EAT/1094/02/RN GMB v (1) AMICUS (AEEU & MSF) (2) BELOIT WALMSLEY LTD (IN ADMINISTRATION) (3) OTHERS [2003] UKEAT 1094_02_1404

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2003] UKEAT 1094_02_1404

Case No Appeal No. EAT/1094/02/RN EAT/1095/02

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

EAT/1094/02/RN GMBAPPELLANT

(1) AMICUS (AEEU & MSF) (2) BELOIT WALMSLEY LTD (IN ADMINISTRATION) (3) OTHERSRESPONDENTS

EAT/1095/02/RN AMICUS (AEEU & MSF)APPELLANT

(1) BELOIT WALMSLEY LTD (IN ADMINISTRATION) (2) GMB (3) OTHERSRESPONDENTS

Before

Mr Justice Mitting Mr B Gibbs Professor P D Wickens

Date 14 April 2003

[1]APPEARANCES For GMB & AMICUS (AEEU & MSF) MR ANDREW BURNS (of Counsel) Instructed on behalf of GMB by: Messrs Whittles Solicitors Pearl Assurance House 23 Princess Square Albert Square Manchester M2 4ER Instructed on behalf of AMICUS (AEEU & MSF) by: Messrs Rowley Ashworth Solicitors Kennedy Tower St Chads Queensway Birmingham B4 6JG For BELOIT WALMSLEY LTD (IN ADMINISTRATION) MR JAMES HURD (of Counsel) Instructed By: Messrs Addleshaw Booth & Co Solicitors 100 Barbirolli Square Manchester M2 3AB MR JUSTICE MITTING : On the facts found by the Employment Tribunal the Respondent and employer was incorporated in 1994 and in 1976 became part of the American-owned Beloit Paper Group, when it was acquired by a subsidiary of Beloit Corp. Inc. The ultimate holding company of the Group was Harnischfeger Industries Inc. which we will refer to hereafter as "HII".

[2]On 7 June 1999 HII and Beloit Corporation applied for protection under Chapter 11 of the United States Bankruptcy Code.

[3]On 18 November 1999 the Respondents' Directors were informed by the Directors of HII that it was no longer prepared to support the Respondent financially. That decision was confirmed on 19 November 1999. It came to the Directors of the Respondents as "a bolt out of the blue". It led to the placing of the Respondent in Administration on 22 November 1999. Thereafter, meetings took place on 23 and 26 November 1999 between the Administrators, the recognised trade unions and employee representatives, and during that period a decision was taken to dismiss at least 55 employees. The decision was implemented on 29 November 1999.

[4]On 9 December 1999 a team from the Administrators went to America to meet representatives of the Beloit Corporation, from whom some 80% of the Respondents' work came. At that meeting the Administrators were informed by Beloit Corporation that it was only prepared to continue with three minor contracts with a life expectancy of about three weeks. The sudden withdrawal of those contracts came as a surprise and disappointment to the Administrators who concluded that it would be necessary to dismiss, as redundant, a further 206 employees. As a result of representations made to the Administrators by the Respondents' Directors it was later decided to reduce the number to be dismissed to 68. Those 68 were dismissed on 16 December 1999.

[5]The Tribunal found that in relation to those dismissed on 29 November 1999 meetings were held on 23 and 26 November 1999 and that in relation to those dismissed on 16 December a meeting was held on 15 December 1999.

[6]The Tribunal went on to say that it was satisfied that there were two separate redundancy exercises. In consequence minimum statutory periods of notice and consultation applied of 30 days for the first, and 90 days for the second. It was conceded that the requirements of Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 had not been complied with. The Respondents contended that special circumstances applied under Section 188(7).

[7]The Respondent's contention was that the two relevant decisions of the parent Company were totally unexpected by the Respondent's Directors. The Tribunal found that as to the first decision, as it put it, to "pull the plug", the announcement was totally unexpected; that the announcement had a profound impact on the financial viability of the Respondent and that in respect of the first batch of redundancies there were special circumstances which made it not reasonably practicable for the Respondent to comply with its obligations under Section 188. In respect of the second batch, the Tribunal found that the Administrators were informed on 9 December 1999 about the decision only to proceed with the three small contracts, and that that also amounted to special circumstances when coupled with the earlier sudden removal of all financial support. In paragraph 18 of its Extended Reasons the Tribunal said this:

"18 For the avoidance of doubt we do not find, as a matter of law, that the second part of Section 188(7) is applicable to this case. We do not find, as a matter of construction, that the decision leading to the proposed dismissals was that of the American parent company. Nor do we find that this is a case where there was a failure on the part of the American parent company to provide relevant information having regard to the definition of relevant information which is set out in Section 188 of the 1992 Act."

[8]The Tribunal went on to conclude that, notwithstanding that there were special reasons for non-compliance with the requirements of Section 188, it was nonetheless just and equitable that a protective award of 15 days should be made in respect of each batch of redundancies.

[9]The two trade unions concerned in the consultation exercise appeal against the Employment Tribunal's decision and, in particular, contend that the Tribunal made two errors of law in paragraph 18 of its Extended Reasons.

[10]This appeal raises for the first time in the Employment Appeal Tribunal the proper construction of the exception to the provision in Section 188(7) of the 1992 Act for special circumstances which make it not reasonably practicable for an employer to comply with its obligations under Section 188(1)(a), (2) and (4). The exception was introduced by Section 34(2)(c) of the Trade Union Rights and Employment Rights Act 1993 , to give effect to Council Directive 92/56, which implemented amendments to Council Directive 75/129/EEC. The relevant Council Directives are now consolidated in 98/59/EC. 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 Lister v Forth Dry Dock & Engineering Co Ltd

[1991] AC 546

, at 559 and of the European Court of Justice in Coote v Granada Hospitality Ltd ,

case C-185/97

[1999] ICR 100

, paragraph 18 of the judgment. We therefore start with the Directive. The relevant paragraphs of the preamble are 6 and 11. The relevant parts of preamble 6 provide:

"(6) Whereas the Community Charter of the fundamental social rights of workers, adopted at the European Council meeting held in Strasbourg on 9 December 1989 by the Heads of State or Government of 11 Member States, states, inter alia ... 17. Information, consultation and participation for workers must be developed along appropriate lines, taking account of the practices in force in the various Member States. 18. Such information, consultation and participation must be implemented in due time, particularly in the following cases: - ... - in cases of collective redundancy procedures."

Preamble 11 provides:

"(11) Whereas it is necessary to ensure that employers' obligations as regards information, consultation and notification apply independently of whether the decision on collective redundancies emanates from the employer or from an undertaking which controls that employer."

[11]The operative provision of the Directive with which we are concerned is Article 2, which provides:

"1 Where an employer is contemplating collective redundancies, he shall begin consultations with the workers' representatives in good time with a view to reaching an agreement. 2 These consultations shall, at least, cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining workers made redundant. 3 To enable workers' representatives to make constructive proposals, the employers shall in good time during the course of the consultations: (a) supply them with all relevant information and (b) in any event notify them in writing of (i) the reasons for the projected redundancies; (ii) the number of categories of workers to be made redundant; (iii) the number and categories of workers normally employed; (iv) the period over which the projected redundancies are to be effected; (v) the criteria proposed for the selection of the workers to be made redundant in so far as national legislation and/or practice confers the power therefore upon the employer, (vi) the method for calculating any redundancy payments other than those arising out of national legislation and/or practice. The employer shall forward to the competent public authority a copy of, at least, the elements of the written communication which are provided for in the first subparagraph, point (b), subpoints (i) to (v). 4 The obligations laid down in paragraphs 1, 2 and 3 shall apply irrespective of whether the decision regarding collective redundancies is being taken by the employer or by an undertaking controlling the employer. In considering alleged breaches of the information, consultation and notification requirements laid down by this Directive, account shall not be taken of any defence on the part of the employer on the ground that the necessary information has not been provided to the employer by the undertaking which took the decision leading to collective redundancies."

[12]Thus, Article 2 requires the following obligations to be imposed on an employer of workers within the Member States by national legislation:(1) To begin consultations with workers' representatives within good time with a view to reaching agreement. The obligation begins where, in other words when, the employer is contemplating collective redundancies: Article

2.1

(2) To undertake consultations to avoid collective redundancies or to reduce the number of workers affected and to mitigate their consequences: Article

2.2

(3) In good time during the course of consultations to supply workers' representatives with all relevant information: Article 2.3(a)

(4) In any event in good time during the consultations to notify workers' representatives in writing of the matters specified in Article 2.3(b)

(5) To forward to the competent public authority a copy of the written communication provided for in Article 2.3(b) with one exception; the method of calculating redundancy payments: Article 2.3, final words.

(6) Each of those obligations applies irrespective of whether the decision regarding collective redundancies is being taken by the employer or by an undertaking controlling the employer: Article 2.4

(7) No defence is to be afforded to an employer for breach of the requirements for information (Article 2.3(a)); consultation (Article 2.1 and 2); and notification: (Article 2.3(b) and the final words of Article

2.3 ) on the ground that the necessary information has not been provided to the employer by the undertaking which took the decision leading to collective redundancies: Article 2.4.

[13]It is to be noted that the Directive uses three slightly different phrases to describe what is essentially the same act. The decision on collective redundancies (preamble 11); the decision regarding collective redundancies (Article 2.4 first paragraph); the decision leading to collective redundancies (Article 2.4 second paragraph).

[14]Article 2 was transposed finally into United Kingdom law by Sections 188 and 193 of the Trade Union and Labour Relations (Consolidation) Act 1992 , as amended by Section 34 of the Trade Union Reform and Employment Rights Act 1993 .

[15]Section 188(1) provides that the employer shall consult about dismissals of 20 or more employees at one establishment. Section 188(1A) provides:

"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 90 days, and (b) otherwise, at least 30 days, before the first of the dismissals takes effect."

Section 188(2) provides:

"The consultation shall include consultation about ways of – (a) avoiding the dismissals, (b) reducing the numbers of employees to be dismissed, and (c) mitigating the consequences of the dismissals, and shall be undertaken by the employer with a view to reaching agreement with the appropriate representatives."

Section 188(4) and (5) provide:

"(4) For the purposes of the consultation the employer shall disclose in writing to the appropriate representatives - (a) the reasons for his proposals, (b) the numbers and descriptions of employees whom it is proposed to dismiss as redundant, (c) the total number of employees of any such description employed by the employer at the establishment in question, (d) the proposed method of selecting the employees who may be dismissed, (e) the proposed method of carrying out the dismissals, with due regard to any agreed procedure, including the period over which the dismissals are to take effect and (f) the proposed method of calculating the amount of any redundancy payments to be made (otherwise than in compliance with obligation imposed by or by virtue of any enactment) to employees who may be dismissed. (5) That information shall be given to each of the appropriate representatives by being delivered to them, or sent by post to an address notified by them to the employer, or in the case of representatives of a trade union sent by post to the union at the address of its head or main office."

Section 188(7) provides:

"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."

[16]Section 193 provides for notification of proposed redundancy dismissals to the Secretary of State. Thus, Sections 188 and 193 follow the scheme of Article 2. The corresponding provisions are: Article 2.1: Section 188(1)(a) and (2), concluding words. Article 2.2: Section 188(2). Article 2.3(b): Section 188(4) and (5). Article 2.3, concluding words: Section 193. Article 2.4: Section 188(7), the exception provided.

[17]There is no equivalent provision in Section 188 to Article 2.3(a). The draftsman of Section 188 (as amended) can be taken to have assumed that all relevant information would be contained in the disclosure of the matters set out in Section 188(4) which corresponds to those set out in Article 2.3(b). By contrast Article 2.3 requires the employer to supply all relevant information to workers' representatives and to notify them of the matters set out in Article 2.3(b). No reason for this omission can be discerned from the United Kingdom statute other than, perhaps, the draftsman's wish for precision and clarity and this Tribunal has not been referred to any Parliamentary material which might assist.

[18]On a natural reading of Article 2, the phrases "all relevant information" in Article 2.3(a) and the necessary information in Article 2.4 are not synonymous or, at any rate, do not describe exactly the same thing. All relevant information is required to be given during the course of the consultations, in other words after they have started, but an employer is required by Article 2.1 to begin consultations in good time. The obligation to begin consultations therefore precedes the obligation to supply the relevant information. Article 2.4 however, provides that in considering alleged breaches of the consultation requirements, amongst others, account shall not be taken of any defence that necessary information has not been provided to the employer by the undertaking which took the decision leading to collective redundancies. Thus, it is no defence for an employer to fail to begin consultations in good time, because he has not been provided beforehand with necessary information by such an undertaking. If, in Article 2, relevant information and necessary information are not to be treated as the same, there is no ground for treating information in Section 188(7) as exclusively defined by the information identified in Section 188(5). Information in Section 188(7) means "information necessary to begin the process of consultation", as well as "the giving of information required by Section 184".

[19]This Tribunal therefore rejects Mr Hurd's primary submission that information in Section 187 is limited to and defined exclusively by the information required to be disclosed by Section 188(4).

[20]In the view of this Tribunal information in Section 188(7) and necessary information in Article 2.4 mean "information about the decision leading to the proposed dismissals".

[21]The next question is, what is meant by "leading to the proposed dismissals"? The phrase is the least prescriptive of the three used in the Directive: see "on" in preamble 11 and "regarding" in Article 2.4, first paragraph.

[22]In the view of this Tribunal it connotes both the causal effect of the decision and contemplation of its consequences. The decision must cause, in the sense of "give rise to the occurrence of" the dismissals and the person making the decision must contemplate that it will have that consequence. It is not necessary that that person must contemplate any particular number of dismissals by reason of redundancy, or that they will occur at any particular establishment. It is delay in communicating that decision which is the mischief at which the exception to the special circumstances defence in Section 188(7) is aimed. The effect of the exception is to remove from consideration the time lost as a result of that delay. A practical example will suffice to illustrate the operation of the exception. Suppose a parent company decides that a wholly-owned subsidiary operating one plant with 100 employees must cease trading. It makes that decision on day one, but does not inform its subsidiary until day 90. The subsidiary ceases trading on day 91 and dismisses all of its employees on that day. It cannot rely on the parent company's delay in notifying it of its decision as a special reason for non-compliance with its obligations under Section 188. If, instead, the parent company's delay in informing its subsidiary was only 30 days, it would be only that shorter period of delay which would fall to be ignored. If the dismissals could not be avoided before a further 60 days had elapsed, the parent company's decision might still amount to a special reason for non-compliance by its subsidiary with its obligations under Section 188, but not if the prompt provision of the information about its decision to its subsidiary would have permitted compliance.

[23]On the facts found by the Employment Tribunal in paragraphs 13(d) and (e) and 13(h) of its Extended Reasons, it appears to this Tribunal that the decision of the parent companies, of which the Respondent was informed on 18 November 1999 and 9 December 1999, were potentially decisions which did have the causal effect of requiring dismissals by reason of redundancy by the Respondent, and that the person or persons who made them must have contemplated that it would have that consequence. Accordingly, its decision at paragraph 18 that the decision leading to the dismissals was not that of the American parent Company cannot stand, nor can its implicit acceptance in paragraph 18 of the Respondent's submission that information in Section 188(7) is defined by and limited to the information set out in Section 188(4). The case must therefore be remitted to the Employment Tribunal to make further findings of fact.

[24]First, if the Employment Tribunal finds that the decision by HII to withdraw financial support from the Respondent caused financial difficulties which led to the dismissal of 55 employees on 29 November 1999 and that when that decision was made, the Directors of HII contemplated that it would have that consequence, the Employment Tribunal should go on to find when the decision was made, and to disregard any period between the making of the decision and the date on which the Respondent's Directors were informed of it in considering the special circumstances defence under Section 188(7).

[25]Secondly, if it finds that the decision by Beloit Corporation to end all but three minor contracts caused the reduction in work at the Respondent's Bolton Plant, which required the dismissal of 68 employees on 16 December 1999, and that when that decision was made the relevant officers of Beloit Corporation contemplated that it would have that consequence, the Employment Tribunal should go on to find when that decision was made and disregard any period between the making of the decision and the date on which the Respondent Administrators were informed of it, in considering special circumstances under Section 188(7).

[26]It is not necessary in either instance for the Employment Tribunal to find that HII or Beloit Corporation contemplated any particular number of redundancies, merely that some dismissals for redundancy would follow from their decisions.

[27]This Tribunal finds it unnecessary to express any view on Mr Burns' submission that contemplation by a parent company should include consequences which it ought to have contemplated but fails due to wilful blindness to contemplate. In the unlikely event that any circumstances arise, which require that question to be answered, that decision can best be left to the Tribunal which has to consider the facts.

[28]Finally, this Tribunal acknowledges that, unlike the Employment Tribunal, it has had the relevant Directive cited to it. The Employment Tribunal cannot therefore be criticised for failing to take its provisions into account in construing Section 188. This Tribunal wishes to pay tribute to the decision of the Employment Tribunal which in all other respects is a model of clarity and succinctness.