ECJ – when duty to consult about redundancies should begin

Facts

Fujitsu Siemens Computers Oy (FSC) is the Finnish subsidiary of Fujitsu Siemens Computers (Holding) BV (the Parent Company). The group had production plants in Finland and Germany.

In December 1999 the executive council of the parent company decided to make a proposal to the board to divest the Finland plant. The board supported the proposal but no decision was taken.

The same day, FSC began consultations with workforce representatives, which took place in January. On 1 February 2000 FSC’s board took a decision to close FSC’s operations in Finland with the exception of computer sales. On 8 February 2000 FSC began making redundancies.

In total 450 of about 490 employees were made redundant. Some employees brought proceedings alleging that FSC had not properly consulted, and assigned their claims to trade unions.

The unions alleged that the decision to close the Finnish plant had been taken by 14 December 1999 at the latest, before the consultation took place. FSC argued that the final decision could only have been taken by the employer, not the parent company. The Finnish Court of Appeal referred the case to the European Court of Justice (ECJ).

Decision

The ECJ clarified the meaning of an employer ‘contemplating collective redundancies’ in article 2(1) of the Collective Redundancies Directive (CRD), which triggers the obligation to consult. The references in articles 3 and 4 of the directive to ‘projected’ collective redundancies confirm that the obligation arises when there is an intention to make collective redundancies.

The ECJ held that the CRD must be interpreted as meaning that the adoption, within a group of companies, of strategic decisions or of changes in activities which compel the employer to contemplate, or to plan for collective redundancies gives rise to an obligation on that employer to hold consultations with workers’ representatives. The obligation to start consultations arises even where the employer is unable to supply to the workers’ representatives all the information that is required under the CRD. The employer may supply that information during the consultation as and when it becomes available.

In the case of a group of companies consisting of a parent company and one or more subsidiaries, the obligation to hold consultations with employee representatives falls on the subsidiary which employs the employees once the company within which the redundancies may be made has been identified. The subsidiary employer is responsible for compliance with information and consultation requirements even if the decision is made by the parent company and it is not properly and immediately informed of the relevant decision by the parent company. That subsidiary must conclude the consultation procedure before terminating contracts of employment, whether on the direct instructions of the parent company or otherwise.

Implications

The ECJ ruled that the duty to consult is triggered where an employer is compelled to contemplate or plan for redundancies as a result of a strategic decision, in this case taken by a parent company. However, where a parent company of a corporate group takes a decision likely to have repercussions for workers within that group, it is for the subsidiary whose employees may be affected by redundancies, in its capacity as their employer, to start consultations with them – so that it is only possible to start consultation when the subsidiary has been identified. This means that there may be a delay between the duty to consult being triggered and consultation actually beginning.

The ECJ agreed with an observation of the UK government that a premature triggering of the obligation to consult could lead to results contrary to the purpose of the CRD, including restricting the flexibility available to organisations when restructuring.

Alan Chalmers, employment partner, DLA Piper

Comments are closed.