Consultation on collective redundancies

23 Jan 2013

An employer proposing to make 20 or more redundancies must consult with representatives of the affected employees but when must it start the consultation?

The EU Directive says the employer must start consulting when it contemplates redundancies.  UK legislation says the consultation must start when dismissals are proposed and in good time before they take place.  The difference is more than semantic and has generated considerable difficulties for many employers.

The Employment Appeal Tribunal has said the consultation must begin sufficiently early to include consultation about the business reasons for making redundancies.  It requires an early start because the obligation extends to considering ways in which redundancies may be avoided.  Therefore, a consultation which does not begin until after the business decision has been taken will be too late.

The Court of Justice of the European Union (as we must now learn to call the European Court of Justice) has said the consultation is triggered by a strategic decision which compels the employer to contemplate redundancies (i.e. after a business decision has been taken but before anything is done to implement it).  This judgement has been criticised for not defining the nature of the business decision with sufficient clarity and the UK Court of Appeal sought the guidance of the CJEU.

In March, the Advocate General of the CJEU published an opinion to the effect that the former is premature and the latter is too late!  On 19 October, the CJEU dodged the issue by saying that it did not have jurisdiction to decide the question.  The case is USA v Nolan.

Our view:

This decision is as surprising as it is frustrating.  For the time being, we advise employers to follow the EAT’s guidance and start consulting early so representatives' comments can be fed into the commercial decision making process.