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It’s good to talk. When does the duty to consult about redundancies arise?

The recent case of E Ivor Hughes Education Foundation v Mrs JE Morris and others, demonstrates how deciding when to start such consultation can be a tricky decision for employers.

The statutory time limits for redundancy consultation are well known.  To recap; where an employer is proposing to dismiss at least 20 employees within 90 days or less the employer must consult the appropriate representatives at least 30 days before the first notice of dismissal takes effect.  This rises to 45 days where the employer is proposing to dismiss 100 or more employees.

In this particular case the employer was an independent girl’s school which was experiencing declining pupil numbers.  The Governors reached a provisional decision in February 2014 that they would have to close at the academic year end if pupil numbers did not increase.  Unfortunately numbers did not increase and the school closed early in April 2014 with no collective consultation having taken place at all. 
To add to the school’s financial difficulties, staff successfully sued the school for a failure to consult over the school closure and each received an award of 90 days actual pay by way of a maximum protective award.  This was in addition to their normal statutory and contractual entitlements. 

Unsurprisingly the employer appealed on the basis that the decision in February was strictly provisional and therefore no duty to consult was triggered.  They also sought to rely upon the special circumstances defence.  This provides a limited exception to the obligation to consult in circumstances where it was not reasonably practicable for the employer to comply with all these requirements but the employer took such steps as were reasonably practicable to comply. 

The employer’s appeal was unsuccessful however there are a number of key points arising from this case:

  • The duty to consult arises when the employer has reached a “Fixed, clear, albeit provisional intention”.  Each situation turns on its facts but the duty may in practice arise earlier than the employer would prefer.
  • Concerns about confidentiality and the impact on the business of potential “leaks” arising from staff consultation, in this case the fear of “parent flight”, do not normally amount to “special circumstances”.  In contrast an extreme, unforeseen financial crisis may make it necessary to close a business at short notice therefore reducing the consultation period.
  • An employer can only rely on the “special circumstances” defence if it considers this at the relevant time.  The fact that an employer subsequently identifies in hindsight what it might have thought about the practicalities of consultation, had it thought about consultation at the relevant time, is not a special circumstance.
  • The fact that an employee has not actually suffered loss as a result of the failure to consult is not a mitigating factor for justifying a reduction in the size of the protective award.   A similar approach would also apply to consideration of an award for non-consultation in the context of a business transfer. The key factor is the seriousness of the employer’s breach and failure to comply with their consultation obligations.

Finally, as always, ignorance of the law is no defence.  An employer will be criticised for “recklessly failing to consult relevant legal experts of the employment implications of the possible closure of the school”.  You have been warned…

If you would like to find out more call Catherine Wilson on 01274  377659