Collective consultation - when is the duty triggered?

The case of Keeping Kids Company v Smith & others recently confirmed when the duty to collectively consult is triggered. Moving forwards this will be an important judgment for employers to remember when proposing to make redundancies.

The facts

The Keeping Kids Company (KKC) case dates back to August 2015 when the children's charity was closed and all of its employees were dismissed. KKC had been in financial difficulties since late 2014 and on 12 June 2015 applied to the government for emergency funding. The application included a business plan confirming that, as part of a company restructure, it was proposing to dismiss as redundant more than 50% of the organisation's workforce in September 2015. The business plan detailed that KKC intended to go through collective consultation to effect those redundancies. No specific posts were identified at risk of redundancy at that stage. (If the funding was not obtained KKC identified it would become insolvent.)

In late July 2015, the government granted the funding in accordance with the business plan KKC had submitted. However, soon after (on 30 July 2015), the Metropolitan Police announced that it was investigating allegations of safeguarding issues at the charity - this subsequently led to the government immediately withdrawing its funding. As a result, KKC could no longer function and had to dismiss all of its workforce as redundant (more than 200 employees in total).

The law

Section 188(1) Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) states that an employer is obliged to collectively consult if it is proposing to dismiss as redundant 20 or more employees at one establishment, within a period of 90 days or less. No collective consultation took place prior to the KKC redundancies.

Employers may, however, be able to take advantage of a limited exception to the obligation to collectively consult - this is known as the special circumstances defence. This exception applies where there are special circumstances which render it not reasonably practicable for an employer to comply with the requirement to begin consultation in good time (and at least the relevant minimum period before the first dismissal). The exception allows the employer to provide the necessary statutory information under section 188(4) TULRCA and to consult with a view to reaching agreement about the way of avoiding dismissals, reducing the number of employees to be dismissed or mitigating the consequences of dismissals when it is reasonably practicable to do so, rather than under the normal timescales.

The case

Claims were brought by more than 100 KKC employees for a failure to collectively consult prior to their redundancies (in breach of TULRCA).

In August 2016, an employment tribunal panel held that there was a proposal by KKC to dismiss in June 2015, when the charity requested funding and the business plan was submitted to the government and that collective consultation should have begun "promptly" after this point. A full protective award of 90 days' pay was therefore made to the claimants (This is the maximum amount that can be awarded by a tribunal for an employer's failure to collectively consult.)

However, one employment judge on the panel took a different view. He commented that it was relevant that the dismissals that took effect in August were not the dismissals that were proposed in the business plan for September 2015. In his view, KKC could not have known which employees would be dismissed until 29 July 2015 (when the government funding was offered) and so the obligation to collectively consult did not arise until then. He was also of the view (in contrast to the other panel members) that the Metropolitan Police investigation amounted to a special circumstance such that the defence could be relied on.

KKC appealed to the Employment Appeal Tribunal (EAT) which, in January this year, dismissed the appeal. It held that the tribunal majority was entitled to conclude that on 12 June 2015 there was a proposal that might affect any or all of KKC's employees, triggering the obligation to consult under section 188(1) TULRCA. This was on the basis that the business plan provided for either immediate insolvency or large-scale redundancies, which inevitably had the potential to affect all employees.

The EAT held that KKC had a clear, albeit provisional, intention to dismiss for redundancy and given the potential impact upon all staff, this was not limited to particular categories of employee. KKC, therefore, could not rely on the argument that it did not have sufficient information to engage in meaningful collective consultation until it received the government's response to its funding application (i.e. before 29 July 2015).

The EAT also rejected KKC's argument that the outstanding government funding application or the Metropolitan Police investigation were relevant special circumstances for the purpose of the defence. The employment tribunal majority had already found the outstanding application was not a reason to delay consultation and in respect of the Metropolitan Police investigation, the EAT considered this to be irrelevant because the obligation to consult had already crystallised on 12 June 2015. The EAT noted, however, that the Metropolitan Police investigation may have prevented further consultation beyond 30 July 2015 and it therefore agreed that the protective award made to the claimants should not be the full 90 days' pay. The case has therefore been remitted to the original employment tribunal panel to determine the correct protective award.

The learning points for employers

The EAT's decision makes it clear that the obligation on an employer to begin collective consultation is triggered when it has a clear intention to dismiss at least 20 employees for redundancy. This is so even if, at that point in time, the intention is provisional and it has not yet identified which employees are potentially at risk.

The decision also re-iterates that the special circumstances defence can rarely be successfully relied on.