Case of the week: consultation on collective redundancies

UK Coal Mining Ltd v (1) National Union of Mineworkers (2) British Association of Colliery Management

FACTS UK Coal Mining owned the Ellington Colliery, where it employed 329 employees. The National Union of Mineworkers (NUM) and British Association of Colliery Management (BACM) were recognised in respect of the employees. In January 2005, the colliery managers informed NUM and BACM representatives that the mine would be closed on safety and economic grounds due to flooding. UK Coal began formal consultation with the unions stating that the reasons for the proposed redundancies were special circumstances as a result of being forced to cease production for safety reasons. The closure was, in fact, for economic reasons.

Consultation with the unions took place between 26 January and 22 February, and the first compulsory redundancies took effect on 26 February. The unions then made claims for protective awards for failure to consult.

DECISION The tribunal awarded the maximum protective award of 90 days’ pay per employee. It held that although there was no obligation to consult about the reasons for the decision to close the colliery, as UK Coal chose to give information about the reason for the closure, that information should have been true and given in good faith. There were no special circumstances justifying a reduction in the period of consultation.

UK Coal appealed to the Employment Appeal Tribunal (EAT) and the unions cross-appealed, arguing that there is an obligation to consult over the reason for the redundancy and, where that reason is the closure of the workplace, that involves consulting over the reasons for the closure decision.

The EAT held that UK Coal had failed to comply with the duty to consult by giving a deliberately misleading reason for the closure, which affected the nature of the subsequent consultation. UK Coal had not established the special circumstances defence. The EAT said the tribunal was entitled to consider that this was a very serious failure to comply with redundancy consultation requirements. It went on to consider whether UK Coal was, in fact, obliged to consult with the unions over the decision to close the colliery and held that there is an obligation to consult over a decision to close a workplace. In a closure context, dismissals are proposed at the same time as the closure is proposed. The obligation to consult therefore arises when closure is fixed as a clear, albeit provisional, intention. The obligation to consult over avoiding the proposed redundancies inevitably involves engaging with the reasons for the dismissals and that, in turn, requires consultation over the reasons for the closure.

IMPLICATIONS This important case overturns the accepted principle that employers do not have to consult with employee representatives over the reasons for closure of a workplace. This will have a significant impact on the information that employers have to provide to employee representatives at the start of a consultation.

Where closure of a workplace is for economic reasons, meaningful consultation is likely to require the disclosure of information regarding the economic basis for the decision. This could give rise to the risk that sensitive business information may be leaked to competitors.

The repercussions for employers that fail to consult over the reasons for closure of a workplace will be significant, as the tribunal may regard the rest of the consultation process as fundamentally flawed. This could mean that, even if the employer undertakes lengthy consultation, if the consultation over the underlying reasons for the closure was inadequate, the employer could still be exposed to the maximum protective award.

David Bradley, partner and joint global head of employment, pensions and benefits, DLA Piper

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