Mrs J Jordan and Others v Shaylor Management Services (In Voluntary Liquidation) and Secretary of State for BEIS: 1306318/2019

EMPLOYMENT TRIBUNALS

Case No 1306318/2019

Between

Mrs J Jordan & Others (as per schedule of claimants)Claimant

Shaylor Management Services (In Voluntary Liquidation) (1) Secretary of State for BEIS (2)Respondent

Before

Employment Judge Miller

Date 1 April 2020

JUDGMENT

[1]In breach of s.188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992, the First Respondent failed to make any arrangements for the election of employee representatives in respect of redundancies it proposed to make in respect of its entire workforce. The redundancies took place on 17 June 2019.

[2]Each of the claimants who was made redundant is entitled to a protective award in respect of the protected period against the First Respondent, the protected period being 90 days from 17 June 2019.

[3]In the event that the First Respondent is insolvent, the Second Respondent must meet the First Respondent’s liability for the protective awards, subject to its maximum liability under s.186 of the Employment Rights Act 1996.

REASONS

[1]The claimants were employed by the First Respondent but working, effectively, for Shaylor Group Ltd (Shaylor Group). Shaylor Group was a construction company providing construction services to the public and private sector.

[2]Shaylor Group entered administration on 17 June 2019 and ceased all operations immediately. The claimant’s say they were dismissed with immediate effect on the same day and now bring claims for protective awards on the basis that the First Respondent did not elect any representatives and did not take any steps to consult with the claimants or any representatives. before making redundancies.

The issues

[3]This case was considered at a case management hearing before EJ Lloyd on 3 February 2020. At that hearing, it was identified that the claimants bring their claims under s 189(1) of the Trade Union and Labour Relations (Consolidation) act 1992 (TULRCA). The issues to be determined were identified at that hearing and are as follows:

[4]In respect of the Claimants’ dismissals on 17 June 2019 - did the Respondent fail to comply with its obligations under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 - in that:a. it failed to give affected employees the opportunity to elect representatives and neither did it provide the required information under section 188(4) of the Trade Union and Labour Relations (Consolidation) Act 1992;

b. consultation did not take place in good time and at least 45 days before the first of the proposed dismissals was due to take effect;

c. information about the proposed redundancies was not provided to the Claimants in writing.

d. it failed to consult with the Claimants on ways of avoiding the dismissals and reducing the number of employees to be dismissed and mitigating the consequences of the dismissals and with a view to reaching agreement?

[5]Are the Claimants entitled to:a. a declaration that the Respondent failed to comply with its obligations under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992; and

b. a protective award under sections 189(2) to (4) of the Trade Union and Labour Relations (Consolidation) Act 1992?

The hearing

[6]The First Respondent did not submit a response. The Second Respondent submitted a response but indicated that they did not intend to attend any hearing. They asked that their response be considered as written representations under Rule 42 of the Employment Tribunals Rule of Procedure. Further to the orders of EJ Lloyd, the lead claimant confirmed on behalf of all the claimants that the claimants consented to having the claims heard before an Employment Judge in chambers, on the papers alone.

[7]The claimants produced a witness statement by Janice Jordan, the former Head of people Services for the First Respondent and a bundle of documents which included the Administrators Proposals, correspondence relating to the dismissal of the claimants, a pro forma contract of employment and a “Place of Work Definition” from the First Respondent’s employee handbook.

[8]The witness stamen of Janice Jordan is signed and accompanied by a statement of truth. There is no evidence from either response. I therefore accept the evidence of Ms Jordan as accurate and, given Ms Jordan’s position in the First Respondent, well informed.

[9]I have considered these documents, along with the claim forms, the response and EJ Lloyd’s case management order.

Findings

[10]I take the following information from Ms Jordan’s statement.

[11]Shaylor group was a construction company that acted as a main contractor for public sector building projects and latterly building residential accommodation. Shaylor group had approximately 193 employees before its collapse and they were all assigned to the Aldridge office. The employees either worked wholly from that office or were assigned on a temporary basis to various projects around the country as each project demanded. The projects generally lasted between 1 and 9 months and infrequently up to two years. Between projects, employees would return to work at the Aldridge office.

[12]It is clear from the standard contract of employment and the extract from the Employee Handbook that all employees could be sent to work temporarily on any project but that their main work base was the Aldridge office. This is supported by the statement that Shaylor group would pay for travel to sites and accommodation costs where reasonable.

[13]Staff who were assigned for the duration of a project to a site reported to a Contracts Manager who was responsible for a number of sites and who was based at Aldridge.

[14]I find therefore that all employees worked for and were permanently assigned to a centralised organisation based at the Aldridge office. When temporarily assigned to individual project sites, staff remained part of the same organisational structure with no site-specific line management and no sitespecific managerial autonomy. They remained an integrated part of the Shaylor Group establishment.

[15]During 2019 there were cash flow issues with the Shaylor Group. Ms Jordan says “We were aware that there were some cash flow issues and projects were falling behind programme because of difficulties in getting subcontractors to attend site. This then caused a vicious circle in respect of cash flow as clients were not paying us as we were behind programme and unable to carry out work and we, in turn, were unable to pay sub-contractors. Recruitment agencies were also putting us on stop so we were unable to employ agency workers to carry out work in place of sub-contract labour”.

[16]She adds “About two weeks before we were made redundant the PreConstruction Manager asked if employees were going to be paid in June and the response was “Why wouldn’t they, there is money in the bank to pay the staff and there is nothing untoward going on”. The senior team meetings were then stopped immediately after that”.

[17]The administrators record in “The Administrators’ Proposals” that, “The Company was ﬁrst introduced to FRP in February 2019 with a view to exploring options to raise additional funding for liquidity and growth, either via debt or equity. However, no formal engagement was entered into immediately as certain Directors injected £2m of combined funds into the Company between February and April 2019 to address the funding requirement. Informal discussions continued between FRP and the Company as there remained some cash ﬂow pressure”.

[18]This appears to have come to a head on Friday 14 June 2019 when an unpaid contractor arrived at the office and blocked the exit to the carpark demanding payment of unpaid invoices. Even then, however, Richie Shaylor (one of the directors of Shaylor Group) instructed Mrs Jordan to tell staff, who were concerned by this turn of events, to go home and come in the following Monday (17 June 2019) for a staff meeting.

[19]I find that Shaylor Group were well aware for some time that they were in financial difficulties and on the balance of probabilities had known that since February 2019.

[20]On 16 June 2019, the employees received an email from Sharon Goodwin, described as executive PA, on behalf of the Board of Directors to the effect that Shaylor Group had been placed in Administration. It then says: “Your contracts of employment are with a separate entity, Shaylor Management Services Limited. It is the intention to place this company into Creditors’ Voluntary Liquidation as soon as possible, however, due to statutory notice periods, this may take approximately one week. Given the situation with Shaylor Group Limited and the group’s inability to fund salaries, it will unfortunately be necessary for Shaylor Management Services Limited to make all staff redundant in the meantime. It is likely that the redundancies will either be effected on Monday or Tuesday and you will receive a letter from Shaylor Management Services Limited confirming this, along with details of how to lodge your claims with the Redundancy Payments Service for arrears of wages, and where applicable, pay in lieu of notice, accrued holiday pay and redundancy pay”.

[21]The letter goes on to confirm that most members of staff will not be required to attend the offices, except for a small number who will be requested to assist with the administration process. I accept, however, Mrs Jordan’s evidence that all the employees then received a letter dated 17 June 2019 terminating their employment with immediate effect.

[22]Mrs Jordan confirms, and I find, that there was no trade union recognised by the First Respondent and no body of employee representatives in place. It is clear that there was no consultation with staff at all about the imminent redundancies whether collectively or individually and it is equally clear, as Mrs Jordan says in her statement, that no steps were taken to elect employee representatives for the First Respondent to consult with about the impending redundancies. The Second Respondent’s submissions

[23]In its ET3 (which is to stand as the Second Respondent’s submissions), the Second Respondent neither supports nor resists the claims for protective awards. My attention is helpfully drawn to the provisions of Part XII of the Employment Rights Act 1996 (the relevant parts of which are set out below) under which the Second Respondent describes itself as the statutory guarantor. In respect of that, I am invited to confine my judgment to the description of employees covered by the award, rather than seeking to quantify it, in the event that I find in favour of the claimants and make a protective award.

[24]The Second Respondent invites me to ensure that I am satisfied that the claimants have the standing to bring a claim, which I deal with below, and my attention s drawn to the Usdaw case (again see below) in respect of the meaning of establishment.

[25]Finally, the Second Respondent confirms that the First Respondent entered into creditors voluntary liquidation on 27 June 2019.

Law

[26]Section 188 Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) provides (as far as is relevant) 188 Duty of employer to consult . . . representatives(1) Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals. (1A) The consultation shall begin in good time and in any event— (a) where the employer is proposing to dismiss 100 or more employees as mentioned in subsection (1), at least 45 days, and (b) otherwise, at least 30 days, before the first of the dismissals takes effect. (1B) For the purposes of this section the appropriate representatives of any affected employees are— (a) if the employees are of a description in respect of which an independent trade union is recognised by their employer, representatives of the trade union, or (b) in any other case, whichever of the following employee representatives the employer chooses:— (i) employee representatives appointed or elected by the affected employees otherwise than for the purposes of this section, who (having regard to the purposes for and the method by which they were appointed or elected) have authority from those employees to receive information and to be consulted about the proposed dismissals on their behalf; (ii) employee representatives elected by the affected employees, for the purposes of this section, in an election satisfying the requirements of section 188A(1). … (7) If in any case there are special circumstances which render it not reasonably practicable for the employer to comply with a requirement of subsection (1A),

(2) or (4), the employer shall take all such steps towards compliance with that requirement as are reasonably practicable in those circumstances. Where the decision leading to the proposed dismissals is that of a person controlling the employer (directly or indirectly), a failure on the part of that person to provide information to the employer shall not constitute special circumstances rendering it not reasonably practicable for the employer to comply with such a requirement.

[27]In GMB and AMICUS v Beloit Walmsley Ltd (in administration) and others

[2004] IRLR 18

it was held that “It is settled law that if statutes enacted to give effect to the United Kingdom's obligations under European Union Directives can reasonably be construed so as to achieve the result pursued by the Directives, the statute must be so construed: see the observations of Lord Oliver in Litster v Forth Dry Dock & Engineering Co Ltd

[1989] IRLR 161

at 165 and of the European Court of Justice in Coote v Granada Hospitality Ltd,

case C-185/97

[1998] IRLR 656

, paragraph 18 of the judgment”.

[28]The collective consultation provisions in TULRCA were enacted in response to the UK’s obligations under the Collective Redundancies Directive (Directive 98/59/EC) (See paragraph 12 of USDAW (below)). In considering the meaning of “Establishment”, therefore, I have considered the European cases of Rockfon A/S v Specialarbejderforbundet I Danmark C-449/93 (Rockfon) and USDAW and another v WW Realisation 1 LTD (in liquidation) and others; Lyttle and others v Bluebird UK Bidco 2 LTD; Rabal Cañas v Nexea Gestión Documental SA and another

[2015] IRLR 577

(USDAW).

[29]In Rockfon, it was held that “the term 'establishment' appearing in Article 1(1)(a) of the Directive must be understood as meaning, de-pending on the circumstances, the unit to which the workers made redundant are assigned to carry out their duties. It is not essential, in order for there to be an 'establishment', for the unit in question to be endowed with a management which can independently effect collective redundancies”.

[30]In USDAW, the European Court confirmed that the meaning of “establishment” in Article 1(1)(a)(i) of Directive 98/59 is the same as that of the terms 'establishment' or 'establishments' in Article 1(1)(a)(ii) (the latter Article being the Article on which s188 TULRA 1992 is based). In this case, therefore, the meaning of establishment is the unit to which the workers made redundant are assigned.

[31]In this case, the effect of these provisions is that, if all the employees were employed in the same establishment, the First Respondent was obliged to begin consultation with appropriate representatives about proposed redundancies in good time and in any event 45 days before the date of the first redundancy.

[32]S 188A imposes obligations on the First Respondent in respect of the election of employee representatives. It says:(1) The requirements for the election of employee representatives under section 188(1B)(b)(ii) are that— (a) the employer shall make such arrangements as are reasonably practical to ensure that the election is fair; (b) the employer shall determine the number of representatives to be elected so that there are sufficient representatives to represent the interests of all the affected employees having regard to the number and classes of those employees; (c) the employer shall determine whether the affected employees should be represented either by representatives of all the affected employees or by representatives of particular classes of those employees; (d) before the election the employer shall determine the term of office as employee representatives so that it is of sufficient length to enable information to be given and consultations under section 188 to be completed; (e) the candidates for election as employee representatives are affected employees on the date of the election; (f) no affected employee is unreasonably excluded from standing for election; (g) all affected employees on the date of the election are entitled to vote for employee representatives; (h) the employees entitled to vote may vote for as many candidates as there are representatives to be elected to represent them or, if there are to be representatives for particular classes of employees, may vote for as many candidates as there are representatives to be elected to represent their particular class of employee; (i) the election is conducted so as to secure that— (i) so far as is reasonably practicable, those voting do so in secret, and (ii) the votes given at the election are accurately counted.

(2) Where, after an election of employee representatives satisfying the requirements of subsection (1) has been held, one of those elected ceases to act as an employee representative and any of those employees are no longer represented, they shall elect another representative by an election satisfying the requirements of subsection (1)(a), (e), (f) and (i).

[33]Section 189 TULRCA provides: 189 Complaint and protective award(1) Where an employer has failed to comply with a requirement of section 188 or section 188A, a complaint may be presented to an employment tribunal on that ground— (a) in the case of a failure relating to the election of employee representatives, by any of the affected employees or by any of the employees who have been dismissed as redundant; (b) in the case of any other failure relating to employee representatives, by any of the employee representatives to whom the failure related, (c) in the case of failure relating to representatives of a trade union, by the trade union, and (d) in any other case, by any of the affected employees or by any of the employees who have been dismissed as redundant. (1A) If on a complaint under subsection (1) a question arises as to whether or not any employee representative was an appropriate representative for the purposes of section 188, it shall be for the employer to show that the employee representative had the authority to represent the affected employees. (1B) On a complaint under subsection (1)(a) it shall be for the employer to show that the requirements in section 188A have been satisfied.

(2) If the tribunal finds the complaint well-founded it shall make a declaration to that effect and may also make a protective award.

(3) A protective award is an award in respect of one or more descriptions of employees— (a) who have been dismissed as redundant, or whom it is proposed to dismiss as redundant, and (b) in respect of whose dismissal or proposed dismissal the employer has failed to comply with a requirement of section 188, ordering the employer to pay remuneration for the protected period.

(4) The protected period— (a) begins with the date on which the first of the dismissals to which the complaint relates takes effect, or the date of the award, whichever is the earlier, and (b) is of such length as the tribunal determines to be just and equitable in all the circumstances having regard to the seriousness of the employer's default in complying with any requirement of section 188; but shall not exceed 90 days . . ..

(5) An employment tribunal shall not consider a complaint under this section unless it is presented to the tribunal— (a) before the date on which the last of the dismissals to which the complaint relates takes effect, or (b) during the period of three months beginning with the [that date], or (c) where the tribunal is satisfied that it was not reasonably practicable for the complaint to be presented during the period of three months, within such further period as it considers reasonable. (5A) Where the complaint concerns a failure to comply with a requirement of section 188 or 188A, section 292A (extension of time limits to facilitate conciliation before institution of proceedings) applies for the purposes of subsection (5)(b).

(6) If on a complaint under this section a question arises— (a) whether there were special circumstances which rendered it not reasonably practicable for the employer to comply with any requirement of section 188, or (b) whether he took all such steps towards compliance with that requirement as were reasonably practicable in those circumstances, it is for the employer to show that there were and that he did.

[34]The length of the protected period under s 189(4) shall be of such length as the tribunal determines to be just and equitable in all the circumstances having regard to the seriousness of the employer's default in complying with any requirement of section 188 but shall not exceed 90 days. In Susie Radin LTD v GMB and others

[2004] EWCA Civ 180

, Gibson LJ said “I suggest that ETs, in deciding in the exercise of their discretion whether to make a protective award and for what period, should have the following matters in mind:(1) The purpose of the award is to provide a sanction for breach by the employer of the obligations in s.188: it is not to compensate the employees for loss which they have suffered in consequence of the breach.

(2) The ET have a wide discretion to do what is just and equitable in all the circumstances, but the focus should be on the seriousness of the employer's default.

(3) The default may vary in seriousness from the technical to a complete failure to provide any of the required information and to consult.

(4) The deliberateness of the failure may be relevant, as may the availability to the employer of legal advice about his obligations under s.188.

(5) How the ET assesses the length of the protected period is a matter for the ET, but a proper approach in a case where there has been no consultation is to start with the maximum period and reduce it only if there are mitigating circumstances justifying a reduction to an extent which the ET consider appropriate”.

[35]It is clear, therefore, that the starting point for the protected period is 90 days and it will be for the First Respondent to show if there are any mitigating circumstances justifying a reduction.

[36]I refer also to the case of Independent Insurance Company Ltd v Aspinall and another

[2011] IRLR 716

. Despite the apparently very clear wording of sections 189(1)(a) and 189(3) the EAT held, approving commentary in Harvey on Industrial Relations, that: “TULRCA 1992 says that a protective award is 'an award in respect of … employees ... in respect of whose dismissal or proposed dismissal the employer has failed to comply with a requirement of s.188' (s.189(3)). On a purely literal construction, that provision might be read as giving any claimant the right to seek a protective award covering every employee in respect of whom the employer has failed to consult. But that is not so. The provision must be read in its context: a personal claimant may obtain a protective award for himself; a representative claimant may obtain a protective award for those whom he represents in the litigation.”

[37]This means that any protective award, in a case where there has been a complete failure by the employer to take any steps to elect representatives, may only be made in favour of the claimants who are party to the claim before the Tribunal.

[38]In respect of the Second Respondent’s potential liability, I refer to the following provisions in Part XII of the Employment Rights Act 1996. 182 Employee's rights on insolvency of employer If, on an application made to him in writing by an employee, the Secretary of State is satisfied that—(a) the employee's employer has become insolvent,

(b) the employee's employment has been terminated, and

(c) on the appropriate date the employee was entitled to be paid the whole or part of any debt to which this Part applies, the Secretary of State shall, subject to section 186, pay the employee out of the National Insurance Fund the amount to which, in the opinion of the Secretary of State, the employee is entitled in respect of the debt.

[39]By section 184 (1) and (2)(d), payments under a protective award are included in section 182(c). Section 185(b) provides that, “in relation to a basic award of compensation for unfair dismissal and to remuneration under a protective award so made, means whichever is the latest of— (i) the date on which the employer became insolvent, (ii) the date of the termination of the employee's employment, and (iii) the date on which the award was made”.

[40]In this case, therefore, the appropriate date is the date of this judgment.

[41]The limits to which payments are subject are set out in section 186 which provides: (1) The total amount payable to an employee in respect of any debt to which this Part applies, where the amount of the debt is referable to a period of time, shall not exceed— (a) £538 in respect of any one week, or (b) in respect of a shorter period, an amount bearing the same proportion to £538 as that shorter period bears to a week.

[42]The effect of these provisions is that the Second Respondent may be liable for any protective award made in respect of any employees in circumstances where the employer is insolvent, but subject to a statutory cap on a week’s wages.

Conclusion

[43]I have found that the claimants all worked for and were permanently assigned to a centralised organisation, being Shaylor Management Services, based at the Aldridge office. Having regard to the meaning of establishment set out in Rockfon, they were, in my judgment, employees at one establishment and that was not changed by temporary assignments to different projects undertaken by Shaylor Group. I have further found that there were 193 employees employed at this establishment and they were all made redundant.

[44]The duties of the First Respondent under section 188 of TULRA to engage in collective consultation with appropriate employee representatives were therefore engaged. I have not made findings as to when the First Respondent first proposed to dismiss the employees as redundant, but it is not necessary to do so.

[45]It is abundantly clear that the First Respondent took no steps at all to attempt to comply with its obligations to consult under sections 188 or its obligations to facilitate the election of employee representatives under s188A of TULRCA.

[46]I have found as a fact that there was no trade union recognised by the First Respondent and no body of employee representatives in place who had authority from the employees to receive information and be consulted in accordance with section 188(1B) TULRCA. The First Respondent was therefore obliged to make arrangements under s 188A TULRCA for the election of employee representatives. It took no such steps.

[47]As there was no recognised Trade Union and no other employee representatives, the claimants are entitled to bring their claims under s 189(1)(a) of TULRCA and the claimants’ complaint under s 189 (1) TULRCA that the First Respondent failed to comply with either s188 or s188A.

[48]It is for the First Respondent to show that there are mitigating circumstances so that the protected period should be reduced to less than 90 days. The First Respondent has taken no part in proceedings and, in any event, took no steps at all towards discharging its obligations to consult.

[49]I therefore make an order that the First Respondent shall pay remuneration for the protected period to every claimant employed by the First Respondent who was dismissed by reason of redundancy on or after 17 June 2019. The protected period is 90 days commencing on 17 June 2019.

[50]In the event that the First Respondent is insolvent, the liability shall fall to the Second Respondent subject to the limits set out in part XII of the Employment Rights Act 1996