Independent Insurance Co Ltd (in provisional liquidation) v Aspinall
Independent Insurance Co Ltd went into provisional liquidation in June 2001. There were 971 employees made redundant, including more than 300 at its premises in Cheadle. The immediacy of the closure meant that Independent Insurance failed to comply with its obligations to elect, inform and consult employee representatives under ss.188 and 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A).
A large number of the employees brought claims for protective awards for failure to inform and consult. Over time, a number of the claims were struck out or settled and eventually the employment tribunal was left to consider just three remaining claims.
The employment tribunal found in favour of the claimants and made a protective award of 90 days’ pay in respect of all 351 affected employees.
Independent appealed to the Employment Appeal Tribunal (EAT). The EAT held that, where an individual claimant seeks a protective award under ss.188 and 189 of TULR(C)A, the employment tribunal has jurisdiction only to make an award in his or her favour and cannot make an award that benefits other redundant employees.
The EAT noted that there were varying practices in this respect in the employment tribunals and said that it was important that this case should bring clarity. The EAT noted that, when TULR(C)A was enacted, only a trade union could bring a claim for a protective award. The right was later extended to employee representatives and individual employees.
The EAT adopted the statement of the law in Harvey that: “A personal claimant may obtain a protective award for himself; a representative claimant may obtain a protective award for those whom he represents in the litigation; and the trade union may obtain a protective award for all the employees in its bargaining unit (whether they are members of the union or not). But the award it obtains may not be stretched to cover those outside its bargaining unit. It is a case of each to his own.”
The EAT said that it would otherwise enable employees to benefit from the judgment whose cases had already been struck out or dismissed, or who had not brought claims in the first place.
This case clarifies a point that has previously been a significant cause of risk for employers. As the right to claim a protective award cannot effectively be settled by a compromise agreement, employers that undertake large-scale redundancies without electing, informing and consulting employee representatives have previously faced the risk that one disgruntled employee bringing a claim could result in a protective award being made in respect of all the redundant employees.
However, this does produce the rather anomalous result that an employer that makes no attempt to elect employee representatives at all may be in a better position in practice than one that elects representatives but does not carry out adequate consultation, as it is unlikely that every affected employee will bring a separate claim for a protective award.
While this case provides useful clarification on a key aspect of an employer’s obligations and liabilities under the collective redundancy consultation regime, there remain many areas of uncertainty. As part of its ongoing review of employment law, the Government has said that it will review the rules to see if there is a case for reform. The scope for reform will be limited as the framework derives from European law, but any additional clarity will be welcomed.
Mary Clarke, employment partner, DLA Piper
Practical guidance from XpertHR on redundancy consultation