CRANWICK COUNTRY FOOD PLC v GMB TRADE UNION [2005] UKEAT 0225_05_0609

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2005] UKEAT 0225_05_0609Case No Appeal No. UKEAT/0225/05Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
CRANWICK COUNTRY FOOD PLCAPPELLANTGMB TRADE UNIONRESPONDENT
Before
His Honour Judge Ansell Ms V Branney Mrs R A VickersDate 6 September 2005
[1]APPEARANCES For the Appellant MR SIMON DEVONSHIRE (Of Counsel) 11 King's Bench Walk Temple London EC4Y 7EQ For the Respondent MR OLIVER SEGAL (Of Counsel) Old Square Chambers 1 Verulam Buildings Grays Inn London WC1R 5LQ SUMMARY Tribunal correct that consultation about the correspondence of factory closure should have taken place immediately after closure plans announced before contracts exchanged on a new site. Securicor and Susie Radin considered. HIS HONOUR JUDGE ANSELL This is an appeal from a judgment of an Employment Tribunal sitting at Thornaby on Tees who following a hearing in December 2004 ordered that the Appellant employers should make a protective award of 70 days duration arising out of their failure contrary to s.188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 to consult with the Respondent Union on the proposal to dismiss more than 20 employees at their factory in Thornaby. The reserved judgment was sent to the parties on 9 February 2005 and permission for this appeal was given by HHJ Peter Clark in chambers on 26 April 2005.[2]The background facts are that the Appellants operated two sausage production plants – one in Cottingham, near Hull and another in Thornaby on Tees. From the middle of 2003 Mr Hoggarth, Chief Executive of the Appellants food group began to investigate the possibilities of consolidating the two sausage production sites but rejected the development of either of the two existing sites neither of which would be suitable. A new site in Hull was identified in August 2003, a bid being submitted in September and being accepted in October. By 5 November 2003 the board of directors was informed that the bid had been accepted and detailed plans had been drawn up and planning permission was being sought. By 3 December 2003 the board had been told that a detailed planning application had been submitted and that property developers had visited the Cottingham site and were to return with offers. The minutes of the board meeting held on 5 January 2004 show that a paper was presented by the finance director outlining the savings from consolidating the two sausage production sites onto a new site and to record Mr Hoggarth's intention to move production from the Thornaby site to Cottingham over the next few months and to move to the new site in November 2004 provided it was ready otherwise after Christmas. Conditional planning approval was granted by Hull City Council on 12 January 2004 and contracts exchanged the land in early February by which time planning consent had also been received.[3]The first meeting with union took place on 18 February 2004, the representatives not having been given notice of the purpose of the meeting. They were informed that a decision had been made to consolidate the two sausage businesses which necessitated an initial reduction in the workforce at Thornaby of between 90-95 employees with the selection being on a "last in first out" basis. Thereafter the production at the factory would be at a lower level of output until the factory closed in November 2004 when the remainder of the workforce at Thornaby would become redundant. The form HR1 prepared by the Appellants and given to Jackie Woodall of the GMB showed that 93 employees were to be made redundant out of a total of 178. The workforce were addressed about the redundancies on 20 and 21 February. The Tribunal found that thereafter there was some consultation with regard to mitigating the consequences of the dismissal such as assistance with CV's, involving Job Centre Plus and providing financial advice. But they described the consultation as "minimal" and there was no meaningful consultation on avoiding the dismissals and reducing the number of employees to be dismissed. Although the Appellants offered that employees could transfer to the new site in Hull since this was approximately 80 miles away this was not a practical alternative for employees earning the level of renumeration of manual workers in the Thornaby factory. Mr Hoggarth told the Tribunal that there had not been a good relationship with the trade union at Thornaby because of previous threatened industrial action and the Tribunal found that there was a reluctance on the part of the Appellants to consult or to involve the trade union in discussions at an early stage. Two further meetings took place with the union representatives on 25 February and 3 March and a number of issues were discussed, although it was stated that there was no way in avoiding the redundancies. The first employees were made redundant on 12 April and the remaining employees in the first batch of redundancies on 19 th . There were meetings later in the year regarding the final closure of the factory with a view to mitigating the consequences of the dismissals of the remaining employees but again there was no meaningful consultation with regard to avoiding those redundancies or reducing the number of employees to be dismissed. The factory eventually closed on 19 November.[4]The main issue in the case was the question of when the duty to consult arose under s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992 . The section provides that:
"188- (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. (1 A) 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. (2) 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."
[5]The Appellants contended at the Tribunal that they had not formulated any proposals to dismiss as redundant more than 20 employees until they had obtained planning permission and reached a legal agreement for the purchase of the land and agreements with the contractors for the construction of the new factory. They argued there was a clear distinction between consultation in advance of dismissal due to redundancy and consultation about the decision which meant the redundancies may be a possibility. However the Tribunal found that the Appellants had had a clear proposal to consolidate the two sausage production units for some considerable time and the proposal to make the employees at the Thornaby factory redundant had been reached at the latest by 5 January and quite possibly significantly before that date. The Tribunal was satisfied that by 5 January the Appellants were in a position to know the number of proposed redundancies and therefore to start consultation under s.188. Indeed the Tribunal found that if there was to be meaningful consultation about ways of avoiding the dismissals or reducing the number of employees to be dismissed consultation should have taken place with the trade union when the proposals were still at a formative stage rather than wait until February when the "decision to dismiss is cast in stone and cannot be altered".[6]The Tribunal also dealt with s.188 subsection 4 which provides that for the purposes of consultation the employers shall disclose in writing to the representatives certain information. This was provided to the trade union on a form on or around 20 February 2004 and the Tribunal held that this information was too late to be part of any consultation process. The Tribunal's award of 70 days was on the basis that they were able to reduce the maximum period of 90 days because of the mitigation in that the trade union had been involved in some discussions regarding the mitigation of the consequences of dismissal although they held that the Appellants had "totally avoided its duty to consult with the representatives of the employees with regard to ways of avoiding dismissals and reducing their number."[7]Before us Mr Devonshire (who did not appear below) on behalf of the Appellants does not seek to challenge the Tribunal's principal finding, namely that the obligation to consult arose by 5 January 2004. But he argues that the requirement for the consultations to begin in good time, in any event, at least 30 days before the first of dismissals takes effect was satisfied by the consultation with the unions which commenced on 18 February 2004. He contends that the commercial or economic decision to cease operations at Thornaby with the inevitable consequence in terms of dismissals had not altered as between January and February and the criticism of the Tribunal for failing to give the union the opportunity to make "constructive proposals before the proposed decision dismissal became inevitable" was in reality a criticism of the employers in failing to give the union the opportunity to consult about the reasons for proposing redundancies and all the economic background or context in which the proposal for redundancy had arisen. He contends that the employers were not obliged by s.188 to consult about these matters. He contends that once the decision had been taken to move production from Thornaby the meaningful consultation would involve the consequences of that decision, and that those consultations could, and did take place, after 18 February, some 52 days before the first dismissal with the written statutory information being provided two days later and as such was in time to be part of the consultation process.[8]In the course of the hearing before us we raised with Mr Devonshire whether the matters that he was now advancing, namely that even if 5 January was the trigger date for consultations, meaningful consultations could take place in good time after 18 February was an issue that was canvassed before the Employment Tribunal. He referred us to the Appellants' written closing submissions placed before the Tribunal. Those submissions concentrated on the primary argument that the Appellants had not formulated any proposals to dismiss until they had obtained planning permission and entered into a contract for the purchase of the land for the new factory. However the submissions also contended that the consultation which commenced on 18 February was a consultation with the Respondents "in good time" even if the Tribunal found contrary to the primary submissions that the decision to make redundancies had already been made prior to the middle of February; it did not automatically follow that the Tribunal should find that the Appellants had failed in its duty to consult about the matters under s.188. In the light of these submissions we are satisfied that the matters which Mr Devonshire advanced before us were issues before the original tribunal.[9]In support of his argument Mr Devonshire then took us to three authorities that deal with the requirement of consultation against a background of proposed plant closures. In R v British Coal Corporation and Secretary of State for Trade and Industry ex parte Vardy and others [1993] IRLR 104 a case which dealt with the closure of collieries in 1992 Glide LJ said this in relation to s.188 "116 In my judgment this section does not require a consultation about the reasons for the redundancy, including whether or not a plant should close. 117 I agree with the passage in the current edition of Harvey on Industrial Relations . In paragraph 1365 the learned editor says:
'In substance, the Act places on employers an obligation to plan any redundancy programme well in advance, and to do so in conjunction with the unions where appropriate. Although it is mainly directed at large-scale redundancies, it should be emphasised that its provisions also apply where the employer proposes to make even one single employee redundant… However, according to the interpretation so far placed upon the Act by the English courts, the obligation is not so much to consult with the unions on whether there should be redundancies, but rather to consult on how to carry out any redundancy programme which management deems necessary.'
[10]In Dewhirst Group v GMB Trade Union [2003] EAT/0486/2003/ZT Dewhirst Ladies Wear Ltd, part of the Dewhirst Group, had decided in 2001 that threatened with a substantial loss of business from its customers, particularly Marks & Spencer, they were considering the possibility of closing their Leechmere manufacturing site and transferring capacity to Morocco. By 25 January 2002 attempts to negotiate with Marks & Spencer proved unsuccessful and the directors had concluded that the only option was to transfer production to Morocco, closing Leechmere. The union were however not notified until 7 February and there was an issue in the case as to whether the trigger date was 25 January or 7 February, the EAT approving the Tribunal's decision that the obligation to consult arose on 25 January. At paragraph 27 of the decision HHJ Serota QC said this:
"The meaningfulness and negotiations must be assessed by reference to the position as it was when the triggered proposal was first made. At that point in time the employer considered that closure on economic grounds was inevitable and meaningful negotiations must be assessed against that factual background."
[11]Finally and most recently in Securicor Omega Express Ltd v GMB Burton J (P) dealt with this issue. In that case Securicor decided at the end of November 2001 to close two of its branches and to make redundancies at a third. A senior representative of the union was asked to attend a meeting on 10 December to discuss redundancies when they were told of the branch closures and redundancies and there was discussion about the method of selection and other matters such as voluntary redundancy and relocation. An employment tribunal held that there was no consultation with the union to consider ways of avoiding the dismissals and reducing the number of employees involved. According to the tribunal the meeting on 10 December was not a consultation meeting because the decision to close branches had been made before the union was involved and since there was no further meeting there had been no consultation at all. The tribunal also concluded that whilst part of the minutes of that meeting on 10 December could be said to comply with s.188 subsection 4 that document did not form part of the consultation process because it was not provided until after the meeting. At paragraphs 21 and 22 Burton J(P) dealt with the basic requirements of consultation under s.188 thus:
"21 We turn then, against that factual background, to the submissions on this appeal in relation to the tribunal's decision. In the, as ever, clear judgment of Judge Clark, at the EAT, in Middlesbrough Borough Council v TGWU [2002] IRLR 332 , a good deal of what has become important to us in the course of this hearing is clearly set out at paragraph 27, Judge Clark said as follows under the heading: 'Section 188 Consultation': 'A number of features merit attention in the context of this case: (1) Consultation An employer is not required, under s.188, to consult with the recognised unions about the reasons for the proposed redundancies, in the present case, financial reasons. (R v British Coal Board ex parte Vardy [1993] IRLR 104 and ex parte Price [1994] IRLR 72). 28. The topics for consultation include those specified in s.188(2). As to those, consultation must be genuine and meaningful. In the later judgment of the Divisional Court in ex parte Price [1994] IRLR 72, Glidewell LJ, said, paragraphs 24-25; "
It is axiomatic that the process of consultation is not one in which the consultor is obliged to adopt any or all of the views expressed by the person or body whom he is consulting. I would respectfully adopt the test proposed by Hodgson J in R v Gwent County Council ex parte Bryant, reported, as far as I know, only at [1988] Crown Office Digest, p.19, when he said:
'Fair consultation means: (a) consultation when the proposals are still at a formative stage; (b) adequate information on which to respond; (c) adequate time in which to respond; (d) conscientious consideration by an authority of the response to consultation.'
Another way of putting the point more shortly is that fair consultation involves giving the body consulted a fair and proper opportunity to understand fully the matters about which it is being consulted, and to express its views on those subjects, with the consultor thereafter considering those views properly and genuinely".' And then in paragraphs 45 to 47 Judge Clark returns to the subject-matter of consultation and he said this: 45. We have earlier observed that the employer is not obliged to consult as to his reasons for proposing redundancies: ex parte Vardy. However, consultation must ("shall") include consultation about ways of avoiding dismissals: reducing the number of employees to be dismissed and mitigating the consequences of the dismissal, and shall be undertaken with a view to reaching agreement with the unions: s.188(2). 46. We view those three features of consultation disjunctively. Thus an employer may genuinely consult with the unions about ways of reducing the numbers of employees to be dismissed and mitigating the consequences of the dismissals, without genuinely consulting as to the principle of whether or not to declare redundancies at all. The fact that the employer, when embarking on consultation, who believes that his case for redundancies is unanswerable will not, as a matter of law, fail to discharge his statutory duty under s.188, see Hough, passage cited earlier, so it does not follow, as a matter of fact, that such a belief precludes a finding that he has not engaged in genuine consultation for the purposes of s.118(2)(a). 47. The duties under the section are mandatory. It is not open to an employer, for this purpose, to argue, as would be open to him in defending a complaint of unfair dismissal by the individual employee, that consultation would, in the circumstances, be futile or utterly useless: see Polkey vAE Dayton Services Ltd [1987] IRLR 503 .' 22 That enshrines two principles. 1. That the consultation must in general be fair and meaningful and certainly must not be a sham. 2. That the consultation does not need to extend to the economic background or context in which the proposal for redundancy arises. Mr Hogarth has drawn our attention to the recent decision of this tribunal presided over by Lindsay P, MSF v Refuge Assurance plc [2002] IRLR 324,('MSF') in which it is emphasised that the duty of consultation does not arise until redundancies are proposed. But, of course, implicitly, it must arise before the precise redundancies are decided upon."[12]Applying those principles to the facts of the Securicor case Burton J(P) went on at paragraph 38 thus:
"38. What the employer was required to consult about, in relation to its proposals for redundancy, were ways of avoiding the dismissals which would result from the closures, reducing the numbers of the employees to be dismissed and mitigating the consequences of those dismissed. It appears to us, that that is in fact what occurred at the meeting on 10 December. There was very nearly a meeting of minds between the parties, certainly, as to the procedure to be gone through and the basis of selection. There was to be, and was, local consultation, in which either the union was fully involved or, in so far as it ceased to be involved, if it did after 14 December, that was as a result of a decision by Mr Lockwood. And the result of the consultation procedures was a reduction in the number of redundancies, by virtue of exactly that process which, perfectly rightly and understandably, Mr Lockwood himself had suggested in the course of the meeting on 10 December. 39 We conclude that the tribunal here allowed itself to be overtaken by its conclusion that there had been no consultation, which is clearly the case, in relation to the closures . Had they asked themselves the question as to whether there had been adequate consultation in relation to the consequences of the closures, with a view to reducing, possibly even avoiding entirely, but certainly reducing, the redundancies which were consequential upon it, they would be bound to have answered that question in the affirmative."
[13]He also went on to hold that there was no requirement to serve a notice under s.188(4) prior to the start of the consultation exercise and he referred to the EC Collective Redundancies Directive which referred to relevant information being supplied by the employer in good time "during the course of the consultations".[14]In the light of these authorities Mr Devonshire submits that the tribunal were in error in criticising the Appellants for failing to consult with the union about the commercial decision to close the factory in Thornaby and thereafter move production temporarily to Cottingham and eventually to Hull; matters which he contends had effectively been decided upon by the beginning of January. He referred us to three passages in particular in the tribunal's reasons. First at the end of paragraph 8 where they referred to the union being given the opportunity to make "constructive proposals before the proposed dismissals became inevitable". Secondly in paragraph 9 where the tribunal stated "in this case there could be no meaningful consultations." The decision to close the factory and transfer production to Hull, some 80 miles south had been made. And finally the first three sentences in paragraph 10, the tribunal said thus:
"The Respondent had decided to consolidate its sausage production in one factory. If there was to be meaningful consultation about ways of avoiding the dismissals or reducing the number of employees to be dismissed, consultation should have taken place with the trade union when the proposals were still at a formative stage. The GMB's resources were such that they could have reasonably have been expected to produce alternative propositions for consideration."
[15]Mr Segal for the Respondents did not seek to differ from Mr Devonshire in relation to the principles that emerge from cases such as Dewhirst and Securicor . He argued that those cases established that the need and scope of consultation with the unions must be considered in the light of the commercial and economic decisions taken by the time of the trigger date of the proposal to dismiss. In Dewhirst need for consultations had to be considered in the light of the decision that had already been taken to close the factory at Leechmere with consequent redundancies. In Securicor as at the trigger date a decision had been made to close two branches but no decision yet made as to the numbers of redundancies or as to who they should be. He argued that on the facts as found by the tribunal there was a considerable difference between the irrevocable decisions taken by the beginning of January compared to the situation that existed in the middle of February by which time contracts had been exchanged and planning permission granted thereby inevitably restricting the consultation to ways of mitigating the dismissals.[16]Before reminding us of the crucial facts found by the Tribunal in relation to the situation that existed in the beginning of January, he reminded us that, contrary to the submissions now being made by Mr Devonshire that there was essentially no difference in the factual situation that existed at the beginning of January to that in the middle of February, before the tribunal the Appellants had indeed been arguing that prior to the granting of planning permission during the week of 9 February 2004 they had been unable to, and had not formulated any proposals regarding the employees at the Thornaby site. Their case was later amended to state that prior to the granting of planning permission (on or around 15 January an exchange of the building agreement) on 6 February the Appellants were unable to, and had not formulated any proposals regarding employees at the Thornaby site.[17]Mr Segal reminded us of the core findings made by the Tribunal. In paragraph 6.6 they found that by 5 January 2004:- "a paper was presented by Malcolm Woodyat outlining the savings and consolidating the two sausage production sites onto a new site and that it was Mr Hoggarth's intention to move production from the Thornaby site to Cottingham over the next few months and to move into the new site in November 2004, provided it was ready, otherwise after Christmas…. Mr Hoggarth told the Tribunal that planning permission had not been obtained and contracts had not been exchanged."[18]In paragraph 9 the tribunal concluded:- "the Respondent had a clear proposal to consolidate the two sausage production units for some considerable time. This was a proposal to make the employees at Thornaby factory redundant and had been reached by 5 January and quite possibly significantly before that date. It is not possible nor necessary for the Tribunal to pinpoint the exact date but the Respondent was in a position to identify the employees likely to be made redundant when it reached the position that it intended to move production from the Thornaby site."[19]In paragraph 10 the Tribunal concluded "The Respondent had decided to consolidate its sausage production in one factory. If there was to be meaningful consultation about ways of avoiding the dismissals or reducing the number of employees to be dismissed consultation should have taken place with the trade union when the proposals were still at a formative stage. The GMB's resources were such that they could have reasonably have been expected to produce alternative propositions for consideration. This would not be a question of consultation about the economic background or context in which the proposal for redundancy arises. Once a proposal to consolidate the two sausage production sites had been made consultation with the employees representatives could have been meaningful with regard to avoiding redundancies on Teeside or reducing their number… In this case the employees representatives have been denied any meaningful opportunity to consider the redundancies consequent upon the closure of the factory and to put forward alternative suggestions."[20]Mr Segal argued that the tribunal's findings clearly established that there was a different factual situation that existed at the beginning of January to the fait accompli which was presented to the unions in February. At the beginning of January the essential decisions that had been taken related simply to the proposal to consolidate sausage production in one factory and to close the Thornaby plant. He argued that the reference in paragraph 10 to the GMB resources should not be seen as a challenge to the economic decision to close the plant but rather, putting forward alternative suggestions, as to what might flow from that closure whilst the move to Hull was clearly a possibility in January it was not a definite – contracts had not been exchanged and more importantly planning permission not yet granted. He reminded us that in paragraph 9 of the Tribunal's decision they made express reference to the Securicor case and accordingly he submitted that the Tribunal clearly had in mind the distinction that had been made in relation to consultation about the economic decision to close as opposed to consultation about the consequences of such a closure.[21]Mr Segal reminded us of the guidance given by Peter Gibson LJ in Susie Radin Ltd v GMB and Others [2004] IRLR 400 . In that case the Court of Appeal held that the futility of consultation was not relevant as to the making of a protective award. Paragraph 24 Peter Gibson LJ reviewed the statutory provisions in relation to consultation and said this:
"24 (1) An absolute obligation is imposed on the employer to consult the appropriate representatives of employees who may be affected by the proposed dismissals, such consultation to be in good time and to be conducted with representatives who are fully informed by reason of the required disclosure specified in s.188(4). Moreover, because the disclosure must be in writing, there can be no dispute as to the extent of the disclosure in fact made. (2) The topics for the consultation must include the matters specified in s.188(2) and the employer must undertake the consultation not as an end in itself but with a view actually to reach agreement."
[22]We agree with Mr Segal's submissions regarding the Tribunal's approach. Once they had selected 5 January (or before) as the trigger date, and established the facts in terms of the commercial decisions that had actually been taken by that date, the Tribunal were entitled to take the view on the facts that there still could be meaningful consultation in relation to either avoiding or reducing the number of dismissals as a consequence of those decisions. The Tribunal were entitled to form the view that that was a wholly different situation from that which existed by the middle of February by which the new site at Hull had become a fait accompli and consultation became meaningless. Consultations in January may have been futile but that does not provide a defence to the need for such consultations – see Susie Radin . Once the tribunal had rightfully established that consultations should have commenced in early January then clearly they were entitled to take the view that documentation submitted on 20 February was far too late to be meaningful within the consultation process.[23]Finally we turn briefly to the level of protective award which Mr Devonshire argues was excessive. His primary contention, in his grounds and written submissions, was that having regard to the extent of the Appellants' statutory consultation obligation (at least 30 days) a protective award of 70 days was excessive punishment. A similar suggestion was advanced but rejected by the EAT in Newage Transmission Ltd v TGWU and Others (EAT/0131/05) where HHJ Peter Clark held that since a protective award was punitive not compensatory (see Susie Radin ) the question for the tribunal was the seriousness of the employer's breach and therefore all employers proposing to dismiss 20 or more employees as redundant were liable to a maximum protective award. Accordingly Mr Devonshire did not seek to pursue this argument before us. He then sought to argue generally that on the principle that the punishment should fit the crime the award of 70 days was excessive. We cannot agree. The Tribunal adopted the approach set out in Susie Radin namely that in a case where there has been n consultation to start with the maximum period and reduce it only if there are mitigating circumstances. This was the approach taken by the Tribunal in this case. Peter Gibson LJ also made it clear in paragraph 45 of Susie Radin that the Employment Tribunal had a wide discretion to do what was just and equitable and we cannot find any fault in this Tribunal's approach.[24]Accordingly for the reasons stated this Appeal is dismissed.