Exit discussions are no bar to a constructive dismissal claim

As you may be aware constructive dismissal occurs when an employee terminates their employment in response to their employee’s treatment of them. The employee has to show that they have resigned in response to fundamental breach of contract by the employer. The Employment Rights Act essentially say that if the employee terminates their contract in circumstances which they are entitled to do so without notice because of the employer’s conduct that termination constitutes a dismissal.

In the case of Gibbs v Leeds United FC the Court was required to determine liability for breach of contract, considering whether Leeds United FC was in breach of its contract with the Claimant, whether that breach was repudiatory and whether, when the Claimant resigned, he did so at least in partly as a result of that breach.

The Claimant (here photographed when at Tottenham) had worked as an assistant manager at Leeds United Football Club. When the head coach was dismissed it was expected that, as is usually the case, the Claimant would also be dismissed despite working under the terms of a fixed term contract which was due to expire in June 2016.

Following the departure of the head coach the claimant did enter into discussions concerning the early termination of his employment however the Chairman made clear that he wanted him to remain at the club. The Claimant returned to work as requested although discussions continued with the club in an attempt to negotiate the early termination of his contract. During this period the Claimant was not assigned work which fell within his contract to do, although he turned up ready and willing to do it. He complained and said that he had been left with nothing to do and expressed that he was unhappy about this situation. However subsequently on the 23 June he received an email from the club secretary, Graham Bean, which read as follows:

Redundancy consultations and notifications – criminal sanctions

Most employers and HR staff with experience of dealing with redundancies are aware of the requirements for collective consultation. Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 requires employers, where 20 or more employees are proposed to be made redundant within a period of 90 days, to consult with the employees who are at risk of being made redundant for a minimum of 30 days. The period is extended to 45 days where 100 or more employees are affected. Failure to consult can result in protective awards of up to 90 days’ pay.

There is also a requirement to notify the Secretary of State of the proposed redundancies and this is done by using prescribed form HR1.

What is less well known is that failure to do so is a criminal offence and can result in prosecution and a fine. According to the Government’s website the fine may be up to £5000. However this is incorrect. Section 194 of the Act provides that an employer is liable on summary conviction to a fine not exceeding level 5 on the standard scale. Since 12 March 2015 such fines have been unlimited.

Further, pursuant to section 194(3):
Where an offence under this section committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, any director, manager, secretary or other similar officer of the body corporate, or any person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.
Accordingly, individuals can be prosecuted and, if convicted, face an unlimited fine as well as a criminal record.

This month, in a marked departure from the prior approach pursuant to which such prosecutions were virtually unheard of, prosecutions under the Act have been brought against the chief executive of Sports Direct and three former directors of City Link.

a reasonable alternative to redundancy?

In redundancy situations employers sometimes offer “suitable alternative employment” as a means of avoiding redundancy. Suitability depends on how similar the work is, the terms of the job being offered, the skills, abilities and circumstances of the person being offered the job and the pay, status, hours and location. If a reasonable offer is unreasonably refused, the individual concerned may lose the right to a statutory redundancy payment.
When the writing was on the wall for Tavistock and Summerhill School as a result of falling rolls, the governors decided there was no option but to close the school and gave notice of redundancy to the staff in March 2011 – without much regard to collective consultation, although the Head and Deputy Head were involved in management discussions about it. The parents stepped in and mounted a rescue plan, and offered most of the staff new employment just before the end of the summer term, when their employment was due to end. No such offer was made to the Head, and no explanation was ever given for this. The teachers turned the offer down, having found other employment. Were they reasonable in doing so? Both the Employment Tribunal and the Employment Appeal Tribunal agreed that they were. The offer came very late in the day after all had made alternative arrangements either by way of alternative employment or, in one case, planned retirement. Accordingly all were entitled to redundancy payments.
A number of further issues were considered in the case, including the obligation to carry out collective consultation. It was found that a protective award was due to all of the employees, including those on the management team who had been aware of what was being discussed:
A clear distinction must be drawn between the discussions with a view to saving the school at a high management level and consultation with employees about job losses or possible job losses in the future.

expiry of fixed terms – do they count for consultation duties?

Fixed term contracts have become very popular in the public sector, not least as the result of the need for strict budgeting and frequent funding reviews. This is nowhere more so than in the academic world. University of Stirling v University & College Union deals with whether fixed term workers whose contracts are not being renewed should be counted when totting up the number of employees being made redundant at one time for the purpose of working out whether the duty to carry out collective consultation is triggered. As most readers will be are there are special procedures to be applied in the event that more than 20 redundancies are proposed at one establishment in any period of 90 days. This triggers an obligation to notify the Redundancy Payments Service and a minimum consultation period of 30 days. In this case the decision turned on whether the employees whose contracts ended were made redundant – which for this purpose means being dismissed
… for a reason not related to the individual concerned or for a number of reasons all of which are not so related.
The Court of Session concluded that non-renewal of the fixed terms was a reason related to the individual employee – so these dismissals did not count as redundancies. This conflicts with previous decisions of the Employment Appeal Tribunal which assumed that non renewal of a fixed term was not a reason relating to the individual (Lancaster University v The University & College Union [2011] IRLR 4).

collective consultation – one establishment or many?

When USDAW originally took the liquidators of Woolworths to Court over the failure to consult employees before shutting down all its shops in 2008, workers in smaller branches were excluded from the award of 60 days’ pay for each employee. The reasoning behind this was that the obligation to consult on a collective basis only applies where more than 20 employees are to be made redundant at “one establishment”. The conventional interpretation of those words has been that individual sites, like factories, schools, or shops, which are managed locally, are distinct establishments. However, in USDAW and others v WW Realisation 1 Ltd the Employment Appeal Tribunal has broken with “established” tradition in taking the view that “establishment” in this context refers to a business rather than a particular location at which a business operates.
In his summary His Honour Judge McMullen QC has left in no doubt the firmness of his approach by stating that a purposive construction of section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 required the court to delete the words “at one establishment”, thereby allowing protective awards to be made. USDAW has estimated that the value of the awards in this case (which was a combined hearing covering both Wooolworths and Ethel Austin) is about £5 million. With reference to the new rules which have come into force this month it is notable that the appeal very nearly never happened. It was rejected by Mr Justice Langstaff, President of the EAT on initial assessment and only allowed to proceed after a review by His Honour Judge Peter Clark.
Judges are normally very reluctant to interfere with the words contained in a statute, based on the primacy of Parliament. It is no doubt with this in mind that Judge McMullen made the following observation:

reduction in redundancy consultation unlikely to affect SMEs

There has been a great deal of press coverage about the Government’s proposal to halve the consultation period for large scale redundancies from 90 days to 45 days.

According to employment relations minister Jo Swinson (yes, I’d never heard of her either until now):
The process is usually completed well within the existing 90-day minimum period, which can cause unnecessary delays for restructuring and make it difficult for those affected to get new jobs quickly. Our reforms will strike an appropriate balance between making sure employees are engaged in decisions about their future and allowing employers greater certainty and flexibility to take necessary steps to restructure.

However, Brendan Barber of the TUC countered this:
The last thing we need is for the government to make it easier to sack people. Unemployment has not gone as high as many feared because employers have worked with unions to save jobs, even if it has meant sharing round fewer hours and less work.

European Court of Justice judgment on timing of collective consultation obligations

In United States of America v Nolan, the European Court of Justice has confronted the combined forces of redundancy procedure and semantics. Perhaps overfaced with such a powerful combination it has declined to give a ruling in the long running saga of whether the USA was in breach of an obligation to inform and consult employees before closing an army base situated in the UK, because although UK law does not exclude public bodies from the operation of domestic rules on redundancy consultation, the European directive on collective consultation expressly does make such an exclusion. The Court of Appeal had asked it to determine the point at which the duty to consult is triggered. While the UK legislation refers to redundancies being "proposed" – EU law uses the term "contemplated"; and so uncertainty has arisen about when, exactly, the duty to consult is triggered. The point therefore remains to be determined by the Court of Appeal.
As is usual with European cases the judgment of the Court was preceded (last March) by the Opinion of the Advocate General (AG). The AG was concerned that, above all, the obligation to consult under TUPE should not be triggered "prematurely". This seems to be an entirely laudable concern, taking into account that employees might be unnecessarily worried about a potential transfer, even though that transfer might not ultimately happen. However, that appears to be at odds with the European reference to redundancies being "contemplated" which implies that, at that stage, the decision to make people redundant has not been finalised.
The counterpoint to that is that a consultation should not take place too late, so that it is in effect a sham. What is the point of a collective consultation when the decision to make people redundant has already been taken, i.e. when redundancies are "proposed"?

the most summary of dismissals

City traders may not spring to mind as the most deserving of sympathy but spare a thought for those who were unable to access their offices today.

According to a report in today’s Times (behind paywall) about 100 traders turned up at work this morning only to find that their passes had been deactivated. They were met in reception by HR staff who gave them bags containing their personal belongings and were told that they would have two weeks’ paid leave, following which they should return to collect their redundancy payments.

Evidently, UBS have decided entirely to disregard proper redundancy procedure which requires notification to employees that they are at risk of being made redundant as soon as the possibility arises, as well as meaningful consultation which should include consideration of alternatives to redundancy.

consultation on consultation

Two areas have been flagged for possible changes in the future. There are “calls for evidence” on both TUPE and redundancy consultation processes.
Under the current Regulations TUPE places an obligation on both the transferor and transferee to provide information to, and to consult with, the representatives of their respective employees who may be affected by the transfer.
This can include employees who are not part of the transfer, but who are affected by the transfer.
TUPE also has the effect of transferring trade union recognition agreements, as long as the transferring group of employees maintains a distinct identify from the rest of the transferee’s business.
The transferor and transferee must inform and consult the recognised trade union. If there is no recognised trade union, the employees must be given the opportunity to elect their own representatives.