On appeal

Continuing our regular series spelling out the implications
of important cases heard recently in the appeal courts. Paul White and
Charlotte Hamer look at the issues

Council fails to consult on collective redundancies
(1) TGWU (2) Unison v Middlesbrough Borough Council – EAT IRLB 670 p14

Middlesbrough Borough Council was suffering from financial problems. On 16
June 1998, its corporate management team decided there would have to be
redundancies.

The TGWU found out and circulated a newsletter to its members on 19 June. On
22 and 23 June, meetings took place between management, the TGWU and Unison.

On 24 June the council sent notice to the trade unions indicating up to 150
employees would be made redundant.

The unions were given a draft proposal on 25 June. The final proposal,
issued five days later, set out a redundancy timetable stating that redundancy
notices would be sent on 8 July and termination of employment would be on 30
September.

The unions considered there was insufficient opportunity to respond and said
so on 2 July.

However, that same day the redundancies were agreed by the council and the
council printed leaflets telling the staff that there would be 150
redundancies. Notices of dismissal were issued on 3 July.

The unions brought a claim alleging insufficient consultation under section
188 of the Trade Union and Labour Relations (Consolidation) Act 1992.

The tribunal found that there had been a failure as the decision had already
been taken prior to the consultation process and that the consultation was a
sham as it only looked at the process of redundancy instead of including ways
of avoiding redundancies. The council appealed.

The EAT made a number of points. First, that while an employer is not
required to consult about the reasons for the proposed redundancies, there is a
"need for meaningful consultation at the proposal stage". Such
consultation must take place before the dismissal notices are sent out.

Secondly, the minimum 90-day period is to be counted back from the expiry
date of the notice and consultation may continue up to this date.

Thirdly, the duties under section 188 are mandatory and it is not open to
the employer to argue that consultation would be "futile or utterly
useless" as in individual consultation.

The EAT agreed with the tribunal findings that the council had failed to conduct
adequate consultation.

Implied term of trust and confidence
Safeway Stores v Morrow – EAT Unreported

Morrow was employed by Safeway as a bakery production controller. She
considered that, for several months, she had been subjected to harassment and
unreasonable pressure by the store manager, but was unsupported by her line
manager and her staff.

On 20 August the store manager told her in front of members of staff and a
customer, "If you cannot do the job that I pay you to do, then I will get
someone who can".

Morrow was very distressed and later went to human resources to complain.
She then decided to leave and resigned and claimed unfair constructive
dismissal.

The tribunal agreed that there had been a breach of the implied term of
trust and confidence in reprimanding her in public, but that it was not
sufficiently fundamental to entitle her to resign. Morrow appealed.

The EAT noted that there appeared to be a history of the store manager’s
dissatisfaction with Morrow and criticised Safeway for allowing the situation
to develop without formally investigating her performance or, if necessary,
using the disciplinary procedure.

The EAT concluded that if the employer has been guilty of conduct which was
likely to destroy or seriously damage the trust and confidence between an
employer and employee, "that is something which goes to the root of the
contract and amounts to a repudiatory breach".

The EAT remitted the case for rehearing, making the general point that
"a finding that there has been conduct which amounts to a breach of the
implied term of trust and confidence will mean, inevitably, that there has been
a fundamental or repudiatory breach going necessarily to the root of the
contract".

EAT rules on ‘ETO reasons’ under Tupe
Thompson v SCS Consulting – EAT [2001] IRLR 801

Thompson was employed by Lava Systems (Europe) which became insolvent. Open
Text (UK) agreed to purchase the business as a going concern.

On 23 December, the rec-eivers designate for Lava Systems Europe informed
Open Text UK that they intended to dismiss all the employees with immediate
effect.

Open Text UK did not want to lose key members of staff and it was agreed the
appointment of receivers would be delayed until 29 December, by which time Open
Text UK would have identified those they wished to retain. The receivers would
then dismiss those not required.

Thompson (and 24 others) were accordingly dismissed by the receivers at
11.30am on 29 December. The transfer of the business and remaining employees
took place at 10.30pm the same day. This transfer was subject to Tupe.

The question that arose was whether the principal reason for the dismissals
was the Tupe transfer – which would render these dismissals automatically
unfair by regulation 8(1) of Tupe, with liability transferring to Open Text
(UK) under the Litster principle – or whether it was an "economic,
technical or organisational [ETO] reason entailing changes in the
workforce" under regulation 8(2) which could render the dismissals fair
and prevent liability transferring.

The EAT held the principal reason for dismissal was a question of fact in
each case and, in making its decision, the tribunal was entitled to take into
account whether there was any collusion between the parties and whether the
transferor had any funds to carry on the business at the time of the decision
to dismiss.

In this case, it found that there was no collusion and that, given the
insolvent state of the transferor, had the transfer not taken place then all
the employees would have been dismissed. Therefore the principal reason for the
dismissals was an ETO reason, that the dismissals were not automatically unfair
and that liability did not pass to Open Text UK.

Paul White is a senior associate and Charlotte Hamer is a professional
support lawyer in the employment and pensions group of City law firm Stephenson
Harwood

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