A recent recommendation suggesting that the 2013 decision changing the rules on collective consultation could be overturned might be good news for employers, but for now means a return to uncertainty.
Last month the advocate general of the European Court of Justice (ECJ) issued an opinion that UK employers should not be obliged to consult collectively across multiple branches.
If followed by the ECJ, this would mean that a 2013 ruling by the Employment Appeal Tribunal (EAT) would be overturned.
This ruling said that if more than 20 employees are affected by redundancies across a company it would not matter if they are based at several different locations.
The case dates back to 2008, when shopworkers’ union USDAW brought to tribunal the case of employees at retail chains Woolworths and Ethel Austin who claimed they were denied a consultation period due to working in smaller shops, while employees in larger outlets did receive consultation.
The 2013 ruling meant rewriting UK legislation that had been in place for decades.
“Businesses had a very clear idea about how to go about collective consultation until the 2013 decision turned all that on its head,” says Irwin Mitchell employment partner Omer Simjee.
It meant that people who would not have been included in collective consultation would now have to be, creating an extra burden on business, he explains. It also created wider problems, for example in situations where a business was losing money and now had to employ people longer.
“The EAT decision upset rules that businesses were comfortable with, and has made redundancies more expensive, which means the business has less money,” says Simjee.
The reversal of this suggested by the advocate general has been welcomed by business groups, but as the final decision is yet to come (and there is no clarity on when it will) the current position remains one of uncertainty.
Up in the air
“Fewer situations where collective consultation applies would be good news, but the bad news is that this throws everything up in the air again,” says Nina Robinson, head of legal services for HR Legal Services – HR magazine’s employment law advisory service provided by ESP.
Simjee suggests that in 75% of cases the opinion of the advocate general would be followed, and predicts that in this case it would be “extremely difficult” for the ECJ to come to a different opinion.
However, head of employment at law firm King & Wood Mallesons, Nicola Kerr suggests that while the advocate general’s reasoning, if followed by the ECJ, would allow the UK to adopt the previous approach, it does not oblige it to do so. It is possible that the UK courts might apply a different interpretation, she explains.
The ECJ has previously ruled that ‘establishment’ should be interpreted in a way that ensures as few collective redundancies as possible escape collective consultation, which could lead the ECJ to disagree with the advocate general, according to Kerr. Also, this is the first time the Court of Appeal has looked at this point, and it’s possible that they could stick with the EAT’s approach.
Kerr maintains that both of these outcomes are unlikely, but she adds that there have been exceptions under the law to the “one site, one establishment” principle and the Court of Appeal could take the opportunity to revisit these.
This uncertainty puts employers with imminent redundancies in a difficult position.
Simjee predicts that most employers will consider it a “safer bet” to continue to consult. However, in a situation where a company was making 15 employees redundant, and another five on a different site brought this to 20, “they might accept a greater degree of risk” and go back to the original rules.
Looking forward, experts agree that if the 2013 ruling is overturned, this is likely to mean a reduction in red tape for most employers and greater flexibility, with fewer cases requiring consultation.
However, employers should be wary of oversimplifying what a return to the original rules would mean, Simjee warns, explaining that there have always been questions around the meaning of the word “establishment”.
“Do sites have a shared management structure, payroll, or HR function? If they do, you could argue that they are one establishment,” he explains.
Kerr adds that the final decision may involve some modifications to the previously established principles of how establishment is defined. “We may end up somewhere between the old rules and the current position.”
Robinson predicts that there will be red tape either way, and the change will be the circumstances in which it applies.
Greater flexibility and less administration is something employers will welcome, and Simjee suggests that a reversal of the 2013 ruling would be welcomed by the government, which has been keen to make things more streamlined for the business world.
Too much regulation?
The question of how regulated the UK labour market should be was discussed in a recent CIPD report, which considered the impact of employment regulation on labour market outcomes.
The report, Employment Regulation and the Labour Market, found that the UK’s flexible labour market is working well in comparison with other countries, suggesting there isn’t a strong case to de-regulate further or strengthen employment rights.
In the case of collective consultation, the CIPD had “no problem” with how it was before 2013, according to CIPD public policy adviser for employee relations Mike Emmott.
He argues that dealing with redundancies at the level of the overall organisation puts more demands on local management and an “unnecessary burden” on businesses.
For a business spread across the country, considering small numbers of redundancies across multiple sites “doesn’t really add up”.
“For a national organisation it doesn’t make a lot of sense to consider sites together,” he says. “There is no business imperative underpinning it.”
Employers will now have to wait and see how the situation develops, but Kerr advises them to remember that consultation has its benefits, giving a period in which employers can talk to employees, allowing them to vent complaints that might otherwise have gone into a tribunal claim.
“Despite the increased time and effort, we firmly believe that collective consultation often saves employers money in the end,” she says.