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The Employment Appeal Tribunal (EAT) has ruled that the obligation on an employer, under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), to consult over collective redundancies extends to consultations over the reasons for the closure of a business (UK Coal Mining Ltd. v National Union of Mineworkers). In the EAT’s view, the obligation to consult over avoiding proposed redundancies inevitably involves examining the reasons for the dismissals and that in turn requires consultation over the reasons for the closure.

This is an important decision as it overturns previously binding authority on this area of the law. One difficulty is that EC Directive 98/59/EC provides that an employer should begin consultations when ‘contemplating’ making collective redundancies, whereas this duty is given effect in domestic law as being a duty to consult when an employer ‘proposes to dismiss’ employees as redundant.

UK Coal Mining Ltd. took the decision to close Ellington Colliery, a deep mine in Northumberland, after the seam being worked became flooded in January 2005. The 329 employees were represented by the National Union of Mineworkers (NUM) and the British Association of Colliery Management (BACM).

The Unions argued that UK Coal Mining Ltd. had failed in its obligation to consult properly over the mass redundancies. The company claimed that in the light of legal authorities it did not have to consult over the closure itself and the exceptional circumstances surrounding the closure, which it maintained was for safety reasons, also meant that it was relieved from the full duty of consultation.

The Employment Tribunal (ET) accepted that legal authorities did establish that there was no obligation to consult over the closure itself. However, it found no credible evidence that the reason for the dismissals was safety. In its view, UK Coal Mining Ltd. had deliberately misled the Unions on this point. The real reason for the closure of the mine was economic. Even if there were special circumstances, the company had failed in its duty because it had not taken such steps as were reasonable in the circumstances. The ET concluded that there was no consultation at all when the redundancy proposal was still at a formative stage. It awarded the maximum 90 day protective award to the employees.

UK Coal Mining Ltd. appealed against the decision. The NUM and the BACM cross appealed that the ET was wrong to take the view that there was no obligation to consult over the reasons for the closure.

As regards the company’s appeal, the EAT upheld the ET’s decision and the size of the protective award. The ET was entitled to consider that there had been a serious failure to comply with the redundancy consultation requirements on the evidence presented to it. As regards the cross appeal, the EAT held that as domestic law now stands, the obligation to consult over the avoidance of dismissals has significantly widened the scope of the consultation obligations. In its view, in a closure context, where it is recognised that dismissals will inevitably, or almost inevitably, result from closure, dismissals are proposed at the point when the closure of the business is proposed. Where closure and dismissals are inextricably linked, the duty to consult over the reasons for the closure arises.

Says John Merry, Partner and head of the employment law department, “It is important that employers are aware of this requirement to consult at an early stage in the decision-making process. Carrying out a redundancy programme always requires care and failure to consult as required can lead to an Employment Tribunal requiring the employer to make protective awards to the dismissed employees. We can help ensure that this difficult process is carried out without the risk of unanticipated financial consequences.”