The Court of Appeal refers the timing of worker consultation under TUPE to the ECJ

United States of America v Nolan [2010] EWCA Civ 1223

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• The Court of Appeal has referred a question regarding the USA v Nolan to the ECJ asking when, in relation to collective redundancies, the employer's obligation to consult arises; whether it is before or after the decision to carry out redundancies has been made.

The US Army closed its base at Hythe in 2006 resulting in the redundancy of 200 employees.

Mrs Nolan brought proceedings in the Southampton Employment Tribunal under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) for a protective award alleging that the USA had failed to consult with representatives of the civilian workforce before deciding to close the base, in accordance with its obligations under section 188 of TULRCA.

The ET found in favour of Nolan and made a protective award covering all United Kingdom citizen employees of the base.

The USA appealed to the Employment Appeal Tribunal against the ET's decision on liability and remedy decision. The EAT upheld the tribunal's decisions on liability and remedy but remitted the case to the ET for a re-hearing as to whether Mrs Nolan was an 'employee representative' entitled to bring the claim.

The USA then appealed to the Court of Appeal, arguing that as a foreign state it had no consultation obligation (something that the ET rejected as the US had already waived this right by defending the case) and that in any case an employer is only obliged to consult workers after he has decided to make employees redundant. The CA in upholding the ET's decision noted that under section 188(7) the US could have used a 'special circumstances' defence but hadn't done so (para42). The CA also rejected the US's contention that the appeal tribunal was wrong to remit that issue for a re-hearing by the same tribunal but rather a differently constituted tribunal (para43).

Directive 98/59/EC, the Collective Redundancies Directive, a consolidation of Directive 75/129/EEC as amended by Directive 92/56/EECl was considered, where Recital 2 finds it important, 'that greater protection should be afforded to workers in the event of collective redundancies while taking into account the need for balanced economic and social development within the Community.' The ET had used the decision of Maurice Kay LJ in Northgate HR Ltd v. Mercy [2007] EWCA Civ 1304; [2008] IRLR 222 when deciding that it had jurisdiction to hear Mrs Nolan's claim for a protective award.

The Employment Appeal Tribunal decision in UK Coal Mining Ltd v. National Union of Mineworkers (Northumberland Area) and another [2008] ICR 163 was decided by the CA as relevant to how wide the consultation obligation was.

The EAT had quoted the Divisional Court's decision in R v. British Coal Corporation [1993] ICR 720 whereby when an employer was 'contemplating' collective redundancies consultations were required in good time. It also required the consultations to 'cover ways and means of avoiding' redundancies.

The EAT applied this approach in Middlesbrough Council v. Transport and General Workers' Union [2002] IRLR 332 (despite section 188(2) stating that the consultation shall include consultation about ways of 'avoiding the dismissals' (an amendment introduced by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995/2587).

In Securicor Omega Express Ltd v. GMB [2004] IRLR 9 Vardy and Middlesbrough were followed an employer was not obliged to consult as to his reasons for proposing redundancies.

These decisions were challenged in UK Coal which recognised that the Directive required consultation regarding proposed closures and broached the possibility of giving effect to section 188 so as to read "proposed" as "contemplated" and thus bring domestic law into line with the Directive. However the Court of Appeal decided to follow the EAT decision in Employment Appeal Tribunal in MSF v. Refuge Assurance plc [2002] ICR 1365, whereby a court had limits on interpreting rules to be compatible with European law.

The decision of the ECJ in Akavan Erityisalojen Keskusliitto Alek RY and others v. Fujitsu Siemens Computers OY Case C-44/08; [2009] IRLR 944 post-dating the decision of the EAT prevented the CA from deciding in Nolan's favour. Fujitsu interprets the Directive in that the obligation to consult is triggered not by a proposed business decision close a plant but later when the business decision has been made and an intention to make redundancies has been formed.

The US argued that UK Coal went too far, the correct interpretation of the Directive being found in Middlesbrough and Securicor, with Fujitsu being authority for a narrower interpretation of the Directive than Vardy and UK Coal.

From the judgment in Dansk Metalarbejderforbund and Specialarbejderforbundet I Danmark Case 284/83; [1985] ECR 553 it has been argued that Article 2(1) of Directive 98/59 can be adopted where the employer has contemplated collective redundancies. Junk v. Kuhnel C-188/03 [2005] IRLR 310 was considered regarding the mitigation of the consequences of dismissals.

The CA believed that the Advocate General saw consultation obligation as arising only once the crucial operational decision is taken and the employer contemplates collective redundancies.

But the ECJ had also said (para38) that the consultation obligations arise 'prior to the employer's decision to terminate employment contracts' wher there is 'still a possibility of avoiding or at least reducing collective redundancies, or of mitigating the consequences.'

The CA was therefore uncertain whether Fujitsu holds that the need for consultation does not arise prior to the employer's decision or other change leading to contemplation of collective redundancies.

"we consider that it must follow that insofar as the Divisional Court in Vardy interpreted the Directive as imposing a wider consultation obligation, it was in error. UK Coal did no more than hold that the introduction of section 188(2) enabled section 188 to be interpreted with the supposed wider meaning of the Directive. Whilst section 188 could have imposed a wider consultation obligation than the Directive, we do not consider that it purported to do so.

The ordinary rule of interpretation requires section 188 to be interpreted so far as possible in a way conforming with the obligations required by the Directive (Litster and others v. Forth Dry Dock & Engineering Co. Ltd. (in receivership) and Another [1989] ICR 341, per Lord Templeman, at 353C to F; and per Lord Oliver of Aylmerton, at 354D to F). If the true sense of the decision in Fujitsu was to favour what we have called alternative (ii), it would appear to us to follow that Middlesbrough and Securicor were correctly decided and that UK Coal was not. It would, we consider, further follow that the employment tribunal was wrong to have held that the USA had breached its consultation obligations in the present case."

In the absence of the possibility of a ruling from the Supreme Court, the CA referred the matter to the ECJ for a decision.