Collective redundancy: ECJ ruling muddies the waters

The recent European Court of Justice decision in the case of Akavan Erityisalojen Keskusliitto AEK ry and ors v Fujitsu Siemens Computers Oy provides guidance about when the obligation to collectively consult on redundancy dismissals is triggered.

Although the case was referred by the Finnish High Court, it develops the meaning of consultation under the relevant European directive and this may have an impact on the interpretation of the legislation (the Trade Union and Labour Relations Act (TULRA)) in the UK that is intended to implement the directive.

It provides that collective consultation is triggered when dismissals are contemplated, whereas under TULRA collective consultation is triggered by a proposal to dismiss as redundant 20 or more employees within a 90-day period. It has been suggested that there is a tension between the two concepts.

A proposal to dismiss at least 20 employees may be more concrete than dismissals that are simply in contemplation. That may be illustrated, for instance, by the need to work out how many employees may be dismissed before deciding whether the collective consultation obligations are engaged.

In the Finnish case, the Advocate General gave an opinion earlier this year which seemed to support the view that a more concrete trigger was necessary. He said that it was the moment when the employer intended to make redundancies, or at least foresaw that possibility.

The ECJ has, however, concluded that while intention to make redundancies is a factor, consultation is triggered “once a strategic or commercial decision compelling him to contemplate or plan for collective redundancies” has been made. This clearly favours the view that the obligation to consult arises at an earlier point in the decision-making process and puts the emphasis firmly back on the word ‘contemplate’.

The further twist in this case is that the decision that resulted in redundancy dismissals was taken by a parent company of the employer. The ECJ has made it clear that in these circumstances the subsidiary is still responsible for meeting the consultation obligations, even where the parent company has failed to properly inform the subsidiary of the decision it reached.

This is consistent with TULRA, which states that it is no defence for an employer to argue that a controlling hand failed to provide it with the relevant information. On a more positive note, where a decision is taken by a parent company, the obligation to consult is only triggered once the subsidiary within which the redundancies may be made has been identified. Wider strategic decisions about company activities which do not put the spotlight on a particular subsidiary are therefore unlikely to trigger the obligation to consult.

Recent decisions in the UK have tended to favour the requirement to consult sooner rather than later, but the cases tend to be fact-sensitive. The UK courts may be content to continue to walk the line between ‘propose’ and ‘contemplate’. This latest ECJ decision may, however, make that exercise more difficult.

Wendy Somerville, senior solicitor, employment team, Brodies

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