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22/02/2010

Shanahan Engineering Ltd v. Unite The Union

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Employment Appeal Tribunal

Although special circumstances relieved an engineering construction contractor of its duty under the Trade Union and Labour Relations (Consolidation) Act 1992 s.188(1A) to consult, at least 30 days in advance, the appropriate trade union representatives when it proposed to make more than 20 employees redundant, those circumstances did not relieve the contractor of the obligation to consult under s.188(2) and s.188(4).

The appellant employer (S) appealed against a decision of the employment tribunal that it had breached its duty under the Trade Union and Labour Relations (Consolidation) Act 1992 s.188 by failing to consult with the respondent trade union (U) when proposing to make more than 20 employees redundant. S also appealed against an order requiring it to pay remuneration by way of a protective award for a 90-day period to those employees it had dismissed as redundant.

S, an engineering construction contractor, had won a contract for work on a power station which was under construction by another company (X). S employed 145 individuals to work at the site, but X later wrote to S stating that in light of a revised schedule of works, it expected an immediate reduction of labour. S immediately selected 50 employees to make redundant in accordance with a method previously agreed with U. In reaching its decision, the tribunal stated that it was for the employer to establish the existence of any special circumstances under s.188(7) which were sufficient to excuse its obligations to consult. The tribunal further stated that although such special circumstances might relieve the employer of the obligation to consult in respect of some of the requirements, it could still be left under the duty to consult in relation to others. The tribunal concluded that the sudden requirement to reduce labour was sufficient to relieve S of its obligation under s.188(1A). However, it went on to conclude that that special circumstance did not relieve S of its obligation to consult as required by s.188(2) and s.188(4). The tribunal made a protective award under s.189 in respect of the employees concerned for the protected period of 90 days.

S argued that (1) the tribunal ought to have held that there were special circumstances by reason of which it was not reasonably practicable to have consulted at all, namely the sudden nature of X's change of plan and its explicit direction, which was tantamount to ordering immediate dismissals; (2) the tribunal had taken into account irrelevant matters in reaching its decision, namely S's financial position; (3) even if it was in breach of its duty, there were substantial mitigating factors which the tribunal was not entitled to ignore when determining the protective award.

HELD: (1) When applying s.188(7), the tribunal had to consider whether there were special circumstances which rendered compliance with s.188(1A), s.188(2) and s.188(4) not reasonably practicable, and, if so, whether the employer took all such steps towards compliance with those provisions as were reasonably practicable, Clarks of Hove Ltd v Bakers Union [1978] 1 W.L.R. 1207 applied. It was plain that the tribunal in the instant case had had the correct test in mind. It found special circumstances to exist which rendered it not practicable to comply with s.188(1A) by consulting at least 30 days in advance. However, it remained reasonably practicable to consult; such consultation should have been undertaken and the tribunal had not erred in law in reaching that conclusion. Although X's instructions had made it inevitable that the workforce would have to be reduced, it remained for S to decide whether employees should be dismissed for redundancy; how many employees should be dismissed; when they should be dismissed; and what, if anything, ought to be done to mitigate the consequences of dismissal. Those were proper matters for consultation. In any event, X's instruction had been to reduce labour in accordance with an agreement which provided for redundancy consultation; it was therefore difficult to see how that instruction could be read as an instruction to immediately dismiss regardless of a duty to consult. (2) The tribunal had not erred in its approach to financial issues. It had only stated that there was nothing in S's financial circumstances which rendered it not reasonably practicable to consult. In some cases, special circumstances coupled with the financial exigencies caused by them might render it not reasonably practicable to consult, but that had not happened in this case. (3) The purpose of the protective award was to provide a sanction for breach of an employer's obligations under s.188; it was not to compensate employees, Susie Radin Ltd v GMB [2004] EWCA Civ 180, [2004] 2 All E.R. 279 applied. Accordingly, tribunals had to focus on the seriousness of the employer's default, and there was no linkage between the 90-day maximum award and the length of time consultation would have taken. When assessing the seriousness of a default, it was relevant to consider both the culpability of the employer and the harm or potential for harm of the default. Tribunals had to take into account all the circumstances and make such an award as was just and equitable. In this case, it was relevant that there was no consultation at all. However, the tribunal had erred in concluding that there was nothing which would have justified a lesser protected period. The special circumstance found by the tribunal was a potentially powerful mitigating factor, and the fact that that circumstance was not sufficient to excuse compliance did not necessarily deprive it of its power as a mitigating factor. The case was remitted to the tribunal to reconsider the length of the protective award in the light of the guidance given.

Appeal allowed in part

LTL 3/3/2010
Shanahan.pdf

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