German ruling could be cause for concern in UK

The case of Junk v Khnel in Germany raises questions over obligations to consult and notify the authorities when dealing with collective redundancies, and it also has implications for HR in UK tribunals.

Irmtraud Junk was employed as a care assistant by AWO, a not-for-profit care provider. Wolfgang Khnel was the liquidator appointed to wind up AWO when it got into financial difficulties. On 23 May 2002, he reached agreement with the AWO works council that AWO would cease trading and agreed a social plan, as required by German law. On 19 June, he informed them that he intended to terminate all 176 remaining contracts of employment, including that of Mrs Junk. Ten days later, she received written notice from the liquidator that her employment would end on 30 September. On 27 August, after consultations with the works council, the liquidator notified the redundancies to the labour office.

Junk claimed that her dismissal notice was ineffective, as the liquidator did not inform the labour office or properly consult the works council before giving her notice.

The Berlin Labour Court decided that the answer to Junk’s case was in Council Directive 98/59/EC, which lays down the rules on collective redundancies (in the UK, these can be found in part IV, chapter II of the Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULRCA’).) The Berlin court asked the European Court of Justice (ECJ) whether the word ‘redundancy’ in the directive refers to the giving of notice or the actual termination of employment.

The ECJ held (Junk v Khnel, Case C-188/03, 27.1.05) that ‘redundancy’ in the Collective Redundancies Directive means giving notice to dismiss for redundancy, and not the contract’s termination on expiry of the notice. Thus the obligations to consult and notify the authorities arise prior to any decision to terminate contracts of employment.

However, the decision goes further. Despite arguments from the UK government that the law should not unnecessarily prolong a crisis situation, the court still held that notice of dismissal for redundancy can only be given after the conclusion of the consultation procedure, and not during it.
In words that will be music to the ears of the trade unions, the court said the directive’s requirement to consult ‘with a view to reaching an agreement’ is (‘it appears’) an obligation to negotiate. The effectiveness of that obligation, it said, would be compromised if the employer could issue dismissal notices during negotiations.

Under TULRCA, the employer has to begin consultation in good time, and in any event (and this is a requirement of UK law rather than of the directive) at least 30 days before the first of the dismissals actually takes effect (or 90 days, if 100 or more redundancies are proposed). The remedy for non-compliance is a protective award. Unlike in Germany, there is no automatic effect on the validity or, indeed, fairness, of any dismissal.

UK tribunals will now seek to interpret our law in accordance with Junk. To comply with the case, employers must show that ‘negotiations’ with representatives were started in good time, and were completed before the redundancy notices were issued, or staff were dismissed with payment in lieu. That is not the same as saying that employers must postpone giving notice of dismissal (or dismissing with payment in lieu) until after the 30- or 90-day consultation period ends, although that may be the best practical course of action.

The interesting question now is how far the DTI will feel it has to go to bring our law in line with Junk. The rule on notification – form HR1 has to be submitted 30 or, where 100 or more staff are to go, 90 days before the first dismissal actually takes effect – will have to be amended, at least to make clear that notification must precede the giving of any notice of dismissal.

However, does Junk go even further and, for example, bring into question the relevance of requiring consultation to begin 30 or 90 days before the dismissals take effect?

By Peter Schofield, director of employment and legal affairs, EEF

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