It was therefore apparent that any further trading by the Respondent Company would be impossible and indeed, it would seem, unlawful; and the Respondent wrote to almost all employees on
    20 February, indicating that negotiations had not resulted in a purchaser being identified, nor in any resolution over the issue of the withdrawal of the key customers, and consequently their employment was terminated. The last three employees were similarly dismissed on
    27 February 2004.
11. There were concessions made by the Respondent, not all of which have been explicable to us, or indeed to Counsel now representing the Respondent, Mr Segal. Counsel for the Claimant, Mr Edwards, also did not appear at the Tribunal and has been able to throw no further light on them. The concessions, for our purposes, were two-fold. One was that no claim in respect of special circumstances was going to be made, ie special circumstances which would discharge the Respondent from any obligation to consult; and secondly, that the date upon which the relevant proposal to make redundancies was made was 19 February and not earlier. Consequently, the issue before the Tribunal was very much shortened. There was no denial in those circumstances that there had been a breach of s188 nor that s189 applied, and there was no doubt that there was no consultation after 19 February and before the termination letter on 20 February. The only question that thus arose for the Tribunal to decide was the quantum of the protected award. That arises under s189 of the TULRCA.
12. S 189 reads as follows:

"(1) Where an employer has failed to comply with a requirement of section… a complaint may be presented to an employment tribunal on that ground-

…

(c) in the case of failure relating to representatives of a trade union, by the trade union,

…

(2) If the tribunal finds the complaint well-founded it shall make a declaration to that effect and may also make a protective award.

(3) A protective award is an award in respect of one or more descriptions of employees –

(a) who have been dismissed as redundant, or whom it is proposed to dismiss as redundant, and

(b) in respect of whose dismissal or proposed dismissal the employer has failed to comply with a requirement of section 188,

ordering the employer to pay remuneration for the protected period.

(4) The protected period—

(a) begins with the date on which the first of the dismissals to which the complaint relates takes effect, or the date of the award, whichever is the earlier, and

(b) is 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 section 188;

but shall not exceed 90 days…"

It was common ground that there was an availability of an award of up to 90 days, notwithstanding the fact that in relation to s188(1A), the period of consultation required was only 30 days.

13. The leading authority, now, on the construction and application of s189 of TULRCA is the decision of the Court of Appeal in Susie Radin Ltd v GMB and others [2004] IRLR 400. This decision of the Court of Appeal put beyond doubt, for the first time, the question that the protective award in a redundancy situation for breach of s188 is punitive and not compensatory. This, of course, is illustrated not least by that to which we have just referred, namely that a
    90 award can be made in respect of a failure over 30 days; and so that there can be no suggestion that the issues are: What difference would it have made if there had been consultation? What steps could have been taken? Would it have been feasible for dismissal to be avoided? And if the answer were, 'Well if a few more days here or there had been gained nothing would have been different', that would not affect the punitive nature of the award; and so it was made clear in that case, for the first time, that what is called the futility of consultation is not relevant to the making of a protective award. That was shortly summarised in the judgment of Longmore LJ at paragraph 49, where he says:

"It may at first sight seem surprising to say that the fact that consultation would have been futile is something which an employment tribunal should not take into account when assessing the length of time for which a protective award should be made. But the argument that took place has convinced me (1) that there is nothing in the statutory wording which requires such futility to be taken into account and (2) that in a collective claim brought by a union it would be impossible to take such futility into account in a fair and practical way."

14. We have referred to the fact that the Respondent in this case did not rely on the defence of special circumstances, which is given by s188(7) of TULRCA. It reads as follows:

"(7) If in any case there are special circumstances which render it not reasonably practicable for the employer to comply with a requirement of subsection (1A), (2) or (4), the employer shall take all such steps towards compliance with that requirement as are reasonably practicable in those circumstances…."

It may well be that where it was established that consultation was futile, in the sense of a case in which there was simply no time for consultation to be operated at all, then such defence may be available. It is not put forward in this case, and therefore the Tribunal was not in a position to assess whether, in this case, where the date of the proposal was 19 February on the basis that the Company was trading insolvent and the dismissals were 20 February, special circumstances could have been argued. In the absence of such defence being put forward, the Tribunal could made no findings in that regard. We mention it only because it may well be that that is the area in which questions of futility are best addressed.

15. Given, however, that, leaving aside futility, leaving aside any issue as to what difference a few days or a more lengthy period might have made, what might or could have happened had there been more consultation, and concentrating on the issue which alone is now clear as a result of Radin as being the purpose lying behind the protective period, namely that of being punitive, the Court of Appeal laid down very helpful guidelines as to the way in which this jurisdiction should be operated; and they are set out in the judgment of Peter Gibson LJ. The facts of that case do not need to be addressed in detail. Suffice it to say that on the findings of the tribunal there was no, or no material, consultation carried out or information given at all, notwithstanding advice from the respondent's solicitors to the effect there could or should be such consultation or information; and Peter Gibson LJ, at paragraph 42, referred to a "wholesale disregard of the obligations imposed on the employer by s 188". The guidance Peter Gibson LJ gave for the future is succinctly expressed in the following two paragraphs of his judgment:

"45. I suggest that Employment Tribunals, in deciding in the exercise of their discretion whether to make a protective award and for what period, should have the following matters in mind:

(1) The purpose of the award is to provide a sanction for breach by the employer of the obligations in s. 188: it is not to compensate the employees for loss which they have suffered in consequence of the breach.

(2) The Employment Tribunal have a wide discretion to do what is just and equitable in all the circumstances, but the focus should be on the seriousness of the employer's default.

(3) The default may vary in seriousness from the technical to a complete failure to provide any of the required information and to consult.

(4) The deliberateness of the failure may be relevant, as may the availability to the employer of legal advice about his obligations under s. 188.

(5) How the Employment Tribunal assesses the length of the protected period is a matter for the Employment Tribunal, but a proper approach in a case where there has been no consultation is to start with the maximum period and reduce it only if there are mitigating circumstances justifying a reduction to an extent which the Employment Tribunal consider appropriate.

Conclusion

46. In my judgment, in guiding themselves as they did in para. 40 of their decision the Employment Tribunal, for the reasons I have given, did not misdirect themselves in law. On the facts of this case I readily acknowledge that another Employment Tribunal might have taken a less serious view of the default given the relatively generous notice period. However, I find it impossible to say that the decision to make a protective award of the maximum period was perverse, given the findings that no consultation at all took place, although the Company had been advised by its solicitor of the need for consultation, that on one occasion when consultation might have taken place, the Company was merely going through the motions of what it considered to be consultation – a far cry from meaningful consultation with a view to reaching an agreement – and that none of the information required to be supplied in writing was supplied."

16. That gave what Peter Gibson LJ described as a "wide discretion" to the employment tribunal to do what was just and equitable, and also the obligation to consider the seriousness of the breach and the mitigating circumstances put before it. That is what this Employment Tribunal, in the submission of the Respondent, then did; and it referred to that guidance from Peter Gibson LJ, and to the rejection of futility as a ground for making either no
    protective award or only a nominal award. It also referred to the fact, in paragraph 28, that
    Peter Gibson LJ had acknowledged that another employment tribunal might have taken a less serious view of the default on the facts of the case before it.
17. The conclusion of the Tribunal is set out in the following paragraphs:

"30. In this case it was conceded there was no consultation at all after the proposal to dismiss for redundancy was formulated on 19 February. Mr Money told the tribunal that he was not even aware of the section 188 obligations - an admission which occasioned some surprise to the tribunal coming, as it did, from a [licensed] Insolvency Practitioner. No special circumstances are relied upon as rendering it not reasonably practicable for [the Respondent Company] to have complied with its obligations. The employees were not given any notice of termination of employment. Futility of consultation is apparently not something the tribunal should take into account. That only leaves as a possible mitigating factor that [the Respondent], initially through the Director, and subsequently through the Administrators and their representatives, had taken steps to keep Amicus and the employees informed in general terms of its situation, and the possibility of some redundancies was something in the contemplation of Amicus who had had the opportunity to put forward suggestions but – with the exception of a reduction in pay – appear not to have done so.

31. Bearing these matters in mind, the tribunal determines that a protected period of 70 days beginning with 20 February 2004 if just and equitable in all the circumstances having regard to the seriousness of [the Respondent's] admitted default in complying with requirements of section 188 of the 1992 Act."

18. Mr Edwards, who, as we have said, has appeared for the Appellant, recognises that it is not open to this Appeal Tribunal, save in very exceptional circumstances, to quarrel with a finding by a tribunal on grounds of perversity, on the basis that it would or should have reached a different result. Given the wide discretion which the tribunal is given, and given its correct recital of the legal principles which underlay that Decision, it would be an impossible task in this case for Mr Edwards to pursue. Similarly, Mr Segal, on behalf of the Respondent, explained its decision not to pursue a cross-appeal against what he described as the generosity of the award of 70 days on a similar basis and for similar reasons. Mr Edwards, however, did not challenge the finding on that basis. He submitted that the Tribunal had erred in law; and, effectively, it erred in law on two bases:

(i) that once it had concluded that there had been what he called a total failure of compliance with s188, there was no option for the Tribunal but to make the maximum award; and

(ii) that no attention could be paid to what had occurred prior to the date of the proposal by way of mitigating circumstances; and thus that in this case, where it is accepted that nothing was done between 19 and 20 February:

(a) the maximum award must follow; and

(b) what had been done by the Respondent before 19 February was irrelevant.

19. He referred to the matters which are referred to by the Tribunal itself as mitigating factors, and, quite apart from his challenge to what might be read as a criticism by the Tribunal of Amicus, which he submitted was an unfair one, the whole of that passage of alleged mitigating factors was, in his submission, irrelevant. He made that submission by reference not only to his interpretation of the words of Peter Gibson LJ, to which we have referred, but to his submission as to the construction of the statute. He pointed out that the consultation that was required had to be (a) in good time and, in any event, within the 30 days (see subsection (1)(a)); and (b) consultation with a view to reaching agreement under subsection (2). He submitted that the information that was to be supplied, and had to be supplied in writing (although he accepted that provision of the information orally would only amount to a technical breach), was to be for the purposes of that consultation; and thus that in those circumstances, there having been no consultation within the relevant time, the information not having been given for the purposes of that consultation, and it being accepted that nothing was done between 19 and 20 of February, there was no option for the Tribunal but to make a maximum award.
20. We disagree, and we are entirely persuaded by the submission of Mr Segal that it was within the wide discretion of the Tribunal to take into account the findings of fact that it made as to what had occurred prior to 19 February. We do that for a number of reasons.
    Peter Gibson LJ directs the Tribunal to address the seriousness of the breach. It appears to us clear that where, as here, there was no consultation and no information provided, after the date of the proposal, it must be relevant, in order to sanction or punish a company which is in breach, to look to see what the nature of that breach is, what the consequence of that breach is, and what the state of mind lying behind the breach is. Peter Gibson LJ explained, by way of example, in the passage to which we have referred at subparagraph 45(4), that the deliberateness of the failure may be relevant. A company which has deliberately set out to be secretive would appear to fall into a different category from a company which has completely failed to disclose information through negligence or misguidedness, or, as here, a company which has not completely failed to disclose information but has simply failed to disclose it at the right time and in the right context. An assessment of the seriousness of the breach must include those kind of questions. It is clearly right that there was no finding by the Tribunal, nor would it have been necessary to do so, as to precisely what information was here supplied. It would appear to us that, albeit before 19 February and not after it, the reasons for the proposals within s188(4)(a) were disclosed; namely, if, in the unhoped for event, these customers were to cut off their orders completely and there were no sale of the business, then there would have to be a redundancy.
21. Similarly the numbers and descriptions of employees whom it was proposed to dismiss as redundant would be clear under subsection (4)(b), because it would be the whole of the employees employed by the business, as again was made clear against a background that such event was hoped not to occur. As far as subsection (c) is concerned, that would be particularly relevant where it was only proposed to dismiss some, rather than all, of the employees; but where all were to be dismissed, subsection (c) would not arise, nor would subsection (d) – the proposed method of selection. In general terms then, sufficient information had been given at the various meetings that the Tribunal had found as a fact had occurred, but not necessarily, because the Tribunal made no finding as to this, for the purpose of consultation and certainly not at the right time, namely after the proposals had finally crystallised.
22. Similarly, as to consultation, the Tribunal made no specific finding as to whether there was sufficient consultation that it could be categorised as being "with a view to reaching agreement"; but that it related to ways of avoiding the dismissals, namely, hopefully, trading out of the problem or mitigating the consequences of the dismissals, including the opportunity for employees to have interviews for other jobs during the relevant period, would appear to arise from the facts found by the Tribunal. The Tribunal was not in the business of making findings as to whether there had been breaches of the Act, because it was clear that there were admitted breaches of the Act , and that there was admittedly no information nor consultation during the relevant period. But what the Tribunal found was that there were mitigating circumstances, by virtue of the existence of the earlier meetings and disclosures, to which we have referred, which put this employer into a different category from the employer who had either deliberately, or recklessly, or even negligently, taken no steps whatever to inform the employees or the unions of the problems that might and/or were imminently going to arise.
23. In those circumstances there were plainly mitigating factors which this Tribunal was entitled to take into account, going to the issue of seriousness, unless there is some bar upon the Tribunal considering those factors at all because they ante-dated the date on which the proposal crystallised. We were persuaded by Mr Segal's submissions that it cannot be right, and does not arise out of the statute in any way, that there is some bar upon considering those matters. Mr Segal gave the example of a respondent planning not any kind of insolvency problem, but simply a reorganisation, the precise date of which would remain uncertain. Such an imagined employer would have the fullest negotiations, discussions, disclosure of information and consultation with a view to agreement with unions, indicating, possibly agreeing, numbers to be made redundant and methods of applying those redundancies, but all at a time before the date which was eventually arrived at as the date of the proposal. Then, after that date, the date found to be the date when the proposal was crystallised, no consultation or information, because in fact, in the imagined situation, it had all already been done. In those circumstances there would be a technical breach of the Act, Mr Segal submitted, but one in respect of which there would be the strongest possible mitigation, such as to mean that it would be likely that there would be no protective award ordered. If, on the other hand, there were a bar on looking at anything that had occurred prior to the date when the proposal crystallised, then, even in such a case, an employer would be treated as someone who had totally failed to comply with s188, and if Mr Edwards be right, there could be no other result than the maximum award.
24. We are satisfied that there is nothing in the statute which bars consideration of such circumstances, either on the basis of the nature of the circumstances, or on the basis of the timing of them. Further, we conclude that that is exactly what Peter Gibson LJ had in mind that the Tribunal should be entitled to take into account, in the passage to which we have referred:

24.1 He refers to the wide discretion to do what is just and equitable in the circumstances (see subpara 45(2)).

24.2 The focus should be on the seriousness of the employer's default (subpara 45(2)) and the default may vary in seriousness from the technical to a complete failure to provide any of the required information and to consult (subpara 45(3)). The latter part of that subparagraph is, of course, relied upon by Mr Segal to submit that there can be a situation in which there is a complete failure to provide anything at any time, but that, where, as here, at least some of the information is supplied, albeit not in the form or at the time required, the conduct of such a respondent would be less serious. Mr Edwards submits that that should only be read as a complete failure to provide any of the required information and to consult in accordance with s188, so that in his submission, Peter Gibson LJ is not allowing for a variation of the range where there is, what he calls, a complete failure. We do not read that subparagraph in that way, but in fact there is support, to which we will refer, in the other passages of Peter Gibson LJ judgment, which put beyond doubt that Mr Segal's reading of that subparagraph is correct.

24.3 We have already referred to subparagraph 45(4) of the judgment, whereby the deliberateness of the failure may be relevant, as may be the availability to the employer of legal advice. This passage is completely inconsistent with Mr Edwards' submission, because on his submission deliberateness, if there has been what he calls a total failure after the relevant date, must be irrelevant. His submission is that it would only go to the precise number of the breaches; the fact is it must also apply where there has been a total failure, in his terms.

24.4 In subparagraph 45(5), there is a very significant passage in which Peter Gibson LJ tells the employment tribunal how to assess the length of protected period; and, in terms, he says:

"…a proper approach in a case where there has been no consultation is to start with the maximum period and reduce it only if there are mitigating circumstances justifying a reduction to an extent which the Employment Tribunal consider appropriate."

That last passage is wholly inconsistent with Mr Edwards' submissions, which were that if there is no consultation there can be no basis for any reduction.

24.5 In paragraph 46, as Mr Segal showed us, the approach of Peter Gibson LJ and the Court of Appeal to the facts before them was, again, inconsistent with the submissions of Mr Edwards. If Mr Edwards were right, it would have concluded that as on the facts of that case there was what he would call a total failure by that respondent, there was no alternative for the Tribunal but to have awarded the maximum period. The Court of Appeal did not reach that conclusion or approach the matter in that way. It pointed out that the Tribunal had decided the maximum period and concluded that that could not be said to be perverse on the particular findings it made. There might be a different result, where there were not the particularly extreme circumstances of that case, of not only no consultation at all, but no consultation in the face of advice from a solicitor, the provision of no information whatever, and the one opportunity when there could have been consultation spurned.

25. On the facts of this case, to which we have referred, it is clear that there could be a lesser penalty than 90 days in such a circumstance. That is what this Tribunal concluded. It reduced the maximum of 90 days down to 70 days to take into account the facts it found, and we conclude that it acted well within its discretion to do so. In those circumstances this appeal is dismissed.