United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Applicant	MR G DARNTON (The Applicant in Person)
For the Respondent	MR OLIVER SEGAL (of Counsel) Instructed by: Messrs Martineau Solicitors No. 1 Colmore Square Birmingham B4 6AA


 


SUMMARY

CENTRAL ARBITRATION COMMITTEE

Penalty of £10,000 imposed for breach of reg. 19 (4) of the Information and Consultation of Employees Regulations 2004.


 


THE HONOURABLE MR JUSTICE UNDERHILL (PRESIDENT)

INTRODUCTION

1. What is before us is an application under regs. 19 (6) and 22 (6) of the Information and Consultation of Employees Regulations 2004 for the issue of a penalty notice against the Respondent (to which we will refer as "the University") for breach of its obligations under the Regulations. A recent decision of this Tribunal involving the same parties (UKEAT/0058/09) sets out the legislative background, and we need not repeat that exercise here.
2. The facts which give rise to the present application can be summarised as follows:

(1) The Applicant is employed in the Business School at the University. On 8^th November 2007 he made a request under reg. 7 of the Regulations which triggered the procedure under Part III for the negotiation of an Information and Consultation ("ICE") Agreement. The University duly operated that procedure, which involved the election of "negotiating representatives" and entering into negotiations with those representatives with a view to concluding an ICE Agreement.

(2) By virtue of reg. 14 (3) the primary time limit for the conclusion of an ICE Agreement expired nine months – expressed, for reasons explored in the earlier judgment referred to, as two consecutive periods of three and six months – from the date of the employee request - that is, on 8^th August 2008.

(3) Reg. 14 (5) provides for the possibility of an extension of that period, in the following terms:

"If, before the end of the six month period referred to in para. (3), the employer and a majority of the negotiating representatives agree that that period should be extended, it may be extended by such period as the parties agree and thereafter may be further extended by such period or periods as the parties agree."

(4) In circumstances which we will have to consider more fully in due course, the University proceeded on the basis that the date of the employee request was not 8^th but 29^th November 2007; and accordingly that it had until 29^th August 2008 to conclude an ICE Agreement or to agree an extension in accordance with the terms of reg. 14 (5). As that deadline approached it sought agreement to an extension, and a majority of the negotiating representatives had agreed by 29^th August. Accordingly, negotiations continued, with the benefit of further extensions. A "final draft" of an ICE Agreement was circulated on 25^th September 2008 following a meeting of the negotiating group on 15^th September.

(5) By 25^th November 2008 all the negotiating representatives save the Applicant had agreed to the terms of the proposed ICE Agreement. If the negotiating representatives are not unanimous, any agreement will only be treated as "approved" if it has been approved in writing by the majority of the employees to whom it applies or by 50% of those voting in a ballot held for the purpose (reg. 16). In the event, however, it was unnecessary to go down that route because on 12^th February 2009 the Applicant resigned as a negotiating representative, with the result that the necessary unanimity was achieved. The ICE Agreement apparently took effect from that date. (We say "apparently" because of the matters considered below.) The first consultation meeting in accordance with the agreed arrangements took place on 19^th March 2009.

(6) So far so good. However, on 5^th November 2008, in related proceedings, the Central Arbitration Committee ("the CAC") held that the date of the Applicant's original employee request was indeed 8^th November 2007, not 29^th (see sub-para. (4) above). That undermined the timetable on which the University had been proceeding. Specifically, the extension agreement reached on or shortly before 29^th August 2008 now fell outside the nine-month period, with the result that the agreement concluded in February 2009 was not reached in compliance with the Regulations and was of no effect. On the face of it, it followed that the default provisions of reg. 18 came into effect and the "standard information and consultation provisions" applied. That meant that the University was obliged to arrange for the election of information and consultation representatives under reg. 19. That election had to take place "before the standard information and consultation provisions start to apply" (see reg. 19 (1)), for which the long-stop date was six months from the expiry of the original nine-month period (see reg. 18 (1) (b) (ii)) – i.e., on the facts of the present case, by 8^th February 2009.

(7) The University did not take steps to arrange for the election of information and consultation representatives under reg. 19. Notwithstanding the CAC ruling, it proceeded with its attempts – eventually successful, as we have already recounted - to conclude and implement an ICE Agreement with the negotiating representatives elected in 2008.

(8) Reg. 19 (4) provides that if an employer has not arranged for the election of information and consultation representatives in accordance with reg. 19 (1) an employee may complain to the CAC. The Applicant did so. The University argued in response that, although it was only on or shortly before 29^th August 2008 that it secured express agreement from the negotiating representatives to an extension, there had been an implicit understanding prior to the true deadline of 8^th August – and in particular following a meeting on 23^rd July - that negotiations would continue beyond 29^th August (and therefore also necessarily beyond 8^th August); and that that constituted a sufficient agreement for the purpose of reg. 14 (5).

(9) On 20^th May 2009 the CAC upheld the Applicant's complaint. It accepted that on 23^rd July 2008 the negotiating representatives had agreed to a timetable for further negotiations which took the parties beyond 8^th August; but it held that that did not constitute an extension agreement for the purpose of reg. 14 (5), essentially because it believed that any agreement for an extension must be clearly identified as such and be for a defined period of time. It accordingly made an order under reg. 19 (5) requiring the University to arrange and hold a ballot.

(10) To anticipate, the University has accepted the CAC's ruling and embarked, albeit belatedly, on the procedure for the election of information and consultation representatives. That procedure has however been held up because of a complaint lodged by the Applicant as to the arrangements for the ballot. It was only on December 7^th that the CAC rejected the Applicant's complaint as "without merit" (see decision IC/29 (2009), so that elections may now proceed. In the meantime the University has continued to operate the arrangements introduced under the invalid Agreement on a "shadow" basis, with the intention of folding them into the default arrangements once the representatives have been elected.

3. By reg. 19 (6):

"Where the CAC finds a complaint under paragraph (4) well-founded, the employee or the employee's representative may make an application to the Appeal Tribunal under regulation 22(6) and paragraphs (7) and (8) of that regulation shall apply to any such application."

Reg. 22, as there referred to, provides a machinery whereby breaches by an employer of an ICE Agreement or of the standard information and consultation arrangements can be made the subject of a complaint to the CAC and attract a financial penalty. The effect of reg. 19 (6) is thus to apply those procedures to the situation where the employer fails to take the necessary steps to implement the standard information and consultation procedures in the first place. Paras. (6)-(8) read as follows:

"(6)     If the CAC makes a declaration under paragraph (4) the relevant applicant may, within the period of three months beginning with the date on which the declaration is made, make an application to the Appeal Tribunal for a penalty notice to be issued.

(7)     Where such an application is made, the Appeal Tribunal shall issue a written penalty notice to the employer requiring him to pay a penalty to the Secretary of State in respect of the failure unless satisfied, on hearing representations from the employer, that the failure resulted from a reason beyond the employer's control or that he has some other reasonable excuse for his failure.

(8)     Regulation 23 shall apply in respect of a penalty notice issued under this regulation."

Reg. 23 is headed "Penalties" and reads (so far as material) as follows:

"(1)     A penalty notice issued under regulation 22 shall specify- 

(a)     the amount of the penalty which is payable;

(b)     the date before which the penalty must be paid; and

(c)     the failure and period to which the penalty relates.

(2)     No penalty set by the Appeal Tribunal under this regulation may exceed £75,000.

(3)     Matters to be taken into account by the Appeal Tribunal when setting the amount of the penalty shall include—

(a)     the gravity of the failure;

(b)     the period of time over which the failure occurred;

(c)     the reason for the failure;

(d)     the number of employees affected by the failure; and

(e)     the number of employees employed by the undertaking or, where a negotiated agreement covers employees in more than one undertaking, the number of employees employed by both or all of the undertakings.

(4)-(6) … ."

4. The Applicant has duly issued an application for a penalty notice under those provisions based on the University's failure, as found by the CAC, to arrange for the election of information and consultation representatives prior to 8^th February 2009. He appeared before us in person. The University was represented by Mr Oliver Segal of counsel.
5. There were two issues before us:

(1) The University contended, but the Applicant disputed, that it had a reasonable excuse for the failure, and accordingly that, pursuant to reg, 22 (7) no penalty notice should be issued.

(2) If the University had no such excuse, what should the amount of the penalty be?

We will consider those issues in turn.

(1) REASONABLE EXCUSE

6. The excuse advanced in Mr Segal's skeleton argument had three elements:

(1) He submitted that the University "was relying on a genuine and reasonable view, having taken expert legal advice" that the date of the employee request was 29^th November 2007.

(2) He relied on the "implicit agreement" deriving from the meeting of 23^rd July 2008 (see para. 2 (8)/(9) above).

(3) He relied on the fact that what was believed to be a compliant ICE Agreement was in due course agreed.

7. In our view neither singly nor taken together do these factors constitute a reasonable excuse for the University's failure to arrange for the election of information and consultation representatives prior to 8^th February 2009. We take them in turn.
8. As to (1), the University could only get even to first base on this argument if it produced evidence that it had received legal advice that the date of the employee request was 29^th November 2007 and that at all material times it was acting on the basis of that advice. No such evidence has been supplied. Indeed such evidence as exists points the other way. An extract from the minutes of the relevant committee dated 3^rd December 2007 states:

"The start date of the ICE Consultation will be taken as 8 November after consultation with BU's lawyers."

The CAC in its decision of 20^th May 2009 accepted that by August 2008 the University genuinely believed that the nine-month period under reg. 14 expired on 29^th August (and thus presumably that the employee request as dated 29^th November 2007) – see para. 61 of the decision; but it made no finding as to how that mistaken belief arose. Whether or not mistaken advice from an expert could in principle constitute a reasonable excuse for the purpose of reg. 22 (7), an otherwise unexplained error as to a material matter plainly cannot. There is in any event a further complete answer to this point. At the time of the failure complained of, i.e. February 2009, the CAC had, some three months previously, authoritatively determined the date of the employee request: any mistaken belief on the part of the University could no longer have been operative.

9. As to (2), the argument must be that, following the CAC's decision of 8^th November 2008, the University decided not to proceed with an election under reg. 19 because it – excusably – believed that the meeting of 23^rd July gave rise to a valid agreement for the purpose of reg. 14 (5). Again, however, the evidential foundation for such an argument does not exist. We know that the University ran the "implicit agreement" argument before the CAC; but we do not know what advice it received as to its validity or what it thought about its prospects. The facts are equally consistent with it simply failing to appreciate following 5^th November 2008 the implications of the CAC's decision, or hoping or expecting that the Applicant would be content not to challenge the expected "ICE Agreement", and accordingly taking no steps under reg. 19; and then, when a challenge was in fact mounted, having to run the implicit agreement argument as the only possible defence, whatever its merits. But even if the University did between November 2008 and February 2009 genuinely believe that the meeting of 23^rd July constituted an agreement for an extension satisfying reg. 14 (5) (and we should record that Mr Segal told us that his instructions were that that was the case), so that the reg. 18 did not apply, we do not believe that that would constitute a reasonable excuse for its failure to proceed under reg. 19. Its view was in fact, as the CAC found and as Mr Segal accepted, wrong; and we again do not accept that simply taking a wrong view about a material matter is, without more, sufficient to constitute a reasonable excuse. Mr Segal drew to our attention some expressions in the CAC's decision that suggested that it had found the point difficult and submitted that that showed that the error was reasonable. We are not sure that those expressions bear the weight that Mr Segal put on them; but in any event we believe that the implicit agreement argument was clearly wrong, for the reasons given by the CAC held. (We would add that Mr Segal's argument on this point starts from an unpromising beginning: it is evident that the implicit agreement point was an afterthought and that the University did not believe in August 2008 that what had happened on 23^rd July satisfied reg. 14 (5), since it took considerable trouble to obtain explicit agreement - albeit too late.)
10. As to (3), this may be a mitigating circumstance when it comes to consider penalty, but we do not see how it can be an excuse, reasonable or otherwise, for the failure found by the CAC. In argument before us Mr Segal reluctantly accepted this.

(2) QUANTUM OF PENALTY

11. We were referred by the Applicant and Mr Segal to various authorities which it was said would assist us in setting the level of the penalty in this case. The only case which concerned these particular regulations was Amicus v Macmillan Publishers Ltd. (UKEAT/0185/07), in which this Tribunal, Elias P. presiding, fixed a penalty of £55,000. Mr Segal referred us to Miles v Linkage Community Trust Ltd. (UKEAT/0618/07), which was an appeal to this Tribunal (chaired by HHJ McMullen QC) against the decision of an employment tribunal to make a nil award for a breach of the Working Time Regulations 1998. The Applicant referred us to the decision of the Court of Appeal in Susie Radin Ltd. v GMB [2004] ICR 893, which concerned the principles to be applied in deciding whether to make a protective award under s. 189 of the Trade Union and Labour Relations (Consolidation) Act 1992. We did not find the latter two cases helpful because they were concerned with different legislation. The Amicus case was a useful illustration, but the facts were very different and the decision does not contain any relevant discussion of principle.
12. We are not in fact convinced that this is a jurisdiction in which assistance from other decided cases is likely to be useful. This Tribunal is obliged to have regard to all relevant considerations, which may cover a wide range and are not necessarily limited to those specified under reg. 23 (3). The assessment of the right level of penalty is in the nature of a broad evaluation, and a nice analysis of the weight to be given to individual components is unrealistic. The factors which principally weigh with us in the present case are as follows.
13. First, we are not satisfied that the breach complained of was deliberate or that it resulted from a disregard of the University's obligations under the Regulations. On analysis, what went wrong was twofold:

- First, it made a mistake about the date of the employee request, and, in consequence, about the date that the nine-month negotiation period expired. The Applicant drew our attention to the lack of any clear evidence as to how exactly the mistake arose, particularly in the light of the minute referred to at para. 8 above which appears to show that in December 2007 at least the University appreciated the correct date. We agree that it would have been better if this had been properly explained – and indeed the absence of any explanation has counted against the University in regard to the reasonable excuse issue. But, as we have noted above, the CAC clearly believed that by the summer of 2008 the University genuinely believed that the relevant date was 29^th August, and it was common ground that though it might in some cases be necessary for this Tribunal to hear further evidence we should in the present case proceed on the basis of the CAC's findings. We are content to do so: puzzling though the apparent change in the University's understanding of the position is, it is inherently far more likely that somebody made a mistake than that the University deliberately adopted a position which it knew to be wrong. Although in his skeleton argument the Applicant had explicitly alleged bad faith on the part of the University, he wisely accepted in the course of his oral submissions that that was an allegation which he was not in a position to make good.

- Secondly, it proceeded after 5^th November 2008 on the basis that, notwithstanding what the CAC held to be its mistake about the date, it had – however fortuitously – secured an extension to the ICE Agreement negotiations and so did not need to operate the default procedures. As observed at para. 9 above, it is not clear exactly what the University's thinking on this point was. But even on the least generous interpretation – that is, that it always appreciated that the implicit agreement argument was weak – the position was not that it had set out to ignore the Regulations: rather, as a result of its initial mistake it had got itself into a very awkward situation but was reluctant to abort the results of a year's negotiations which were about to result in an ICE Agreement and was prepared to take the chance of running even a weak argument that stood a chance of saving that Agreement. We do not regard that as a discreditable attitude: if the CAC had, after all, accepted the implicit agreement argument a valid ICE Agreement acceptable both to it and to the duly elected representatives of the workforce would have been up and running in February 2009.

The combination of those two factors seems to us to have been the reason for the failure complained of – i.e. head (c) under reg. 23 (3). The fact that neither of them involves or evinces a deliberate disregard for the Regulations, or even an attitude of carelessness or insouciance towards the obligations imposed by them, is an important mitigating factor as regards penalty.

14. Secondly – and to some extent related to the previous point – although the formal effect of the University's failure was that there was a substantial delay in the coming into operation of the default procedures, and that the failure was thus "grave" and of substantial duration (see heads (a) and (b) under reg. 23 (3)), there have in fact been in place since February 2009 information and consultation procedures which were agreed in accordance with the Regulations in every respect save for the invalidity of the extension agreement. Mr Segal showed us documents generated by those procedures which appeared to show that they had been operating effectively and have given, and will continue to give, employees a "shadow" forum for information and consultation until the default procedures take over. The Applicant very fairly accepted that the shadow procedures had been operating and indeed described them as "extremely helpful". He complained however that the consultation on some points had been inadequate and that a particular issue about potential redundancies had not been addressed under the procedures. Mr Segal responded that the decisions in question pre-dated the coming into force of the shadow Agreement. He also contended that, even if they had not, they would not have fallen within the scope of the procedures because of reg. 20 (5), which subordinates the consultation duties under the Regulations to any arising under s. 189 of the 1992 Act: he relied on the recent decision of the CAC in Gale v Bournemouth University (IC/28/2009). That seems to us on the face of it a good answer; but in any event the essential point is that the shadow procedures are in place and are operating, and there is no reason to believe that the particular issues to which the Applicant drew attention would not have occurred whatever the formal basis of the procedures. In our view this makes a fundamental difference to what would otherwise be the gravity of the University's failure.
15. Taking those two features together, it seems to us that any penalty should be towards the bottom of the available scale, notwithstanding that (see heads (d) and (e)) the failure affected the entirety of the University's workforce. (The parties were not in a position to agree on the number of employees affected, but they accepted that it was over a thousand and that the precise number did not matter.) Nor, however, should the penalty be negligible. The fact remains that the University made a serious and unexplained mistake about the relevant deadline and had then taken a wrong position about whether it had agreed an extension prior to 8^th August. There was some argument before us as to whether those errors should be described as "culpable". This was a largely semantic argument. Whatever label is attached, what seems to us to matter is that these were unexcused errors by the University which led to it being in breach of its legal obligations. It seems to us clear that the scheme of the Regulations requires such errors – in the absence of reasonable excuse – to be marked by a real penalty. Mr Segal sought to suggest that the Regulations were complex and difficult to construe and that an employer should not be penalised for making the wrong judgment on a moot point: he referred to some observations of the employment tribunal in Miles, which he said were effectively endorsed by this Tribunal (see paras. 12 and 33-34). There may be cases where that is a good point, but this is not one of them. As already discussed, it is not established how the original error occurred; but there is nothing to suggest that it was the result of some particular difficulty in the drafting of the Regulations. As regards the reliance on the implicit agreement argument, we have already expressed the view that that argument was plainly wrong.
16. Taking all those factors together, in our judgment the right level of penalty in this case is £10,000.